Singapore Peak Oil

Geologist Colin Campbell made a number of astute observations in this 2005 video interview (below) about oil and the financial system. We have to wake up to the fact that we are nearing or at the end of growth.

The boom time of the last 50 years was based on cheap oil which is now coming to an end. The end of growth threatens to bring down our debt-based monetary system which is founded on economic growth to pay off interest-bearing debt obligations.

We can expect decade-long, unprecedented market gyrations and volatility as central bankers resort to every trick in the economic textbooks and their magic bags to starve off a recession. They will ultimately fail because unlike credit, they can't create oil and natural resources out of thin air.

Dear bankers, welcome back to biophysical reality.

Unfortuantely, the growth mentality is still deeply entrenched in our government as can been seen from the Prime Minister's speech in Parliament (27 May '09):

At the broadest level, our approach to economic development and to growth remains valid. We have to stay open to trade and global competition.

So the question is how do we encourage energy conservation to grow more sustainably and to be less affected when energy prices go up from time to time, all in the long term?

The Workers’ Party chief and Hougang MP defended the long-held growth model, saying in Mandarin: ‘I believe it is correct to attract foreign investments to encourage competition in a free market, to open up our market and to go global and…integrate with the global economy.’

Colin Campbell Interview:

The first half of the age of oil saw the rapid expansion of industry, transport, trade, agriculture - all of those things allowed the population to expand six-fold. So you have this enormous and brief chapter in history of this rapid expansion, and included in that thing is financial capital....

..the banks lend more than they have in deposit...the banks had confidence that the resulting expansion of all of this investment in debt and loans and everything was sufficient collateral for today's debt...

So expansion tomorrow covered the debt of today.

..But unseen by anybody or unrecognized was that this expansion was not just money. It was the good old cheap energy (oil) to make the wheels turn and do everything. So we now face a situation when the bankers begin to wake up and say "well this expansion cannot go on anymore without the cheap energy to make it happen". That means that the massive amount of debt throughout the world is loosing its collateral...

...[Bankers] will wake up and say "we got bad debt on our hands"....

Every single company market quoted on the stock market have a tacit business-as-usual assumption of continuing cheap easy oil such as they have known in their business. So once you realise that this cheap abundant easy oil isn't there, that tells you that virtually every company quoted on the stock market is now overvalued. There has to be some radical readjustment and capital really has to be reduced in some way to match the declining energy supply that on which it eventually depends. So this is the kind of crisis that is staring us in the face...

The geoscientist who proposed the peak oil theory in 1956, Marion King Hubbert, and correctly predicted oil production to peak in the U.S. in 1970, was also sharp enough to grasp the significance of his theory on economics, money, and industrialization. It is puzzling why our economic policymakers do not see the big picture: that the last 100 years of exponential growth in population and industrial output is, what Hubbert would call, an "aberration". Hubbert was trained as a geologist, yet he probably had a better idea of what sustainable monetary policies and economics ought to be. He was a great visionary.

Our politicians formulate their policies around the growth model which must fail at some point due to limiting factors such as land, energy or water. In medicine, uncontrolled growth of abnormal tissue cells in the body and the invasion by these cells into nearby tissue is known as cancer; on the contrary, in conventional economics, growth without boundaries which upsets our ecological balance is known as a panacea for all our social and economic ills. How ironic.

Hubbert quotes:

http://www.mkinghubbert.com/tribute/quotes

Hubbert on the burgeoning world population: "[Its] an aberration. For most of human history, the population doubled once every 32,000 years. Now it's down to 35 years. That is dangerous. No biologic population can double more than a few times without getting seriously out of bounds. I think the world is seriously overpopulated right now. There can be no solutions to the world's problems that do not include the stabilization of the world's population."

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http://www.oilcrisis.com/hubbert/monetary.htm

Hubbert on our monetary system: "The world's present industrial civilization is handicapped by the coexistence of two universal, overlapping, and incompatible intellectual systems: the accumulated knowledge of the last four centuries of the properties and interrelationships of matter and energy; and the associated monetary culture which has evolved from folkways of prehistoric origin.

