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Peak Economy. Richard Heinberg Post Carbon Institute September 2009. The economic crisis changes everything. before crisis I after crisis. It is essential that we…. Understand the crisis and its historical context, so that we can Respond effectively. What is economic growth?.

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Peak

Economy

Richard Heinberg

Post Carbon Institute

September 2009


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The economic crisis changes everything

before crisis I after crisis


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It is essential that we….

  • Understand the crisis and its historical context, so that we can

  • Respond effectively


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What is economic growth?

  • GDP: total amount of money changing hands


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What is economic growth?

  • GDP: total amount of money changing hands

  • Money is a claim on goods and services


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What is economic growth?

  • GDP: total amount of money changing hands

  • Money is a claim on goods and services

  • Provision of goods and services requires energy and material resources







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Growth becomes institutionalized

  • With compound interest, fractional reserve banking, and debt leverage, growth became necessary to the monetary health of nations




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Global oil production falls when loss of output from countries declining exceeds gains from those expanding


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2007 oil production balance countries declining exceeds gains from those expanding

year on year change(thousand barrels/day


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How did Peak Oil contribute to countries declining exceeds gains from those expandingthe financial crisis?


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The drivers of crisis: countries declining exceeds gains from those expanding

Energy growth becomes difficult and expensive (oil at $147 a barrel!)


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Past recessions & oil spikes countries declining exceeds gains from those expanding


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The drivers of crisis: countries declining exceeds gains from those expanding

Energy growth becomes difficult and expensive

Growth-and-debt-based economy goes bust


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Colliding recessions countries declining exceeds gains from those expanding

  • Mortgage/finance crisis and oil price spike would each have caused a recession

  • Both happened at the same time

  • Result: simultaneous crises in auto, airline, banking, housing sectors

  • Once the house of cards started falling, debt de-leverage created a snowball effect


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Cost of the Wall St. Bailout countries declining exceeds gains from those expanding


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“The value of global financial assets including stocks, bonds, and currencies fell by more than $50 Trillion in 2008, equivalent to a year of world GDP.” --Asian Development Bank


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Why did oil prices drop? bonds, and currencies fell by more than

  • Demand destruction

  • Hedge funds in, hedge funds out


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July 2008: the all-time oil peak bonds, and currencies fell by more than

  • Though demand is down, depletion of existing fields continues: capacity erosion


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July 2008: the all-time oil peak bonds, and currencies fell by more than

  • Though demand is down, depletion of existing fields continues: capacity erosion

  • Lack of investment (given low oil prices and credit crisis) means new oil projects are being cancelled. Not enough capacity is being replaced!


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July 2008: the all-time oil peak bonds, and currencies fell by more than

  • Raymond James Associates

  • Macquarie Investment Bank

  • Jeff Rubin (Formerly CIBC)

  • Energy Watch Group

  • Association for the Study of Peak Oil


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The post-peak dilemma bonds, and currencies fell by more than

  • Oil price needed to justify the development of new oil production capacity: $60-70 (and rising)

  • Minimum oil price likely to trigger economic recession: $80


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The trap bonds, and currencies fell by more than

  • If oil prices rise, economic recovery is nipped in the bud

  • If oil prices fall, not enough investment is made in future supply; this leads to high oil prices later (see above)


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But it’s not just oil bonds, and currencies fell by more than


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Depleting materials bonds, and currencies fell by more than

Antimony China Thermoelectric/paraelectric materials

Barium China Thermoelectric/paraelectric materials

Bismuth China, Mexico Thermoelectric/paraelectric materials

Cobalt Kinshasa, Australia Photovoltaics

Gallium China Photovoltaics

Germanium Belgium, Canada Photovoltaics

Indium China, Canada Photovoltaics, thermo/paraelectric mat’ls

Manganese Gabon, S. Africa Photovoltaics

Nickel Canada Fuel cells

Platinum S. Africa Fuel cells, para/thermoelectric materials

Rare Earths China Fuel cells, para/thermoelectric materials

Tellurium Belgium, Germany Solar cells, semiconductors

Titanium Australia, S. Africa Solar cells

Zinc Canada, Mexico Photovoltaics, fuel cells


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World water use bonds, and currencies fell by more than

km3/ year


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Marine fish catch bonds, and currencies fell by more than


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A giant science experiment bonds, and currencies fell by more than


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So, back to the economic crisis… bonds, and currencies fell by more than


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Unemployment nears 10% bonds, and currencies fell by more than


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“We’re in the midst of a once-in-a-lifetime set of economic conditions. The perspective I would bring is not one of recession. Rather, the economy is resetting to a lower level of business and consumer spending based largely on the reduced leverage in the economy.”

Steven Ballmer

Chairman, Microsoft Corp.


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The shape of the recovery economic conditions. The perspective I would bring is

V


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The shape of the recovery economic conditions. The perspective I would bring is

U


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W economic conditions. The perspective I would bring is

The shape of the recovery


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The shape of the recovery economic conditions. The perspective I would bring is

L


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What to expect economic conditions. The perspective I would bring is

  • Unemployment

  • Homelessness

  • Bank failures

  • Hunger

  • Crime

  • Political instability

  • International conflict


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Will reduced energy per capita result in reduced carrying capacity?

Not necessarily; there are other factors:

  • Equity

  • Efficiency


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But the end of growth capacity?means we have entered a new era

  • If population increases, per-capita consumption will decline more rapidly

  • Resource conflicts likely


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What are our levers? capacity?

  • Population

  • Equity

  • Development of renewables

  • Efficiency

  • (we also need a steady-state economy and global conflict resolution)


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