Idiot America: The Keystone Pipeline "Controversy"

As I've said here repeatedly, sometimes you really have to shake your head at the sheer idiotic depths this country has sunk to. Though it really isn't a big surprise, newly (re)installed Senate Majority Leader Mitch McConnell just announced that the new Republican Senate's VERY FIRST PRIORITY will be to pass a bill forcing approval to allow the TransCanada corporation to build the controversial Keystone Pipeline. That's right, with all the many problems facing America these days, many of our current elected "leaders" believe that enacting a law that will enrich a FOREIGN COMPANY is the most important thing that needs to be done.

McConnell's announcement is supremely stupid on many levels. Let's start with the fact that the State Department is expected to render a final decision on Keystone later this year after a court case in Nebraska over the pipeline's proposed route is resolved. In other words, there is a chance--probably a very GOOD chance--that the pipeline will be approved in just a few months anyway. THEN there is the little matter of collapsing oil prices, which if they remain at or near their current levels for awhile will likely cause a shutdown of Canadian tar sands production--meaning there could very well be no oil to ship through the pipeline ANYWAY. Oh, and let's not forget that one of the supposed reasons to approve the pipeline--to help the U.S. become less reliant on Middle Eastern oil--totally contradicts all of the crowing in conservative circles about how our own domestic oil shale production is turning us into "Saudi America."

But let's put all of that aside for a moment and consider what it is that is really going on here--namely more sound and fury in the ongoing and sadly successful effort to convince American citizens consumers idiots that there really is a difference between the two parties and that American representative democracy is not in fact dead as a doornail. The biggest reason McConnell and company are making Keystone their top priority is that their troglodyte conservative base DESPISES environmentalists and right now this is the best way to very publicly score political points and stick it to the environmental movement. Forcing Obama to veto the bill (assuming he does) would allow the Republicans to demonstrate how they differ from blue tribe (Obama, of course, would no doubt prefer to sit back and allow the State Department to take the final decision out of his hands).

On the other side of the equation, the environmental movement has been almost as stupid in making the defeat of Keystone such a big (ahem) cornerstone of their own agenda. Even if the pipeline is never built and assuming oil prices quickly rise back into the territory that makes tar sands production economically viable once again, Canada has already indicated that it will build an alternative pipeline on its own soil since much of the tar sands oil is slated to be shipped out to Asia anyway. Assuming the dip in oil prices is short lived, an Obama veto would be at best a pyrrhic victory for the environmental movement. But hey, at least the Democrats would then have their very own "accomplishment" to sell to their idiot base as a reason to keep supporting them. After all, they'll need SOMETHING to point to in 2016 to try and claim that voting for Hillary is a better choice than voting for Jeb.


Bonus: So who's drinking WHOSE milkshake?

Ha-Ha! Fracking Chesapeake Energy In Dire Fiscal Straits

Here is a story that really warmed my heart, if for no reason than because I am a cynical, cold-hearted SOB. CNN Money has the details:

Can Chesapeake Energy's chief executive pull yet another rabbit out of his hat?

To plug what's been estimated as a $9.2 billion gap between Chesapeake Energy's 2012 capital expenditures and its cash flow, CEO Aubrey McClendon needs to sell assets fast.

Record low natural gas prices have the potential to bankrupt a highly indebted company that was built on $4 natural gas. As natural gas prices hit 10-year lows in recent months, that's put Chesapeake on thin ice.

McClendon has said that Chesapeake plans to sell up to $17 billion in assets by the end of 2013 to fill that gap, but analysts and M&A advisors question whether Chesapeake's assets are worth as much as McClendon claims.

While Chesapeake has valuable assets, it's unlikely to be a takeover target because it also has a heavy debt burden of roughly $10 billion, say analysts.

McClendon and Chesapeake came under fire this week after Reuters reported that McClendon took roughly $1.1 billion in personal loans against his stake in Chesapeake wells.

Low natural gas prices, however, are not the company's only problem:

Yet Argus' Weiss noted that there's only so much that Chesapeake can cut because they could lose leases on production sites if they don't make investments in them. "Since 2001, their capital expenditures have always exceeded their cash flows," said Weiss.