"Despite their inherent incompatibilities, these two systems during the last two centuries have had one fundamental characteristic in common, namely, exponential growth, which has made a reasonably stable coexistence possible. But, for various reasons, it is impossible for the matter-energy system to sustain exponential growth for more than a few tens of doublings, and this phase is by now almost over. The monetary system has no such constraints, and, according to one of its most fundamental rules, it must continue to grow by compound interest. This disparity between a monetary system which continues to grow exponentially and a physical system which is unable to do so leads to an increase with time in the ratio of money to the output of the physical system. This manifests itself as price inflation. A monetary alternative corresponding to a zero physical growth rate would be a zero interest rate. The result in either case would be large-scale financial instability.

"With such relationships in mind, a review will be made of the evolution of the world's matter-energy system culminating in the present industrial society. Questions will then be considered regarding the future:

• What are the constraints and possibilities imposed by the matter-energy system? human society sustained at near optimum conditions?

• Will it be possible to so reform the monetary system that it can serve as a control system to achieve these results?

• If not, can an accounting and control system of a non-monetary nature be devised that would be appropriate for the management of an advanced industrial system?

"It appears that the stage is now set for a critical examination of this problem, and that out of such inquries, if a catastrophic solution can be avoided, there can hardly fail to emerge what the historian of science, Thomas S. Kuhn, has called a major scientific and intellectual revolution."

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http://www.mkinghubbert.com/tribute/quotes

Hubbert on our culture: "The steep ride up the and down the energy curve is the most abnormal thing that has ever happened in human history. Most of human history is a no-growth situation. Our culture is built on growth and that phase of human history is almost over and we are not prepared for it. Our biggest problem is not the end of our resources. That will be gradual. Our biggest problem is a cultural problem. We don't know how to cope with it."

Even in the face of denial of epic proportions, Hubbert remained optimistic: "Since the problems confronting us are not intrinsically insoluble, it behooves us, while there still is yet time, to begin a serious examination of the nature of our cultural constraints and of the cultural adjustments necessary to permit us to deal with effectively with the problems rapidly arising. Provided thus can be done before unmanageable crises arise, there is promise that we could be on the threshold of achieving one of the greatest intellectual cultural advances in human history." [This quote is more than 20 years old, do we still have time?]

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http://www.hubbertpeak.com/hubbert/monetary.htm

"'I was in New York in the 30s. I had a box seat at the depression,' Hubbert says. 'I can assure you it was a very educational experience. We shut the country down because of monetary reasons. We had manpower and abundant raw materials. Yet we shut the country down. We're doing the same kind of thing now but with a different material outlook. We are not in the position we were in 1929-30 with regard to the future. Then the physical system was ready to roll. This time it's not. We are in a crisis in the evolution of human society. It's unique to both human and geologic history. It has never happened before and it can't possibly happen again. You can only use oil once. You can only use metals once. Soon all the oil is going to be burned and all the metals mined and scattered.'

"That is obviously a scenario of catastrophe, a possibility Hubbert concedes. But it is not one he forecasts. The man known to many as a pessimist is, in this case, quite hopeful. In fact, he could be the ultimate utopian. We have, he says, the necessary technology. All we have to do is completely overhaul our culture and find an alternative to money.

"'We are not starting from zero,' he emphasizes. 'We have an enormous amount of existing technical knowledge. It's just a matter of putting it all together. We still have great flexibility but our maneuverability will diminish with time.'

"A non-catastrophic solution is impossible, Hubbert feels, unless society is made stable. This means abandoning two axioms of our culture...the work ethic and the idea that growth is the normal state of life...."

"Our window of opportunity is slowly closing...at the same time, it probably requires a spiral of adversity. In other words, things have to get worse before they can get better. The most important thing is to get a clear picture of the situation we're in, and the outlook for the future--exhaustion of oil and gas, that kind of thing...and an appraisal of where we are and what the time scale is. And the time scale is not centuries, it's decades."