How Oil Prices Will Permanently Cap Economic Growth

Hubbert world 2004Jeff Rubin writes at the Financial Post:

For most of the last century, cheap oil powered global economic growth. But in the last decade, the price of oil has quadrupled, and that shift will permanently shackle the growth potential of the world’s economies.

The countries guzzling the most oil are taking the biggest hits to potential economic growth. That’s sobering news for the U.S., which consumes almost a fifth of the oil used in the world every day. Not long ago, when oil was $20 a barrel, the U.S. was the locomotive of global economic growth; the federal government was running budget surpluses; the jobless rate at the beginning of the last decade was at a 40-year low. Now, growth is stalled, the deficit is more than $1 trillion and almost 13 million Americans are unemployed.

And the U.S. isn’t the only country getting squeezed. From Europe to Japan, governments are struggling to restore growth. But the economic remedies being used are doing more harm than good, based as they are on a fundamental belief that economic growth can return to its former strength. Central bankers and policy makers have failed to fully recognize the suffocating impact of $100-a-barrel oil.

Running huge budget deficits and keeping borrowing costs at record lows are only compounding current problems. These policies cannot be long-term substitutes for cheap oil because an economy can’t grow if it can no longer afford to burn the fuel on which it runs. The end of growth means governments will need to radically change how economies are managed. Fiscal and monetary policies need to be recalibrated to account for slower potential growth rates…

Read more here.

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  • Ted Heistman

    …until we begin to take solar and alternative energy seriously.  We won’t do it if there is no incentive to. There is no incentive when oil is still cheap.

  • Ted Heistman

    …until we begin to take solar and alternative energy seriously.  We won’t do it if there is no incentive to. There is no incentive when oil is still cheap.

    • Anarchy Pony

      You can’t grow the economy on that. It can easily provide enough energy for a steady state, especially if we can shrink the economy and population. But you can’t grow it the way we have been accustomed to without the incredible energy density of fossil fuels.

    • Anarchy Pony

      You can’t grow the economy on that. It can easily provide enough energy for a steady state, especially if we can shrink the economy and population. But you can’t grow it the way we have been accustomed to without the incredible energy density of fossil fuels.

      • alizardx

        That’s an assumption the members of the billionaire class who own a very large portion of the world’s remaining energy reserves and who would lose a large portion of their personal wealth in a “premature” (defined as ANY coal or oil left in the ground) transition to renewables wants you to make.

      • alizardx

        That’s an assumption the members of the billionaire class who own a very large portion of the world’s remaining energy reserves and who would lose a large portion of their personal wealth in a “premature” (defined as ANY coal or oil left in the ground) transition to renewables wants you to make.

        • Ted Heistman

           Right.

        • Guest

          That’s conspiracy theory nonsense.

          And growing the economy in the first place is what’s destroying the biosphere. Never ending growth is the modus operandi of cancer. Don’t pretend it’s a good thing.

          And at no point did I say that renewables aren’t desirable. 

        • Guest

          That’s conspiracy theory nonsense.

          And growing the economy in the first place is what’s destroying the biosphere. Never ending growth is the modus operandi of cancer. Don’t pretend it’s a good thing.

          And at no point did I say that renewables aren’t desirable. 

          • Ted Heistman

             you could possibly base an economy on restoring the environment and grow it that way. It doesn’t have to be a zero sum game where all economic growth must be based on extracting nonrenewable resources.

          • Ted Heistman

             you could possibly base an economy on restoring the environment and grow it that way. It doesn’t have to be a zero sum game where all economic growth must be based on extracting nonrenewable resources.

          • Andrew

            Economic growth is unnecessary.

          • Ted Heistman

             I know because Malthus, Erlich, John Zerzan, Derrick Jensen yada yada yada says so. Right? And you can’t get enough of those guys and can’t stop reading people that agree with them.

            Things will keep growing. Crony Capitalism actually is slowing it down. This is what Humans do. We grow, we innovate, we create, we change stuff, and this will be tied into economic activity.

            This no growth stuff is just a big downer. its like death urge or something.

            There can be an economy based on restoring the environment and fixing all the messes we’ve mad and their will be money in it. We can’t all just live in huts and eat bugs. That’s just a weird green anarchist fantasy.