McClendon has built a track record on buying oil and gas wells and selling them for a profit. The company recently sold assets for $2.6 billion to three groups of buyers.

"That's what they're good at, buying stuff and selling it at a higher price," said Subash Chandra, an oil and gas analyst at Jefferies Group.

Hmmm...you know what that business model sounds like? The mortgage, real estate and home construction industries during the housing bubble years. Buying stuff at a lower price and selling it at a higher price is a great business model...until you run out of greater suckers. THEN, you're fucked.

It also doesn't do anything whatsovever to improve the overall economy. Being an expert "flipper" of any asset may make a person rich provided they know enough to bail out before the fall, but all they really are is a scavenger getting fat on the excess of wealth that is sloshing around during times of prosperity.

The real problem for the fracking industry, aside from the numerous environmental concerns about the practice, is that production grew so fast that it caused the bottom to fall out on natural gas prices. Now you know why there was so much pressure on the Federal Energy Regulatory Commission to approve a natural gas liquefaction and export terminal in Texas as I posted about here last week.

In the end, the entire fracking industry appears to be in trouble:

Overall, investors remain a bit befuddled by how Chesapeake accounts for interest expenses and where profits come from.

"They're spending a lot of money and the money they're making seems to be coming from raising more money," said Daniel Yu, a private investor who has been studying the company but does own any shares or short positions on Chesapeake.

Like many of its competitors, Chesapeake must wrestle with a new world of $2 and under natural gas prices. "If gas stays at $2, there's not a single company out there that's prepared for it," said Chandra.

So we allowed the fracking industry to go crazy with little regulation despite having no idea what the real risks of the process are just so it could oversupply the market at put its own future in jeopardy. What a brilliant fucking culture we are.


Bonus: Sounds like the fracking industry lost on Jeopardy

Another U.S. Government Sellout: Fracking For Export

It's bad enough that rampant natural gas fracking is being allowed in the U.S. despite the negative environmental impacts of the process as well as the risk of earthquakes. Because natural gas is difficult to export, however, one could at least argue that fracking is helping to reduce America's dependence on foreign energy sources. But now all of that is about to change thanks to the fact that the U.S. government has become a wholly owned subsidiary of the corporations. Here is CNN Money with the details:

The government approved the first ever natural gas export facility in the lower 48 states on Monday, clearing the way for a project that could be a significant job creator.

But critics argue that, just like the Keystone pipeline expansion, building this project will have environmental impacts far beyond the plant itself. They also say it could raise the price of natural gas in the U.S.

The Federal Energy Regulatory Commission voted in favor of Texas-based Cheniere Energy's plan to build a giant natural gas liquefaction and export terminal at Sabine Pass, which straddles the Texas-Louisiana boarder just north of the Gulf of Mexico.

Well, so much for the argument that fracking is helping to make America more energy secure. Surprise, surprise, that argument is and always was complete bullshit. Instead, it's all about the Benjamins:

Cheniere says the plant itself and the natural gas extraction needed to fuel it will support between 30,000 and 50,000 jobs a year.

The United Sates is currently experiencing a boom in natural gas production, largely thanks to the controversial process of hydrologic fracturing, or fracking for short.

All the big oil companies, including BP, Exxon Mobil, and Royal Dutch Shell, are now participating in the boom.

But the surge in production -- without any way to export it -- has caused a collapse in natural gas prices in the U.S. The gas industry sees exports as crucial to keep the boom going, along with the thousands of jobs the boom has created.

Natural gas can command five times the U.S. price in Asia or Europe. It can be used as a home heating fuel, burned to make electricity, or used in chemical or fertilizer production.

Notice how they lamely try to justify this action by claiming it will create jobs. Not withstanding the fact that, just like with the Keystone Pipeline, the job creation estimates are no doubt greatly overinflated, there is this little problem:

Cheniere's application was the first the government approved. Applications for seven other facilities around the country are pending. If all are approved, the nation could end up exporting one-fifth of its current gas output.

That's something critics are working to stop.

Fracking is a big reason why. Opponents say an increase in gas exports will lead to an increase in fracking.

