Debt Rattle Jul 10 2014: Fossils, Fuels and Zombies


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    Gottscho-Schleisner Rockefeller Center NYC, RCA Building Sep 1 1933 As fear begins to scare the vanguard of the herd into what may develop into a ramp
    [See the full post at: Debt Rattle Jul 10 2014: Fossils, Fuels and Zombies]


    There is one indicator that can be used to predict every big crash that has already happened in the last 100 or so years. It will be interesting to see if it holds true this time around. Has anyone else here heard about it?

    To summarise: if the price of oil rises 80% over 18 months then the stock market will drop by a big percentage, or something along those lines. Ilargi posted a good chart a few days ago showing the relationship between oil and markets over the last decade. You see things “grow” when oil is steady or rising slowly, but when it goes up fast the economy can’t digest it.

    I remember truck drivers revolting in the streets and food riots just around the time of the 2008 excitement. That’s not happening now. This time is different with all sorts of paper bubbles, but who knows if they will all pop with a satisfying bang at the same time without significant oil price pressure?

    Ken Barrows

    Why exactly is the marginal barrel from shale $85-90? Is it because the source says so? The table from the Bakken shows a much higher cost than that? It’s like solving a math problem in school; I want to see how you got the answer.


    “… the sheer scale of “stranded assets” and potential write-offs in the fossil industry raises eyebrows…. Under a global climate deal consistent with a two degrees centigrade world, we estimate that the fossil fuel industry would stand to lose $28 trillion of gross revenues over the next two decades, compared with business as usual,” said Mr Lewis. The oil industry alone would face stranded assets of $19 trillion, concentrated on deepwater fields, tar sands and shale.”


    The Cheuvreux stuff was indeed an eye-opener. I almost posted it over on that old renewables thread (you know, TAE’s “renewables-won’t-amount-to-shit” thread), but got busy with other things and forgot to do it.

    The thing is, this “stranded assets” issue is of great significance for capital allocation vis a vis renewables, as is the growing realization that the LCOE (cost curve) for renewables keeps on going DOWN over time, whereas for fossil fuel crap it goes UP. The more renewables deployed, the cheaper they get to deploy.

    Meanwhile, the EROI is going up dramatically for renewables as it declines for FFs.

    What all of this adds up to is an increasingly compelling case for massive investment in renewables. It is about to reach critical mass, i.e. we are perhaps just moments before the dam breaks and all heaven (so to say) breaks loose, after which we can all sing “ding dong, the [fossil fuel industry] witch is dead!” — except maybe for the TAE writers, who seem to have swallowed the FF industry’s propaganda hook, pipeline and sinking drill bit (to turn a phrase).

    I predict that once the investment-in-renewables race begins in earnest, which could happen over the next 2-3 years, it will proceed in a self-fueling, feed-forward, almost runaway fashion, producing results that were scarcely dreamed of just a few years before. The more money is invested in it, the more profitable it will become, and the more investment money it will attract, leading to further growth, still more profit, and still more investment, and still more growth.

    Fossils are doomed, thank god. The age of renewables has begun (thanks, Citigroup).


    “In short, the plummeting cost and skyrocketing efficiency of both wind and solar technologies have proved the peak oil theorists like Richard Heinberg wrong. The energy returned over the operating lifetime of today’s solar panels and wind turbines is vastly greater than the energy invested in producing them. Moreover, unlike fossil fuels whose EROI necessarily gets worse over time, as the lowest-cost, highest-quality supplies are exhausted, the EROI of wind and solar gets better over time because the energy sources themselves are both free and inexhaustible, so the EROI is purely a function of the rapidly improving technology.”


    Citigroup says the `Age of Renewables’ has begun

    By Giles Parkinson on 27 March 2014

    Investment banking giant Citigroup has hailed the start of the “age of renewables” in the United States, the world’s biggest electricity market, saying that solar and wind energy are getting competitive with natural gas peaking and baseload plants – even in the US where gas prices are said to be low.

    In a major new analysis released this week, Citi says the big decision makers within the US power industry are focused on securing low cost power, fuel diversity and stable cash flows, and this is drawing them increasingly to the “economics” of solar and wind, and how they compare with other technologies.

