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Worth watching this 3 minute video for an incredibly clear and concise explanation of Peak Oil and why it’s the source of this economic collapse, by Dr. Richard Heinberg. The near-term forecast for the economy is probably a series of large swings up and down, but as the oil shortage deepens the long-term trend will be an accelerating decline in economic activity.
For more, see this short explanation of why the current drop in oil prices is only temporary… (once again – my normal disclaimer – don’t hold me to everything he says here.. particularly not the “markets may be efficient…” statement) [alex]
“The Magic Market”
Richard Heinberg
Originally published by Post Carbon Institute, Oct. 13, 2008.
As the world finance system disintegrates and the price of oil wafts below $80 a barrel, we are about to see yet another instance of Market Magic.
Demand for oil is falling as world economic activity sputters. Many analysts are now forecasting that the barrel price could go as low as $50 to $60 in the next few weeks.
Meanwhile, however, the marginal cost of bringing a new barrel of oil into production has been rising in recent years, and now stands in the range of $80 to $100. Therefore, as the spot price and futures prices weaken, efforts to develop new oil sources will be mothballed. Read the rest of this entry »
This is a very provocative idea, but an important one. If collapse is inevitable, is it a case of ‘the sooner, the better’? Good article overall, though I think a stronger anti-capitalist analysis is needed here. [alex]
‘The best outcome is probably for humans to hit the wall soon and hard.’
By Roger Baker / The Rag Blog / October 2, 2008
Is industrial collapse the BEST way out of our current economic mess?
Arguably yes and here is why. But does it even matter? Perhaps not. Capitalism, in its global form and as we now know it, is likely finished in any case, so the choice is likely to be an illusion. But the best outcome is probably for humans to hit the wall soon and hard.
The Economic Context
Capitalism as an economic system depends on an endless expansion of material goods production at a rate that allows lenders to earn interest on money saved and invested. The only way to get potential lenders to lend rather than spending their money immediately is to reward them with a real rate of return on their savings. This is done by promising lenders that they will be rewarded with the ability to buy more material goods in the future. A reward must be offered to lenders for not buying and stockpiling bars of gold, barrels of oil, or any other desirable goods or services now as opposed to putting their money in banks or investing it in stocks or bonds or whatever else can earn them a real rate of interest as a reward for offering their savings up for investment by others.
Keynesian economics tries to maintain a mild inflation rate of a percent or two in order to encourage people to save their money in banks and other alternatives that offer a return above the rate of inflation. This is necessary to keep people from simply putting their money under a mattress. If the rate of inflation is one percent and they can earn three percent in a bank, they will bank their spare funds and will, in theory, be able to come out ahead and buy two percent more in the amount of physical goods or services than they had originally put in.
That is how those managing the economic system (like the Federal Reserve representing the banks) try to set things up. It is meant to encourage people to behave predictably and to keep them saving and investing. Under conditions in which in which it is possible to keep the material world always expanding and yielding a production of desirable goods at or above the rate of interest on money saved, this system remains viable and stable. This assumes that the financial system has been well-managed, and that there are no external limiting factors.
Enter Peak Oil
We now live in a world economy that is rapidly approaching the limiting factor of fossil fuel energy sources. The specific limiting factor that is most relevant is a looming shortage of liquid fuel based on petroleum as the total world oil production peaks and declines.
The peaking of world oil production strongly affects the investment equation that underlies the global capitalist economy and rewards investments and savings. The global economy is based on a cheap-oil-related infrastructure for its expansion of the production of real goods. Capitalism requires cheap energy to deliver the exponential expansion of material goods through investments that can pay real interest rates on loans. But this expectation is probably more than the expansion an oil-addicted global production system can really deliver. It changes the system’s economic potential by making it impossible to earn a real rate of return on the money saved by lenders, who in the case of the United States have increasingly been foreign lenders.
The underlying problem is that nobody can think of a way to keep expanding the material production of a global economy that is experiencing a shrinking supply of liquid fuels. These oil-based fuels move almost all goods in our global economy. This economy is based everywhere on the cheap transport of people, goods, and the capital goods needed to expand global production, whether it be by ship, by rail, by road, or by air. When the ability to move almost all goods declines, the expansion of the ability of capitalist investments to exploit nature for human uses must also decline. Read the rest of this entry »
I’ve reposted a nice article which highlights the class dynamics at the heart of the current financial meltdown and potential bailout. It gives a very simple and straightforward summary from a revolutionary point of view, so I’m reposting it.