Fracking involves injecting sand, water and chemicals deep into the ground to crack the rock and allow the gas to flow more freely. Some fear it is contaminating the ground water and leading to earthquakes.

Critics also say it could lead to an increase in natural gas prices in the U.S.
That could harm not only consumers who may pay more for heat, but also manufacturers that could pay more for electricity and materials.

That "could potentially have catastrophic impacts on U.S. manufacturing," said a report on the matter from House Democrats on the Natural Resources Committee.

Which would no doubt destroy far more jobs than will be created in the fracking industry. So all of the risks that the American public is being asked to run by allowing fracking to continue are not even being borne to benefit them, and what's more, their own elected government is the one selling them down the river. Too bad so many of them are hooked on American Idol, Dancing with the Stars and the NFL and will never notice until the day a fracking-generated earthquake drops the roof right down on their fucking thick skulls.


Bonus: Now you know what it is like to live in an exploited colony

Ohio Quakes Linked to Oil-Drilling Waste Pumped Into Wells

Okay, so technically the recent earthquakes in Ohio were not the result of fracking, but check out the key passage in this USA Today article about the quakes:

Oil-drilling wastewater pumped into a northeast Ohio well "almost certainly" triggered 11 minor earthquakes around Youngstown since last spring, including one Saturday, a seismologist tells the Associated Press.

Ohio officials closed four inactive "fluid injection" wells within a five-mile radius of the Youngstown well, which is near a fault that geologists apparently weren't aware of. Pressure from the wastewater caused the fault to shift.

Northstar Disposal Services has used the wells to dispose of brine wastewater from shale oil and gas drilling, which officials said is different from so-called fracking, the Youngstown Business Journal and AP report.

Despite the disclaimer, The Christian Science Monitor writes that the disposal wells -- and the earthquakes -- are related to fracking, or hydraulic fracturing ("How fracking caused an Ohio earthquake").

The seismologist interviewed by the AP, John Armbruster of Columbia University's Lamont-Doherty Earth Observatory, said more minor shakes can be expected throughout 2012.

"The earthquakes will trickle on as a kind of a cascading process once you've caused them to occur," he said. "This one year of pumping is a pulse that has been pushed into the ground, and it's going to be spreading out for at least a year."

"...which is near a fault that geologists apparently weren't aware of..." in other words they were tampering with the geology of a potentially unstable area and had no idea about the risks they were taking. If they had no idea this fault line was there, how many other fault lines in potential fracking zones around the country do they have no idea about?

What is it going to take to stop this insanity, the accidental triggering of a major earthquake in a large metropolitan area? And before you scoff and say that can't happen, I would simply ask this question: how do you know? The science of earthquakes is still not well understood and they have yet to be predicted with any degree of accuracy. For all we know, every day that fracking and other injection techniques being used to extract oil and natural gas is placing us at risk of a major catastrophe. Do you want to be living in the area where the fracking equivalent of the Deepwater Horizon disaster takes place? Because I sure don't.

We should stop this madness once and for all and accept the fact that extending our fossil fuel supplies by a few years is not worth the risk of touching off a major earthquake, especially since we are eventually going to be forced to power down one way or another. But of course we won't. We're on a highway to hell, barreling at top speed with the brake line severed.


Bonus: "No stop signs...speed limits...nobody's gonna slow us down"

Household Electricity Bills Skyrocket

Does it feel like your electricity bill has been going nowhere but up lately? You're not alone in that feeling. Just as the Great Recession has been taking a huge bite of of the finances of tens of millions of American households, electricty costs have deviated from their historic norms and are also putting pressure on family budgets, as reported by the USA Today:

Electric bills have skyrocketed in the last five years, a sharp reversal from a quarter-century when Americans enjoyed stable power bills even as they used more electricity.

Households paid a record $1,419 on average for electricity in 2010, the fifth consecutive yearly increase above the inflation rate, a USA TODAY analysis of government data found. The jump has added about $300 a year to what households pay for electricity. That's the largest sustained increase since a run-up in electricity prices during the 1970s.

Electricty is consuming a greater share of Americans' after-tax income than at any time since 1996 — about $1.50 of every $100 in income at a time when income growth has stagnated, a USA TODAY analysis of Bureau of Economic Analysis data found.