    Much of the mainstream media – in the US and abroad – has been swallowing the fossil fuel Kool-Aid and hailing the arrival of cheap gas, through the fracking boom, as a new energy “revolution”, as if this would be a permanent state of affairs. But as we wrote last week, solar costs continue to fall even as gas prices double.

    Citi’s report echoes that conclusion. Gas prices, it notes, are rising and becoming more volatile. This has made wind and solar and other renewable energy sources more attractive because they are not sensitive to fuel price volatility.

    Citi says solar is already becoming more attractive than gas-fired peaking plants, both from a cost and fuel diversity perspective. And in baseload generation, wind, biomass, geothermal, and hydro are becoming more economically attractive than baseload gas.

    It notes that nuclear and coal are structurally disadvantaged because both technologies are viewed as uncompetitive on cost. Environmental regulations are making coal even pricier, and the ageing nuclear fleet in the US is facing plant shutdowns due to the challenging economics.

    “We predict that solar, wind, and biomass to continue to gain market share from coal and nuclear into the future,” the Citi analysts write.

    Citi says the key metric in comparing power sources will be the levellised cost of energy (LCOE). “As solar, wind, biomass, and other power sources gain market share from coal, nukes, and gas, the LCOE metric increasingly becomes important to the new build power generation decision making,” it says.


    Coal, it says, is basically priced out of the market. Environmental regulations means that the LCOE for new coal is around 15.6c/kWh, and it notes that coal only accounts for 2 per cent of the generation projects under development.

    On nuclear, Citi says cost over-runs at the Vogtle plant under construction in Georgia – now slated to cost $15 billion, way above expectations – mean that nuclear is pricing itself out of the market. Citi puts its LCOE at 11c/kWh), which it said is relatively expensive, vs combined cycle gas plants and solar and wind. And it notes that while financing costs are inexpensive in the current monetary environment, this situation will not last.

    John Day

    Buffering capacity is what is lacking for massive shift to wind and solar.
    Batteries to hold that much electricity are just too vast to be created.
    Would you as a person buy enough battery to run an electric dryer or oven?
    You shouldn’t.
    Lead acid batteries have crap for life and crap for duty cycles. Deep discharge that sucker once and it’s about 35% of what it was.
    Nickel iron batteries need a lot of expensive nickel, but last forever(ish). Thanks Thomas Edison!
    Lithium ion batteries are also expensive,and also run into availability and cost issues around lithium. All the variations on super-capacitors are cool, with carbon nanotubes and stuff. I don’t see what has been promised for decades, not yet…
    One way around part of the buffer issue is to massively overbuild solar farms, and just not tap all the voltage as current when demand is lower.
    Even a 3 times overbuild produces no electricity at night.
    Radical conservation is the low-hanging fruit, and each of us is equally free to investigate and practice that art.


    I’m going to be watching real wages overall, and the final GDP print for the second quarter. Any improvement in the former, and a positive print on the latter, and I’m reshuffling. Some $ trillion is going to ignite this thing like a skyrocket.

    Not a good idea to be in securities about then. At least any farther out in duration than a year or two.


    China goes after its judges. “The SPC said 683 judges and court staff turned over illegal gains including cash, securities and payment documents, to the value of 3.32 million yuan (540,000 U.S. dollars), in 2013.”

    China is going after “naked officials”, officials who send their families abroad in order to have a base to send illicit money to or in case they need to get out of Dodge fast (following Russia’s lead). Some have had their families return to China, and others have been repositioned, no doubt to a lower rank where they probably don’t have access to bribe money. They said, “If you don’t have confidence in the economic future of China, then you shouldn’t be holding positions of power.”

    List of China’s 20 richest individuals and what industries they’re in:

    I don’t know if most of these people are in joint ventures with Western multinationals, but how else would they have gotten the expertise so quickly (other than real estate, of course)? Car manufacturing, heavy machinery, IT? Correct me if I’m wrong.


    Professor – but haven’t real wages being going up, but only for the top 10% or so? The average guy isn’t getting a wage increase. And GDP? Another manufactured print?