This is by no means a complete analysis however – for example it overlooks the critical role of oil, which is the lifeblood of the US capitalist economy and motivates many of its military aggression around the world. Specifically, there is a need to understand how the peak in global oil production has affected and continues to undermine the US-led industrial capitalist system, particularly in regards to the bursting of the housing bubble in the first place, along with the rising gas prices, food prices, heating costs, and subsequent inflation of the failing dollar.
Because oil production will never recover to its 2005/6 level, but will continue to decrease more rapidly, there can be no long-term recovery of the global financial markets, and for that reason I disagree with the declaration here that “Capitalism will not collapse…” On the contrary, it WILL collapse, because any system that structurally depends upon constant growth and speculation-upon-that-growth cannot coexist forever on a finite planet where necessary and crucial resources are in permanent and deepening shortage.
The current economic crisis is often compared to other historical crises of capitalism, where after appearing on the verge of death, the system restored itself and came back stronger than ever. Thus we are warned that capitalism is a self-destructive beast, but not a suicidal one. On its face this is solid logic but it overlooks the specific nature of the current crisis and its roots in the global peak oil phenomenon. It is my contention and the purpose of this website to demonstrate that the oil crisis is sucking global industrial capitalism dry like the vampire it is, and that there is no combination of “alternative” energy sources – whether coal, gas, nuclear, ethanol, wind, solar, whatever – that can do for this system what oil does.
Oil is not only the largest energy source, it also provides the material for 99% of pesticides (along with the entire industrial agriculture system), all plastics, almost all pharmaceutical drugs and chemicals, and a massive array of other products and components that keep the industrial economy chugging along. But the real killer is that oil literally fuels almost all transportation of materials and people for this system, including 95% of transportation in the US itself, as well as essentially ALL global air and sea transport. There is simply no way to keep this monster running without more and more petroleum.
Now, just because we’re confident that capitalism won’t recover from the current death-blows doesn’t mean a more vicious and destructive system won’t replace it, which is why this article’s conclusions are relevant and necessary. If we’re headed in the US towards fascism – which is where the rich and their Washington cronies seem to want to take us to protect their wealth and power – the only solution, which will become more and more apparent daily, is to organize a massive resistance here in the US that can stop the vampires and build towards a society based on freedom, justice and democracy.
[alex]
SOME TALKING POINTS ON THE FINANCIAL CRISIS
By Kate Griffiths and Isaac Silver
1. The era of the United States as a “the world’s only superpower” is ending.
The United States economy has not been this bad since the Great Depression. The rulers of the US hoped to retain global power militarily, through the wars in Iraq and Afghanistan, as the country’s raw economic superiority slipped. But these wars cannot be won: opposition among the occupied populations, and growing dissent within the military, prevent any victory on US terms even as the death toll climbs.
2. Beginning during the 1970s, manufacturing stalled, while government and investors focused on the financial sector: banks, real estate, and insurance.
Increasing competition, strong unions, and victories of the Black freedom movement had begun to limit the profits made by US corporations and threaten the power of the ruling class. In response, employers shifted good-paying manufacturing jobs overseas and to nonunionized areas of the USA. As wages stagnated, and workers’ purchasing power declined, workers maintained a precarious hold on our livelihood through working longer hours, sending more household members to work, and buying extensively on credit. The globalization of US capitalism and growth of credit both fueled the financial sector, which provided fluid economic resources that could be quickly moved and re-invested – unlike a physical investment such as a factory or railroad.
3. In 2008, years of government policies favoring the rich provoked instability and sparked collapse of major Wall Street institutions.
As the cost of the basic necessities went up, and wages failed to cover them Read the rest of this entry »
Originally published by the Christian Science Monitor, slightly edited.
Militants step up ‘oil war’ in Niger Delta
Attacks on foreign oil company facilities threaten to disrupt global oil supply.
By Jonathan Adamsfrom the September 17, 2008 edition
Militants in southern Nigeria have sharply stepped up attacks on foreign interests after declaring an “oil war” Sunday. The campaign, which the militants have dubbed “Hurricane Barbarossa,” entered its third day Tuesday with an attack on a Royal Dutch Shell pipeline after attacks on Shell and Chevron facilities in previous days.