Greater electricity use at home and higher prices per kilowatt hour are both driving the higher costs, in roughly equal measure:

•Residential demand for power dropped briefly in 2009 but rebounded strongly last year to a record high. Air-conditioners and household appliances use less power than ever. A new refrigerator consumes half the electricity as a similar one bought in 1990. But consumers have bigger houses, more air-conditioning and more electronics than before, outpacing gains in efficiency and conservation.

As in many other areas of the American economy, aging infrastructure is a big factor causing the increase in costs:

Duke Energy says the rate increase is needed to pay for replacing old power plants and making the transmission system more reliable. The Charlotte-based utility has reached a tentative agreement with North Carolina to raise rates 7.2% in February, lower than its original 17% request.

"The industry as a whole is facing higher costs because we're retiring our aging fleet" of power plants, says Duke Energy spokeswoman Betsy Conway.

All of which is going to be yet another drag on consumer spending, which makes up about 70% of the American economy. That means there are soon going to be more abandoned shopping malls like the one I wrote about this morning.

Another Solar Panel Company is in Deep Trouble

It really is amazing that at a time when world oil prices remain in the triple digits that solar panel companies seem to be dropping like flies. Here is a recent report on the latest casualty:

Energy Conversion Devices Inc. said late Tuesday it plans to furlough 400 workers as it temporarily halts production of solar energy products, and plans to lay off another 500 employees across the company by the end of 2011.

The Auburn Hills-based company said the furloughs include more than 140 employees who last week were given temporary layoffs at United Solar Ovonic plants in Greenville, plus manufacturing employees in Ontario and Mexico, citing high inventory levels.

"As we sell through that inventory, we'll resume production," said Michael Schostak, a company spokesman.

High inventory levels were also cited in a similar story I reported here two weeks ago about First Solar. Clearly, solar panels are not selling like hotcakes despite high energy prices. For Energy Conservation Devices, the news gets even worse:

The company posted a net loss of $306.4 million in the 2011 fiscal year ended June 30, including a net loss of $42.1 million in its fiscal 2011 fourth quarter.

Some analysts have said the company could be heading toward bankruptcy.

"Bankruptcy continues to become more and more likely, although it still is possible ECD could make it through the next year," Morningstar Inc. analyst Stephen Simko wrote in a late August note to investors.

I would never pretend to call myself an expert on solar energy, but it should be plainly obvious that there are very serious problems in an industry that despite government tax incentives and loan guarantees is unable to find profitability at a time when it ought to be booming.


Bonus: Just because I'm feeling a little goofy.

When the Police Run Out of Gas

From down in North Carolina, we have a new spin on the old storyline of cities and towns cutting back on municipal services:

SMITHFIELD --Police say they'll stop responding to some 911 calls and stop investigating misdemeanors if the town doesn't increase funding for gasoline - the latest episode in a standoff between the police chief and Town Council, which is trying to save money.

It's also the latest sign of how tight municipal budgets are impacting services throughout the Triangle.

On Tuesday, the Smithfield Police Department will present dire predictions of how an austere budget could leave police cars in park.

Those of us who are peak oil aware already realize, of course, that it is the underlying cause of the economic crisis that has left so many towns and cities are strapped for cash. But it is still unusual to see the fuel supply for a police department actually under threat. Here are some of the juicy details of what is happening in this unfortunate town:

Police Chief Michael Scott will ask the town council to let him use $30,000 of office supply and equipment repair money to pay for gas. He says his department has already cut patrols, halving the numbers of cars on the street at certain times.

Scott said three recent crimes might have been prevented with more patrols - the armed robbery of a convenience store, the theft of tires and rims from a car dealership and a major cocaine bust.

"Those things can all be directly related to patrol issues," he said, adding that he's gotten complaints about the reduced patrols. Some callers have asked if they should buy guns to protect themselves.

I'd have to say, yes, those callers probably should buy guns to protect themselves, with the caveat that they also get properly trained in how to use said guns. Because the last thing we need is a neighborhood shootout between a bunch of nervous, paranoid and woefully inept firearms-toting homeowners.