    We swallow FF industry propaganda whole, which I’m guessing shows in the fact that I call them zombies?! And the blessings of renewables must be proven through a Citigroup report, who of course have no interests in the huge investment booms in solar or, for that matter, shale?! Sure ….

    John, great write up of the other 800 pound underlying beastie: storage, buffering. If ever you feel like expanding on this and turning it into an article, I’m game.

    Cutting energy use is the big one, Nicole cut her family’s by 90% in 2000, and only then got solar, battery bank etc. But of course, if we all would do this, the grid wouldn’t survive. It’s that grid, the centralized system, that will haunt us all the way to doomsville. The last thing we want at this point is mass and/or centralized investment into anything. We want small investments, home by home. But we will need to give up certain services no matter what. Then again, who needs an electric dryer? And ovens, there are tons of different options that don’t use electricity.

    Dr. Diablo

    Yes, no “Age of Renewables”, it’s largely more Shale Gas-like hype. Do the math on scaling technologies: pounds of rare earth, lithium, nickel, silver, copper, needed. I forget, but back in the hydrogen fuel-cell days (how quickly these fads are pump-n-dumped to a somnambulant public) to replace every car with a fuel cell would consume more platinum-group metal than is in the surface of the earth. That’s not entirely true of RE metals, etc, but the scaling problem is not unlike. Meaning if we’re going to anything in any amount of time you’d need to increase their mine production tenfold on graphite, silver, RE, Lithium, nickel, which does not seem to be in the offing. Basically because it’s all eyewash and we have no intention of fixing anything for real.

    There is another technology that could fill the grid gap in a major way, which is Vanadium-Redox Batteries, or VRBs. Any greenie should research this immediately and spread the word. Far from being test-tube tech, this was already proven for decades in Tasmanian hydro plant and Japanese office buildings. It’s not particularly high-tech nor expensive — which is a big advantage — but it is undeveloped. Basically, you add ions to a liquid medium held in tanks of any size, easily increased or decreased as the project expands (unlike batteries which must be matched), and you draw off the ions using what is basically a fuel cell-like membrane. This could be as small as a SmartCar, or as large as a power plant or wind farm. As a bonus, it’s also ideal for the entirely-inaccessible transportation sector which is untouched by any renewable/solar/hypeware that’s being sold. Because you don’t need 5 hours charge the batteries without damage, or need 100lbs of lithium per vehicle x 1B cars, but just fill the tank with charged Redox like gasoline…with the addition of draining off the used redox into the “Gas” station’s tanks below ground, which it can be recharged by the grid. Or charge it in the car at home, or by onboard hybrid motor. Not necessarily centralized, but can be. Very doable. At the moment lithium hybrids are basically just adding the car’s energy at the smelter instead of at the gas pump, but due to battery subsidies you don’t see its real cost. The battery is like a long-running energy source, but when it wears out, needs to go back the the smelter to have the entropy removed and the energy re-added. Like coal-fired electric grid cars, that’s just consumption shuffling, not energy reduction — or even clean energy.

    Yes, Redox leads to the same scale problem with vanadium and other components, but you’re not bucking new technology nor an impossibility of scale. Besides, there are a lot more iron and vanadium on earth than there is platinum, for example. You could also find that lithium is more suited to small cars and liquid ion to buses, with natural gas or biodiesel for trucking, for instance. It’s an engineering/price question. Who knows?

    In any case, doesn’t matter because no one has any intention of changing the system, only pretending to in order to pick your pockets. And then there’s the other problem that not even alien-space-tech solutions would work if we don’t reduce our consumption and stop wasting energy on useless things and poor planning. Planning alone — like living closer to home and passive solar-fiying your house — could probably cut use by 1/3 and get us out of the present crisis. But nobody has the slightest intention of doing so, because we could have done this all along for the last 100 years. It would reduce profits, so is against the interests of everyone on earth. Just sayin’. Anyway, put Vanadium Redox in your quiver. It’s old, demonstrated, useable, cost-effective tech. And get yourself a wood stove. As nobody’s going to solve anything but you.