          • Ted Heistman

             I know because Malthus, Erlich, John Zerzan, Derrick Jensen yada yada yada says so. Right? And you can’t get enough of those guys and can’t stop reading people that agree with them.

            Things will keep growing. Crony Capitalism actually is slowing it down. This is what Humans do. We grow, we innovate, we create, we change stuff, and this will be tied into economic activity.

            This no growth stuff is just a big downer. its like death urge or something.

            There can be an economy based on restoring the environment and fixing all the messes we’ve mad and their will be money in it. We can’t all just live in huts and eat bugs. That’s just a weird green anarchist fantasy.

          • Liam_McGonagle

            But surely you must admit that there are certain physical constants of the universe that make ad infinitum economic growth incompatible with human life.

            We can argue whether the ‘drop dead’ point is at point A or point B along a hypothetical petroleum production curve.  However, that becomes entirely irrelevant when you consider that, even if ignore the depletion rate of oil itself, mankind would boil itself to death simply with the aggregate body heat of a population that large.

          • Liam_McGonagle

            But surely you must admit that there are certain physical constants of the universe that make ad infinitum economic growth incompatible with human life.

            We can argue whether the ‘drop dead’ point is at point A or point B along a hypothetical petroleum production curve.  However, that becomes entirely irrelevant when you consider that, even if ignore the depletion rate of oil itself, mankind would boil itself to death simply with the aggregate body heat of a population that large.

          • Ted Heistman

             Well there’s Buckminster Fuller’s concept of ephemeralization. Things get lighter and lighter. Like for example part of our economy is based on information, the ultimate in ephemeralization. I think if we as a planet get our shit together enough to colonize the galaxy the economic growth will go on pretty much forever. I man maybe heat death is a constraint zillions of years from now…

          • Ted Heistman

             Well there’s Buckminster Fuller’s concept of ephemeralization. Things get lighter and lighter. Like for example part of our economy is based on information, the ultimate in ephemeralization. I think if we as a planet get our shit together enough to colonize the galaxy the economic growth will go on pretty much forever. I man maybe heat death is a constraint zillions of years from now…

          • Liam_McGonagle

            Yes–but it will always take the same # of calories of heat to boil a gallon of water at Earth’s atmospheric pressure.  That will not change ever.

            Given the proven historical fragility of economic paradigms (e.g., Greenland, the Maya, etc., etc., etc.) shouldn’t we get serious about minimizing our ecological impact while we’re waiting for Santa Claus to show up?

            You talk about unprecedented theoretical shifts in technology and resource availability and I’m talking about actual lived experience of whole civilizations dying out en masse because there was always tomorrow to worry about that.

          • Liam_McGonagle

            Yes–but it will always take the same # of calories of heat to boil a gallon of water at Earth’s atmospheric pressure.  That will not change ever.

            Given the proven historical fragility of economic paradigms (e.g., Greenland, the Maya, etc., etc., etc.) shouldn’t we get serious about minimizing our ecological impact while we’re waiting for Santa Claus to show up?

            You talk about unprecedented theoretical shifts in technology and resource availability and I’m talking about actual lived experience of whole civilizations dying out en masse because there was always tomorrow to worry about that.

          • Ted Heistman

             Its not Santa Claus. You aren’t really listening to what I am saying. Its hard for people because I actually have my own  original opinions on things. People just like memorize various ideologies in order to more quickly be able to pigeon hole everyone.

            There are patents owned by Oil companies. Patents that would make energy way cheaper. The problem is monopolies not growth. If you want to think of growth ONLY in terms of being able to burn more and more fossil fuel every year, then yes that will end.

            But there is no reason it has to mean that. Economic growth can be tied to wealth. It should be but its not. Creating wealth is the best means to economic growth. Since the World is really fucked up and filled with poor people and disease, destruction, pollution etc. There is a SHITLOAD of room for economic growth.

            You guys are saying “The only way to do it is the fucked up way, and that won’t last forever so basically we are all fucked.”

            I don’t buy it.

          • Ted Heistman

             Its not Santa Claus. You aren’t really listening to what I am saying. Its hard for people because I actually have my own  original opinions on things. People just like memorize various ideologies in order to more quickly be able to pigeon hole everyone.

            There are patents owned by Oil companies. Patents that would make energy way cheaper. The problem is monopolies not growth. If you want to think of growth ONLY in terms of being able to burn more and more fossil fuel every year, then yes that will end.