Lest you think this is merely a local story, the article continues:

Law enforcement agencies around the country have seen budget cuts this year. Here in North Carolina, the state Highway Patrol is coping with an $8 million reduction, and they've stopped training new cadets as part of a hiring freeze. The city of Raleigh recently delayed police and fire academies by six months.

The sad part here is that state and local governments as well as the citizenry they serve are treating these situations as if they are merely a temporary condition, when in fact they are a very early sign of much worse to come. So yes, go out and get yourself some form of personal protection if you don't already have it. But if you do please make sure you know how to properly use it. Your very life could depend on it.

Life DURING the Oil Crash

It was around one year ago today that former Peak Oil writer and activist Matt Savinar pulled the plug on the old Life After the Oil Crash forum and went off to become a professional astrologer. It was one of the weirdest spectacles of someone turning their back on their life’s work I have ever witnessed. I have no idea why Mr. Savinar chose to do what he did, but I suspect that perhaps after years of predicting the demise of our cheap oil-based civilization he simply got tired of waiting around for it to happen.

I actually owe Matt Savinar an extreme debt of gratitude. Whatever foibles caused him to flame out in such a spectacular manner, I learned a lot during the two plus years I was a member of LATOC. Though I have clear childhood memories of the 1970s oil shocks and have always harbored a lingering suspicion that something was very wrong with our modern society, I didn’t actually become aware of peak oil until I read Jim Kunstler’s book, The Long Emergency, in February 2008.

Those were scary times. Oil prices had just entered triple digits for the first time, and wild predictions that it would soon hit $200 or $300 seemed eminently plausible. I joined LATOC soon after finishing Kunstler’s book, and was grateful to find an online community that recognized the seemingly imminent catastrophe. That summer oil spiked to $147 a barrel, and when the financial world began to fly apart during September in the wake of the Lehman Brothers collapse, I figured it would only be a manner of months until Mad Max himself came riding over the horizon.

Well, as we all know, the fast crash didn’t happen. Our so-called “leaders” belatedly recognized the danger and pulled out all of the stops to prevent it. Since then, we’ve been living in an economic never-never land, in which if you are still employed all seems normal—except that the normalcy is being purchased by massive amounts of unsustainable government debt.

As time has passed, my own personal panic about the onset of peak oil and resource depletion has abated, and I’ve come to recognize that a complete collapse of our modern civilization will likely not happen for quite some time yet. Kunstler smartly called it a LONG emergency for a good reason. Like with ancient Rome, what took centuries to construct is unlikely to come flying apart overnight.

Perhaps the biggest mistake Matt Savinar made was calling his now-defunct website Life AFTER the Oil Crash. It should be pretty clear by now that although we have entered the initial stages of the end of the cheap oil era, it is going to be a long time--likely several decades--before we reach the point of a completely powered down world. Instead, it is more accurate to call this period we are now living in Life DURING the Oil Crash.

So welcome to LDTOC. What a long, strange trip it's been, and will no doubt continue to be.

Yet Another City is Turning Off Its Streetlights to Save Money

In the latest of a recurring theme of stories over the past few years, the Detroit suburb of Highland Park recently announced that is was shutting off over half of its streetlights due to unpaid electricity bills. Here's the Detroit Free Press with the story:

DTE Energy has finished removing more than half of Highland Park's street lights in a city-approved plan to pay off $4 million in unpaid lighting bills.

DTE Energy spokesman Scott Simons said today that the company removed 1400 light poles and put in 200 poles, replacing them with improved technology at intersections. DTE workers completed the project in late September, he said. There are now 500 streetlights left in the city, Simons said.

Mayor Hubert Yopp said today that he looked at crime statistics and felt the move was the best option for the city.

"We’re trying to keep (costs) down so the taxpayers don’t have to pay extra money," Yopp said. He said city council approved the plan earlier this year.

Highland Park has been unable to pay a bill in full for at least five years, sending only partial payment on $60,000-per-month streetlight fees, Simons said. DTE and city officials agreed on the current plan in May, which will reduce costs to about $15,000 per month, Simons said.

Streetlights are such a commonplace feature of our modern infrastructure that you don't even think about them. Until they get turned off, that is. Taken in isolation, this is just one little story about one struggling community tightening its belt in the age of austerity. But taking the larger, long term view, there is no doubt that, as the picture above shows, it's a sign of things to come for the rest of the country.