    John Day

    I’m honored, but my study to put together an off grid solar rig with 1200W of panels and 10kWHr of nickel-iron batteries is mostly summarized in what I wrote above. This very modest system cost about $12k, and I looked for good deals on the right parts.
    I completely agree with conservation being the first several steps.
    Embedded energy in our tools is of massive importance. I’m sorry to say that the titanium in my nice commuter bike has a huge environmental cost. (I got it used, but I’m still responsible.)
    Here’s a pic of the summer garden with 7 foot tall tomato plants.
    I just sent off a soil sample. I’m getting a lot of foliage and not much fruit, so I suspect I’ve got deficiencies.
    I just moved in here last summer and began the digging for the garden last fall.
    I have lots to learn. It will take me awhile. I’m not a slow learner.


    Well, John, the offer stands; there is of course much more to say about a process like this, you can describe each step, you can talk about what you learned each step, and why you make the decisisons you make, why you choose what you do, and not what you don’t.


    @John Day
    “Here’s a pic of the summer garden with 7 foot tall tomato plants.
    I just sent off a soil sample. I’m getting a lot of foliage and not much fruit, so I suspect I’ve got deficiencies.
    I just moved in here last summer and began the digging for the garden last fall.”
    Add Add potash, you will get a bumper crop. You have lots of nitrogen in the soil, promotes foliage. Get some powered glacier rock at a farm supply, watch ’em go.
    Also off grid, have not bought veggies in years, we have sufficient to give away/trade.

    John Day

    Thank You, Ilargi.
    I will hold your offer in consideration.
    I think off grid makes sense within a lifeboat context.
    Actually moving to Hawaii (the island, not the archipelago) after working there 3 times, and with the move paid for, was the impetus for my project.
    Guess what, I had to move back less than a year later, on my own nickel, due to the little rural clinic I worked at having to run through more elderly patients than could be done properly. It was different than before, but I was the same, so I failed to make the transition, despite being networked with really good people in an ideal place, and welcomed by the small community. The federal government basically mandated that each doctor see 1.5 times as many patients daily as I had before. I worked 11 hr “8 hr days”, but fell short of that mark.
    To me, the story of transitions is more important than the story of Edison cells, but it is less satisfying, to be sure…
    It looks like I’m in Austin, Texas, bike commuting 28 miles per day, to a clinic that took me back, and I’m grateful, and learning the ins and outs of permaculture-style gardening where I am. I got to the ideal place, but had no time for growing, just work and it fell short, despite all involved having goodwill and good relationships.
    I hear people think they can get out of markets before a crash, but find that their transitions don’t work as anticipated.
    It seems like there are lots of ways for that to happen in the lesson which is life.
    Aloha, my teacher…

    Than you, my friend. I suspect I will be working in “green sand” and bone meal when I dig up the summer garden in mid October, when it is a little cooler. I do want to see what the soil analysis tells me. I don’t see that the picture I tried to post showed up. Jungle of 7 foot tomato plants was in the middle of the garden. I hope to get enough veggies to always have fresh, in season, and some to donate.
    Perhaps then I may transition to something larger, but therein lies the rub…



    John Day:
    “Buffering capacity is what is lacking for massive shift to wind and solar.
    Batteries to hold that much electricity are just too vast to be created.
    Would you as a person buy enough battery to run an electric dryer or oven?
    You shouldn’t.”

    Dr Diablo:
    “There is another technology that could fill the grid gap in a major way, which is Vanadium-Redox Batteries, or VRBs. ”

    Why are you guys so stuck on batteries? There are lots of other ways around this problem, I assure you. Highly creative minds are working on it. They’ve already come up with great ideas, and there will be many more, as economic and environmental pressures DEMAND that solutions be found. Here’s a start:

    The startup behind Bill Gates’ ‘ski lift for energy storage’

    Besides, even if there were no such thing as batteries, and no such thing as storing energy by any other means, renewables would still play a critical role in the transition. In the case of solar, power is supplied during most peak demand hours — and that’s pretty damn good.

    Further, not yet mentioned in this exchange is the “goalpost” issue: the goal in my view, and my expectation from renewables, is NOT to maintain every idiotic shit-for-brains excess that the wild age of fossil fuel profligacy cooked up and built-in to our psyches as permanent expectations of “the way things are supposed to be”. The idea, for example, of turning (most) things OFF after dark — of not carrying on after dark as though night were day — does not scare me, and in fact it would be a good thing to do. There is increasingly compelling evidence that high illumination after dark (aka “light pollution”) is having very bad effects on health, by way of screwing up melatonin production and the whole internal circadian rhythm/clock.