            But there is no reason it has to mean that. Economic growth can be tied to wealth. It should be but its not. Creating wealth is the best means to economic growth. Since the World is really fucked up and filled with poor people and disease, destruction, pollution etc. There is a SHITLOAD of room for economic growth.

            You guys are saying “The only way to do it is the fucked up way, and that won’t last forever so basically we are all fucked.”

            I don’t buy it.

          • Andrew

            And I don’t buy that the only alternative to endless economic growth is poverty and death.

          • Ted Heistman

            This from Dimitri Orlov “In praise of Anarchy:

            I have worked in a number of start-up companies, which were quite
            anarchic, in a good way, and were therefore able to invent and to
            innovate. I have also worked in a number of big, established companies,
            with many hierarchies of management, and a laborious approval process
            for any new proposal. These companies couldn’t invent or innovate worth a
            damn, and only continue to exist because the system favors big
            companies

          • Ted Heistman

            This from Dimitri Orlov “In praise of Anarchy:

            I have worked in a number of start-up companies, which were quite
            anarchic, in a good way, and were therefore able to invent and to
            innovate. I have also worked in a number of big, established companies,
            with many hierarchies of management, and a laborious approval process
            for any new proposal. These companies couldn’t invent or innovate worth a
            damn, and only continue to exist because the system favors big
            companies

          • Monkey See Monkey Do

            Where’s your faith? Join the new religion.

          • Monkey See Monkey Do

            Where’s your faith? Join the new religion.

          • Jin The Ninja

             neither do i, nor conversly do i feel the  end of poverty is endless economic growth.

          • Jin The Ninja

             neither do i, nor conversly do i feel the  end of poverty is endless economic growth.

          • Liam_McGonagle

            Tell you what, you show me one instance of a civilization that has coasted along with unbounded growth on one economic paradigm for a zillion years, as you say that’s how long we have until heath death, and then I’ll stop considering that a fantasy.

            On the other hand I’ve referenced multiple actual instances of civilizations actually dying out because they always put off change until tomorrow.

          • Liam_McGonagle

            Tell you what, you show me one instance of a civilization that has coasted along with unbounded growth on one economic paradigm for a zillion years, as you say that’s how long we have until heath death, and then I’ll stop considering that a fantasy.

            On the other hand I’ve referenced multiple actual instances of civilizations actually dying out because they always put off change until tomorrow.

          • alizardx

            The problem isn’t that technology to deal with these problems is impossible.

            Greentech has been an area I’ve been studying for over a decade (I plan to make some) and by and large, environmental problems can be fixed or worked around. At least at the “soft landing” level.

            The problem is political / economic, not due to the laws of physics.

            We are following in the footsteps of those civilizations due to bad decisions made by the elites.

            By definition, the elites are the only people who get to make those decisions.

            “The total annual energy consumption of the United States in 2007 was approximately 100 Quads,[7] less than 0.5% of what is theoretically available from sunlight.” 

            http://en.wikipedia.org/wiki/Solar_power_in_the_United_States

          • Liam_McGonagle

            Can you guarantee a specific rate of technological advancement?  Of course not, because the availability of the raw materials and bursts of intellectual inspiration are utterly unpredictable. 

            Even if they were, I guarantee you that without rigorous ecological management we would eventually be blindsided by a problem we hadn’t even bothered to investigate.  Ask the Maya or the Greenlanders about that.  They weren’t idiots or unfocused.  In fact, if anything they were TOO focused.

          • alizardx

            Can you guarantee a specificrate of environmental disaster?

            Practical answer for survival is create environment favorable for greentech invention. 

          • alizardx

            Can you guarantee a specificrate of environmental disaster?

            Practical answer for survival is create environment favorable for greentech invention. 

          • Andrew

            False dilemma.

          • Andrew

            False dilemma.

          • alizardx

            Explain that in person to a Third World mother who has just buried another child she had due to lack of access to contraception, who died because of lack of access to medical care that would have given that child a prescription which would have cost $5 to fill at Walmart.

            The willingness of people like you to write off the entire Third World and a growing chunk of the First World as sacrifices to your vision is a continuing embarrassment to the environmental movement and a major reason why we can’t get buyin in the Third World for it.