Peak Coal Hits Appalachia

image: West Virginia coal mine, circa 1908

For much of the past decade, coal has been touted by industry flacks and in the media as being the answer to America's future energy needs. Among the notions tossed about during these discussions is the laughable Orwellian concept of "green coal" as well as the idea that we have "a couple of centuries" worth of the stuff still in the ground.

Well, somone might want to review that second talking point, because as pointed out in a recent article that appeared in the Huffington Post, production in America's oldest coal region is dropping fast:

When business screeched to a halt at Jerry Howard's eastern Kentucky mine engineering company two years ago, he decided to call it quits after four decades in the coal industry.

"We were sort of forced out," Howard says of the former company, Walturn, where he was part owner.

Business owners like Howard, politicians and miners in the hilly coalfields of Central Appalachia blame the industry decline on tougher regulation from the Obama administration. They aren't as ready to talk about something a change in administrations cannot fix. The region's thick, easy-to-reach seams of coal are running out, forcing many operators to shift to cheaper and more destructive mining methods that draw heavier environmental regulation.

Coal here is getting harder and costlier to dig – and the region, which includes southern West Virginia, Virginia and Tennessee, is headed for a huge collapse in coal production.

The U.S. Department of Energy projects that in a little more than three years, the amount of coal mined here will be just half of what it was in 2008. That's a significant loss of a signature Appalachian industry, and the jobs that come with it.

"The seams of coal that are left in this area are harder and harder to mine, and they're thinner and thinner and thinner," said Leonard Fleming, a retired Kentucky miner and union leader in Letcher County who worked in the industry for 32 years.

Wow...a 50% crash in production in just seven years sure sounds like Appalachia has hit Peak Coal, all right. As we peakists say about oil, the peak comes when most of the easy to obtain and cheap to produce stuff is all gone, leaving the more expensive and difficult to extract portion behind. And that is clearly what is going on here, or as it was summed up at the end of the article:

Justice said when he was just getting into the business, an old veteran of the mines gave him some words to live by.

"He said, `The number one rule in mining is you mine the best and then what's left is the best,'" Justice said. "They've been mining coal here in the valley for about 100 years. And the first day the first guy mined the best lump of coal he could find – that was the easiest to get."

So What Happens if the "Bumpy Plateau" Lasts for Another Decade?

In his most recent Saturday Oil Report, blogger Dave Cohen of Decline of the Empire wrote the following as part of his analysis:

I am not among those who believe peak oil will cause the End of the World sometime soon. I expect global oil production...to remain on a bumpy plateau through 2020, which is as far out as I am willing to look. I also expect American oil production to stay on a bumpy plateau over the same period. A global production plateau will not result in civilization's demise, but it will certainly constrain economic growth if another demand shock occurs. I've been thinking of calling off my prediction that we'll have another oil price shock next year. A global depression seems to be imminent. We'll see.

For the record, my own position is that absent a catastrophic geopolitical event such as a nuclear conflagration, Dave Cohen is probably going to be proven correct, with one caveat...the political stability of Saudi Arabia is absolutely crucial to the world being able to maintain oil production at the plateau levels. If at some point an internal revolution overthrows the Saudi monarchy and takes offline the production of the world's most important oil producer--and the only one with a significant amount of apparent reserve capacity--then all bets are off. The U.S. and NATO would no doubt intervene were that to happen, but as in Libya there would be no way to prevent a substantial disruption of Saudi oil supplies for an extended period.

Putting all of that aside, the possibility of the status quo in energy production being maintained for another decade got me to thinking about what the likely effects on our society are going to be. Already, just three years into the Great Recession, the social and economic fabric in America is becoming frayed.

Whether you sympathize with the Tea Party or Occupy Wall Street, or neither one, it must be acknowledged that the real motivating force behind both movements is the sense on behalf of certain segments of our population that the prosperity they have enjoyed is slowly being taken away from them. From that perspective, both movements appear to be merely the opening salvos of what is likely to be increasing social unrest within the United States despite the propaganda efforts of the media aimed at preventing it.