    We should not be looking to renewables to completely replace every crazy demand now supplied by fossil fuels, and thus to maintain the age of rampant greed-driven growth and capitalistic excess. Given that understanding, we can set reasonable “goalposts” as to what we expect of renewables. If you set the goalposts the way the American Enterprise Institute or the like would set them — or the way Exxon et al would set them — then of course you will end up with a defeatist picture of what renewables can do, at least in the medium term (next 2-3 decades, say). Longer term, who knows? Maybe it will be possible to replace fossil fuels entirely with renewables. I can’t say that that is what I want, but it is possible.

    I totally agree with the “reduce consumption” sentiment expressed by several of you. This is critically important, and indeed it is another way of expressing the “goalpost” issue. In a world of reduced demand, renewables have even more to offer in less time. But I have to admit (the facts have compelled me to admit, though I was a Jay Hanson-like skeptic back in the day) that even in a world without reduced demand, renewables are rapidly coming into their own and have a brilliant future no matter what else happens or doesn’t happen. I mean, barring black-swan catastrophe — e.g. exponential global warming, precipitating total collapse of civilization; all-out nuclear war, precipitating total collapse of civilization; etc. (all possible, just low-probability).

    There was a time, 10-15 years ago, when hard skepticism about renewables was consistent with enough facts to be a viable position. Those days are over.


    Ilargi: “We swallow FF industry propaganda whole, which I’m guessing shows in the fact that I call them zombies?!”

    “Zombies” or no, what you are saying is quite consistent with what they are saying. They LOVE it when guys like you mouth the messages that they wish to propagate. You’re acting as unpaid propagandist for them. You should send them a bill.

    Ilargi: “And the blessings of renewables must be proven through a Citigroup report, who of course have no interests in the huge investment booms in solar or, for that matter, shale?!”

    Yes, of course they have an interest in investment booms! That’s the whole fucking point! They see the writing on the wall. Their green-eyeshade types have analyzed the situation, likely in mind-numbing detail, and they are now saying that it is safe and advisable for major institutions to begin investing (or I should say investing MORE) in renewables, since renewables are now obviously the wave of the future. Their next report might be about investment in the cannabis industry, which is likewise rapidly coming into its own and will soon be (if not already) a vehicle for major institutional investment. It is their business to analyze stuff like this and tell investors when a sector has matured enough to be taken seriously.

    If the year were 1914 instead of 2014, then Citigroup would be writing reports on this great new “petroleum” industry and why investors should be piling into it right now (i.e. then), if they want their portfolios to grow in the coming decades. And of course they would have been right.

    The Citigroup report does not itself prove anything, except that the pre-existing proofs are so numerous and compelling that a large conservative institution like Citigroup is now recommending the sector in question. I’m not saying that Citigroup cannot be wrong on its calls, only that the likelihood is low.

    Ilargi: “John, great write up of the other 800 pound underlying beastie: storage, buffering.”

    Great? What was great about it? The fact that he left out the non-battery technologies that actually will, more than likely, solve the problem and reduce the “800-lb beastie” to a 99-lb weaking? The fact that he was fixated on batteries as though only batteries COULD solve the problem? The fact that energy storage is beside the point as regards the viability of renewables for most worthwhile purposes? Well, OK, maybe it was “great” if you’re grasping at straws, trying to intellectually justify an anti-renewables bias that has been doomed by events.

    Ilargi: “If ever you feel like expanding on this and turning it into an article, I’m game.”

    If you ever feel like publishing an article-length expansion of my views on renewables, I’m game. 🙂


    Dr Diablo: “Do the math on scaling technologies: pounds of rare earth, lithium, nickel, silver, copper, needed.”

    Rare earths: for what? Hydrogen production? And hydrogen for what? To fuel an insanely oversized fleet of automobiles that should never have existed? Goalposts, again. No, it is true we do not have enough REs to allow us to maintain one of the most stupid misallocations of energy and resources of all time — and one that has almost nothing to do with meeting real human (or other) needs. I’m all broke up about that, believe me. Just inconsolable. 🙂

    Lithium? For what? Car batteries? See above.