          • alizardx

            Explain that in person to a Third World mother who has just buried another child she had due to lack of access to contraception, who died because of lack of access to medical care that would have given that child a prescription which would have cost $5 to fill at Walmart.

            The willingness of people like you to write off the entire Third World and a growing chunk of the First World as sacrifices to your vision is a continuing embarrassment to the environmental movement and a major reason why we can’t get buyin in the Third World for it.

          • Andrew

            I’m not writing off the third world, and I don’t give a shit if I embarrass the environmental movement.  Economic growth is unnecessary, redistribution of some (not all) wealth is.

          • Andrew

            I’m not writing off the third world, and I don’t give a shit if I embarrass the environmental movement.  Economic growth is unnecessary, redistribution of some (not all) wealth is.

          • alizardx

            “ the world’s top fossil fuel companies are valued at some $7.42 trillion” http://grist.org/climate-policy/2011-12-20-markets-and-climate-change-a-case-of-cognitive-dissonance/  – value based on the assumption that all that carbon gets burned and dumped into the biosphere.

            So you are saying that the idea that oil and coal asset owners oppose transition to renewables on the basis that it would destroy the value of their assets is “conspiracy theory”? Just what do you think the Koch brothers whose money is primarily in fossil fuel assets are spending their PR / lobbying / campaign contributions on? Are they imaginary characters?

          • alizardx

            “ the world’s top fossil fuel companies are valued at some $7.42 trillion” http://grist.org/climate-policy/2011-12-20-markets-and-climate-change-a-case-of-cognitive-dissonance/  – value based on the assumption that all that carbon gets burned and dumped into the biosphere.

            So you are saying that the idea that oil and coal asset owners oppose transition to renewables on the basis that it would destroy the value of their assets is “conspiracy theory”? Just what do you think the Koch brothers whose money is primarily in fossil fuel assets are spending their PR / lobbying / campaign contributions on? Are they imaginary characters?

          • David Howe

            it’s a conspiracy, but it’s not theoretical

          • David Howe

            it’s a conspiracy, but it’s not theoretical

          • http://hormeticminds.blogspot.com/ Chaorder Gradient

            just because most/all of our growth is in an unhealthy manner does not necessarily mean growth is defined as unhealthy; much the same way that looking at growth of a cancer could not be used as evidence against biological growth as a whole.

      • http://hormeticminds.blogspot.com/ Chaorder Gradient

        ideally each implementation of alternative energy is permanent. So while, growth (or sustaining ability) will be slow at first, the cumulative effects of not losing output after, say a well is tapped,  over long periods of time  will only increase. Really one of our biggest problems though is battery technology and storage of energy (and this mayyy not easily be solved)

      • http://hormeticminds.blogspot.com/ Chaorder Gradient

        ideally each implementation of alternative energy is permanent. So while, growth (or sustaining ability) will be slow at first, the cumulative effects of not losing output after, say a well is tapped,  over long periods of time  will only increase. Really one of our biggest problems though is battery technology and storage of energy (and this mayyy not easily be solved)

  • http://buzzcoastin.posterous.com BuzzCoastin

    the article could easily be titled
    How Rising Oil Prices Will Save the Human Race from Extinction

  • http://buzzcoastin.posterous.com BuzzCoastin

    the article could easily be titled
    How Rising Oil Prices Will Save the Human Race from Extinction

  • Angry_Energy_Scientist

    We don’t need to consume anything to have energy. We just need to extract it from space and time itself. As Tesla said; “We need to attached our machinery to the very wheel-work of nature.” The energy will come in the form of electromagnetic energy or electrostatic energy but it can be utilized to produce useful work without consumption. Obviously most of you brainwashed fools will think this is nonsense and just pure quackery, but it’s NOT. Energy is a huge business that generates massive amounts of revenue and the people in control of that business have absolutely no desire to pull apart their empire for our benefit. There are also the dangers associated with unlimited energy and extremely high energy density systems which need to be addressed if we were to move in that direction. We would definitely have some national defense issues to deal with. Also, the laws of thermodynamics are not violated when you have an open system that extracts its energy from the very fabric of space and time. The science is just above a lot of people’s heads and the concepts are very hard for the average laymen to understand. Conspiracy theory this conspiracy theory that, I can hear the idiotic ramblings of a little pony right now.. I fully understand where you people come from when dismiss what I’m saying here. It’s not easy to accept, I get it. So I welcome your thoughts and your justification for me being crazy. :-) 