The Nigerian government has tried to downplay the threat. But the violence looks set to further disturb oil supplies from Nigeria, the United States’ fifth-largest source of oil, at a time when global supplies are already being squeezed.
Agence France-Presse (AFP) reported Tuesday that the main militant group, the Movement for the Emancipation of the Niger Delta (MEND), said it had “blown up and destroyed” a Shell pipeline. Read the rest of this entry »
this is a nice article explaining the conflict in Georgia. [for the sake of clarity, i don’t agree with everything stated here, but i found the article useful so i’m reprinting it. – alex]
http://northlandiguana.wordpress.com/2008/08/17/georgia-wargeorgia-war/
Georgia’s History
One of the nations in the Russian Tzar’s prison house, Georgia was granted autonomy by the early Soviet Union. It had a Menshivik-led government friendly to Britain and Germany until that government was overthrown by a Bolshevik-supported uprising in 1921. Ultimately it was re-subsumed by the Soviet Union. Stalin, himself a Georgian but hostile to Georgian nationalism, attempted to thin out ethnic Ossetians by encouraging Russians to move into the territory.
Georgia regained independence in 1990, a year before the Soviet Union fell, and claimed Ossetia as part of its territory. The Ossetians fought this attempted subjugation, and South Ossetia became semi-autonomous in 1992 after the pro-Western Georgian government fell and Russia stepped in. Russian peacekeepers have been present in the region since then. Many if not most South Ossetians have Russian passports and consider themselves Russian citizens. In a 2006 referendum with 95% voter turnout, 99% of South Ossetians voted for full independence from Georgia.
U.S. Influence and NATO
The U.S. has been courting Georgia as an ally since 2003, when the CIA played a large part in orchestrating the so-called “Rose Revolution” which overthrew the Stalinist government of Edward Shevardnadze. The U.S. backed the election of Saakashvili in 2004. Since then, the Georgian president has been very friendly with Bush. Last summer joint war games were held in Georgia with U.S. troops from the state of Georgia. Georgia has sent 2,500 troops to Iraq, the third-largest contingent behind the U.S. and Britain. When Georgia invaded South Ossetia, the U.S. immediately provided planes to fly the Georgian troops stationed in Iraq home. Additionally, the U.S. has about 1,000 military instructors in Georgia, who directly command 2,500-3,000 mercenaries, according to Russia. Israel has also sent military advisers and material to Georgia.
The U.S. has been grooming Georgia to enter NATO, which fits with their post-Soviet policy of encircling and isolating Russia to prevent its resurgence as a competing superpower. Read the rest of this entry »
“Peak Oil and Energy Imperialism” by John Bellamy Foster in the latest issue of Monthly Review is at the tip of a growing awareness of Peak Oil among Left intellectuals. I’ve been waiting for this for a few years now, and it’s good to see that people are starting to make the connections between oil scarcity and US imperialism.
Foster is pushing a kind of “Green Marxism” – in fact the Monthly Review as a whole is beginning to focus quite a bit on energy and ecology in its critiques of US empire.
The approach is good – peak oil is examined with calm as an inevitable geological event, “alternative” energy sources like tar sands and ethanol are shown in their true nasty colors, and the reader is presented with the option of allowing the government to continue to assault those unfortunate enough to be born on top of oil reserves, or to work for a new humane world.
However, one place this critique falls short is in (explicitly or implicitly) propagating the notion that awareness of Peak Oil by neo-conservatives in the halls of power is what prompted aggression against Afghanistan, Iraq or Venezuela, and labeling this a “new energy imperialism.”
Unfortunately the capitalist system is far more complex and multi-faceted than that, and the neo-cons, like all US elites, are just tools existing to serve the interests of US corporations and the Pentagon, which they are doing quite well by continuing the same old foreign policy of trying to control the oil-rich Middle East (by force if necessary – with the added bonus of trillions of dollars of contracts for the military-industrial complex). If only it were as easy as pinning our problems on the ideas in the heads of those in power, all we’d need to do to end the crisis would be to put someone with better ideas in power! Sorry, it’s not gonna work like that.
The “energy imperialism” we see today as the US gears up for war with Iran is nothing “new” at all; it’s the exact same system that toppled Mossadegh in 1953, that provided tanks, planes and chemical weapons to both sides of the Iran-Iraq war throughout the 80s, and that has been pouring billions of dollars of military aid into Israel to act as regional policeman for 60 years.