    Nickel and copper? Perhaps you were not aware, but these are cheap elements available in enormous quantity. Gigatons.

    Silver? Ah, at last we’ve got a real concern. But not all that serious, given that silver use for photovoltaics eats up only 5% of annual production at present, while other highly-non-essential uses of silver (silverware, jewelry) eat up many times that much. In other words, there is plenty of silver for the immediate and mid-term future of PV production, especially after silver prices explode higher (which they will before too long), which will reduce competition for the element (reduced silver jewelry demand, etc.). Long term is another matter, but not that big a deal, since copper is being developed as a replacement for silver. Copper is available in vastly larger, essentially unlimited quantities, cheap. Plus other replacements and alternatives are under development. Plus, solar PV is only one SMALL part of the renewables mix. Solar thermal — requiring no silver or any other seriously limiting element — actually has more potential than PV, even though PV has gotten all the headlines. I could go on, but that should be enough for now. Not a serious issue.

    That all you got?



    I wrote: “Rare earths: for what? Hydrogen production?”

    Pardon. I was thinking of the platinum group metals, esp platinum and palladium, which are the key elements for hydrogen fuel production. The same point stands, however. We have no need for vast fleets of automobiles, hence that (metals) limit does not represent anything of serious concern.

    To that I would add that, on reflection, I am probably being far too optimistic about platinum/palladium shortfalls limiting the perpetuation of a bad technology (personal automobiles). It is possible and even likely that substitutes or partial substitutes will be developed which will allow large-scale development of hydrogen as fuel. Already, technology exists using nanoparticulate palladium as the catalyst, which cuts palladium requirement by about 10-fold. Surely there will be more development along the same lines, and the platinum group metals might ultimately become irrelevant. I say that sadly, since I was hoping to see the collapse of the insane auto-industrial complex and all the mayhem and destruction — everything from unlivable urban environments to the impaired personal health of millions — that goes along with it. Oh well.

    As for the rare earths: More or less same point as regards the finding of substitutes (full or partial) or other workarounds. This is already happening, and will happen a whole lot more in the coming decades. Vis: — Rare earth prices plunging as manufacturers turn to substitutes – November 16, 2011

    Here’s a question for you: just because a particular technology HAS (PAST TENSE) required a certain amount of element/resource X, why are you so quick to believe that X cannot possibly be substituted, or that a workaround which averts the need for X cannot possibly be found, or that some new(er) technology, accomplishing the same end but without the need for X, cannot possibly be found or developed? And that question doubly so when the demand for the end product of the technology is great and when developments along the lines just mentioned are powerfully incented. In other words, why this static view of the world, of human activity and industry and knowledge, such that whatever is now known and in operation is taken to be the limit of that which is knowable and operational?

    In doomster circles scornful reference is often made to the idea that “technology will save us”, as though that belief were one that only deluded Pollyannas could possibly embrace. But what I see is something like the opposite of that. I see half-deluded doomsters (“doomerannas?”) remaining blind — willfully blind, it appears — to the obvious reality of technological development, and indeed dramatic technological development, in our lifetimes alone, let alone for all past generations. Doomerannas have copped this bizarre notion that technological advancement has reached its apotheosis right now, and development — which before had been brisk and relentless for decades or generations — is at an end. I honest to god don’t know where this idea came from, or how it could be believed, unless one subscribes, superstitiously, to a theory of predestination, and within the theory is the precise time (right now!) when we are fated to — in contrast to all experience — cease being creators and innovators, cease to solve problems, cease to take effective action, and so on.

    None of this, by the way, is an argument for the idea that all will be sweetness and light, with smooth sailing from here on out as we effortlessly resolve all our problems. No. We have huge problems, they will not be easy to overcome, and in fact we MIGHT just blow ourselves up or burn ourselves out, or bring about a civilization-wrecking series of events. Possible, indeed. But if those things happen, it will not be for lack of rare earths, or because we suddenly forgot how to solve technical problems. It will be because of spiritual and characterological sickness.

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