    It’s frustrating when you KNOW this whole “energy crisis” is a blatant farce. When you understand physics at a fundamental level and you KNOW there are solutions that have been around since start of the industrial revolution. It’s frustrating to see people with absolutely know understanding of physics say these are conspiracy theories and that you’re crazy. But it’s a wonderful feeling to know your right and the haters are all just brainwashed, ignorant, misinformed, uneducated and/or conditioned to respond in a negative way. I love you all, and I would like nothing more than for all of you to live fulfilling lives with the opportunity to pursue what you love. So I feel it is my duty to pound this into your skulls.

    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 

    For fuck sake people, wake up! The world you live in is a lie, the infrastructure, the problems, the solutions presented, all lies and half truths. 

    - Rant end.  

  • Angry_Energy_Scientist

    We don’t need to consume anything to have energy. We just need to extract it from space and time itself. As Tesla said; “We need to attached our machinery to the very wheel-work of nature.” The energy will come in the form of electromagnetic energy or electrostatic energy but it can be utilized to produce useful work without consumption. Obviously most of you brainwashed fools will think this is nonsense and just pure quackery, but it’s NOT. Energy is a huge business that generates massive amounts of revenue and the people in control of that business have absolutely no desire to pull apart their empire for our benefit. There are also the dangers associated with unlimited energy and extremely high energy density systems which need to be addressed if we were to move in that direction. We would definitely have some national defense issues to deal with. Also, the laws of thermodynamics are not violated when you have an open system that extracts its energy from the very fabric of space and time. The science is just above a lot of people’s heads and the concepts are very hard for the average laymen to understand. Conspiracy theory this conspiracy theory that, I can hear the idiotic ramblings of a little pony right now.. I fully understand where you people come from when dismiss what I’m saying here. It’s not easy to accept, I get it. So I welcome your thoughts and your justification for me being crazy. :-) 

    It’s frustrating when you KNOW this whole “energy crisis” is a blatant farce. When you understand physics at a fundamental level and you KNOW there are solutions that have been around since start of the industrial revolution. It’s frustrating to see people with absolutely know understanding of physics say these are conspiracy theories and that you’re crazy. But it’s a wonderful feeling to know your right and the haters are all just brainwashed, ignorant, misinformed, uneducated and/or conditioned to respond in a negative way. I love you all, and I would like nothing more than for all of you to live fulfilling lives with the opportunity to pursue what you love. So I feel it is my duty to pound this into your skulls.

    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 
    WE ALREADY HAVE THE SOLUTIONS TO SOLVE ALL OF OUR ENERGY PROBLEMS! 

    For fuck sake people, wake up! The world you live in is a lie, the infrastructure, the problems, the solutions presented, all lies and half truths. 

    - Rant end.  

    • Andrew

      Please submit a post or link about how to extract energy from spacetime.

    • Andrew

      Please submit a post or link about how to extract energy from spacetime.

      • Simiantongue

        1. Build space time machine that you cannot possibly comprehend.
        2. Extract energy from it.
        3. ????
        4 Profit!!!
         

      • Simiantongue

        1. Build space time machine that you cannot possibly comprehend.
        2. Extract energy from it.
        3. ????
        4 Profit!!!
         

    • Sonnenritter

      You’re a wild-eyed goof, not a scientist. The real scientists are discussing this issue in places like TheOilDrum, not fucking disinfo.com.

    • Sonnenritter

      You’re a wild-eyed goof, not a scientist. The real scientists are discussing this issue in places like TheOilDrum, not fucking disinfo.com.

  • Hadrian999

    another 50 years of growth will see us all in our graves. the earth’s human population will double every 54 years ant it’s current rate of growth. we have finite space to live in and a finite amount of natural resources,  economic theories and cheap energy wont change that. unless sci fi space travel and planet colonization become a reality we have to reach a point at which we stop growing and reach balance

  • Hadrian999

    another 50 years of growth will see us all in our graves. the earth’s human population will double every 54 years ant it’s current rate of growth. we have finite space to live in and a finite amount of natural resources,  economic theories and cheap energy wont change that. unless sci fi space travel and planet colonization become a reality we have to reach a point at which we stop growing and reach balance