The only thing that’s new is that the system is beginning to fail, and the US is having a much harder time maintaining its dominance over the Persian Gulf region, relying on brute force and direct occupation, and even that isn’t working for them anymore.
What we face is not a “new energy imperialism” but an old energy imperialism, newly being beaten. I see peak oil as a major catalyst in the inevitable crumbling of the US empire, and an immense opportunity for all who desire peace, justice or human rights. [alex]
Peak Oil and Energy Imperialism
by John Bellamy Foster
Originally published by Monthly Review. July/August 2008.
The rise in overt militarism and imperialism at the outset of the twenty-first century can plausibly be attributed largely to attempts by the dominant interests of the world economy to gain control over diminishing world oil supplies.1 Beginning in 1998 a series of strategic energy initiatives were launched in national security circles in the United States in response to: (1) the crossing of the 50 percent threshold in U.S. importation of foreign oil; (2) the disappearance of spare world oil production capacity; (3) concentration of an increasing percentage of all remaining conventional oil resources in the Persian Gulf; and (4) looming fears of peak oil.
The response of the vested interests to this world oil supply crisis was to construct what Michael Klare in Blood and Oil has called a global “strategy of maximum extraction.”2 This required that the United States as the hegemonic power, with the backing of the other leading capitalist states, seek to extend its control over world oil reserves with the object of boosting production. Seen in this light, the invasion and occupation of Afghanistan (the geopolitical doorway to Western access to Caspian Sea Basin oil and natural gas) following the 9/11 attacks, the 2003 invasion of Iraq, the rapid expansion of U.S. military activities in the Gulf of Guinea in Africa (where Washington sees itself as in competition with Beijing), and the increased threats now directed at Iran and Venezuela—all signal the rise of a dangerous new era of energy imperialism. Read the rest of this entry »
The capitalists are beginning to realize their own mortality. How to take advantage?
Published by The Wall Street Journal.
July 1, 2008, 2:56 pm
Peak Oil: IEA Inches Toward the Pessimists’ Camp
Posted by Keith Johnson
What’s up with oil prices? Well, it’s not speculators, and there’s no relief in sight, meaning at least five more years of high prices with no easy fixes. The ugly truth? Peak oil isn’t fringe anymore—it’s going mainstream.
That’s the reading from the latest oil market report from the International Energy Agency, the rich-country energy watchdog. The IEA’s latest x-ray of the oil market includes plenty of disturbing nuggets.
The fact that there are no growing stockpiles of crude around the world, for example, suggests speculators aren’t behind crude’s dizzying rise this year (much to Paul Krugman’s satisfaction and Congress’ chagrin.)
And while U.S. drivers fret and worry over how to pay for the Prius, the sad truth is that it doesn’t matter: By 2015, developing country oil demand will outstrip the rich world’s. They’re already in the driver’s seat: 90% of the demand growth over the next five years will come from Asia, the Middle East, and Latin America, the IEA said.
But the juiciest nugget? The conservative IEA appears to be inching ever-closer to the “peak-oil” crowd. Supply simply can’t keep pace with demand—everybody with an oil well has the taps open, but there’s not much left in the keg. Oil fields are aging quicker than free-agent pitchers, and the global oil industry has to run faster just to stay in place. From the IEA:
Project delays averaging 12 months, coupled with global average decline of 5.2% – up from 4% last year – are the factors behind these revisions. Over 3.5 mb/d of new production will be needed each year just to hold global production steady. “Our findings highlight again the need for sustained, and indeed, increased investment both upstream and downstream — to assure that the market is adequately supplied,” stated [IEA Executive Director Nabuo] Tanaka.
So where’s that fresh supply going to come from? As the IEA noted, Saudi Arabia is the only country with a glimmer of spare production capacity—and the jury is still out on that. Increased domestic drilling, the U.S. energy agency already said, would be but a hiccup in the global market. Non-OPEC countries, from Norway to Mexico, are expected to chip in just 1.2 million barrels per day of new crude by 2013, IEA head of market analysis Lawrence Eagle said—or less than half the global shortfall.
Politicians can pick their bogeyman—be it speculators, OPEC, or Democrats. But more and more it seems like the oil connundrum boils down to an age-old truth: Finite supplies can’t meet infinite demands.
The End of Capitalism 
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