On the political front, it is already painfully evident from the presidential campaign and the recent debt ceiling debacle that the system is already broken beyond repair. Just this weekend, it was reported that the federal deficit again topped $1.3 trillion for Fiscal Year 2011 that ended on September 30th. Since the end of Fiscal Year 2008, the national debt has increased by around $4.8 trillion. To put that number in perspective, according to the U.S. Treasury's own figures the total national debt did not exceed $4.8 trillion until the very end of 1994, meaning that the U.S. has racked up as much debt in just the past 3 years as it did in its first 218 years. And that was just to prevent the economy from completely imploding.

All of this says to me that America is likely to undergo a financial and political collapse well before it experiences chronic energy shortages. The system is currently being propped up by massive amounts of debt, which can only be serviced in the long run if there is continued economic growth. Given that the lack of increase in energy production makes real economic growth impossible, at some point the current system is going to implode.

But that does not mean the government is going to go away and that citizens will be left to their own devices. Quite the contrary, I expect that within the next decade the facade of representative democracy will be stripped away to be replaced by a naked authoritarian regime. Under such conditions, we can expect that the government will come to increasingly control most of the remaining available resources, likely in conjunction with the corporate elites. Anyone who doubts that the government will be able to accomplish this should look no further than the example of Nazi Germany circa 1943 and 1944, when that country's munitions production peaked despite suffering massive aerial bombing and the fact that it should have been obvious to any sentient observer that the war was already lost. Never make the mistake of underestimating what any government can do to preserve itself when it feels it is being backed into a corner.

As time goes on, daily life is going to progressively suck worse and worse for the average person. The unprepared majority will likely continue to slog along, working ever more desperately for less and less reward until such time as they eventually get laid off for good and tossed upon the unemployment scrap heap. Expect that without an increase in economic growth to line their pockets, the elites will accelerate their project of strip mining the wealth of the working and middle classes.

Over the next decade, America will increasingly resemble a third world nation, with tiny pockets of well fortified elite prosperity existing within a sea of ever increasing poverty and desperation. I actually saw a preview of what such a society might resemble last year on a trip to the resort town of Sharm El-Sheikh in Egypt, where the number of cops on the streets actually exceeded the number of tourists. Yes, just a few short months later the Egyptians revolted against the hated President Mubarak, but by all accounts his removal has done little to improve the lot of the average Egyptian.

America crossed a very important threshold in 2008, which was the changeover from 232 years of long term economic growth to an era of permanent economic contraction. Looked at from an historical perspective, it makes sense that what took more than two centuries to build up is going to take more than a handful of years to tear down. The demise of the Roman Empire took well over three centuries after peaking under Emperor Hadrian in the second century A.D. until the barbarians finally stormed the gates for the last time. Our decline and fall will no doubt be greatly accelerated in this age of instant communication and weapons of mass destruction, but it is still very unlikely to happen overnight.

Time Out for an Update on World Oil Production

Link: http://gregor.us/policy/limits-to-keynesianism/

Every once in awhile, I need to remind myself that The Downward Spiral is intended, first and foremost, to be a Peak Oil blog. Sometimes, I get so wrapped up in crabbing about politics, government, the media and related stupidity that the Peak Oil issue tends to fade into the background.

So today, I'm rectifying the situation by posting the above chart from the excellent Gregor.us blog showing the world's oil production for this past decade (mbpd stands for Millions of Barrels Produced Per Day). As you can see, oil production peaked in 2005 and has essentially been flat ever since. If you want to know why the governments of the OECD countries have been so desperately trying to pump up their economies with massive amounts of borrowing in recent years, look no further than the above. It also demonstrates exactly why they will fail, as debts cannot be serviced if the economy does not grow, and the economy will not grow unless the supply of available energy grows. It really is just that simple.

At this point it remains uncertain as to how long the world will continue to bump along this oil production plateau before finally entering terminal decline. A number of of the most knowledgeable analysts, including Tom Whipple, have estimated that it will occur beginning in 2014. If so, we will likely experience the continuation of "extend and pretend" by OECD governments for a few more years before the shit really starts to hit the fan.

Prepare accordingly.