Tipping Point

Tipping Point

As individuals, and as a social species we put up huge psychological defences to protect the status quo. We’ve heard this doom prophesied for decades, all is still well! What about technology? Rising energy prices will bring more oil! We need a Green New Deal! We still have time! We’re busy with a financial crisis! This is depressing! If this were important, everybody would be talking about it!

Our primary question is what happens if there is a net decrease in energy flow through our civilisation? For it is absolutely dependent upon increasing flows of concentrated energy to evolve and grow, and to form and maintain its complex structures. The rules governing energy and its transformation, the laws of thermodynamics, are the inviolate framework through which all things happen- the evolution of the universe, the direction of time, life on earth, human development, the evolution of civilisation, and economic processes. This point is not rhetorical, access to increasing flows of concentrated energy, which can be transformed into work and dispersed energy, is the foundation upon which our civilisation stands. Yet we are at a point where these flows are, with high probability, about to begin decreasing. We should intuit that an energy withdrawal should have major systemic implications, for without energy flows nothing happens.

In the oscillating decline model: economic activity increases→energy prices rise→a recession occurs→energy prices fall→economic activity picks up again but to a lower bound set by declining oil production. In this model the economy oscillates to a lower and lower level of activity. From our discussion about the origins of the current recession, we see this process has already begun.

Full .pdf here. It is kind of long, but well worth a read.


  1. Author
    ptsp 8 years ago

    In a significant policy shift, the government has agreed to undertake more work on whether the UK needs to take action to avoid the massive dislocation that could be caused by the early onset of “peak oil” – the point that marks the start of terminal decline in global oil production.

    “Government has gone from the BP position – ’40 years of supply left, the price mechanism works, no need to worry’ – to ‘crikey’,” he said. “BP and others are telling us that, but you lot, Virgin, Scottish and Southern, and others are telling us something completely different. We do not know who to believe. Let’s do a proper risk assessment with industry,” he said.

    Sir Richard Branson, founder of the Virgin Group, whose rail, airline and travel companies are sensitive to energy prices, warned then that the coming crisis could surpass the credit crunch. “The next five years will see us face another crunch: the oil crunch. This time, we do have the chance to prepare. The challenge is to use that time well,” he said.

    Amrita Sen, an oil analyst at Barclays Capital, believes the price of crude could pass $100 this year and reach nearly $140 by 2015. Francisco Blanch, of Bank of America Merrill Lynch, has speculated it could hit $150 within four years.

    Leggett says all these scenarios could be much too optimistic. He is convinced that Britain must prepare as quickly as possible for a situation when oil becomes so expensive that international trade is hampered and globalisation breaks down.


  2. Author
    ptsp 8 years ago

    Excerpt from the pdf attached to the posted article:
    5.3 Oscillating Decline
    In this model, constrained or declining oil production leads to an escalation in oil (plus other energy and food) prices. But economies cannot pay this price for a number of reasons. Firstly, it adds to energy and food price inflation, which are the most non-discretionary purchases. This means discretionary spending declines, from which follows job losses, business closures, and reduced purchasing power. The decline in economic activity leads to a fall in energy demand and a fall in its price. Secondly, for a country that is a net importer of energy, the money sent abroad to pay for energy is lost to the economy unless we export goods of equivalent value. This will drive deflation, cut production, and reduce energy demand and prices. Thirdly, it would increase the trade deficits of a country already struggling with growing indebtedness, and add to the cost of new debt and debt servicing.
    Falling and volatile energy prices mean new production is harder to bring on stream, while the marginal cost of new energy rises and credit financing becomes more difficult. It would also mean that the cost of maintaining existing energy infrastructure (gas pipelines, refineries etc) would be higher, so laying the foundations for further reductions in production capability.
    In such an energy constrained environment, one would also expect a rise in geo-political risks to supply. This could be bi-lateral arrangements between countries to secure oil (or food), so reducing oil on the open market. It would also increase in the inherent vulnerability to highly asymmetric price/supply shocks from state/non-state military action, extreme weather events, or other so-called black swan events.
    When oil prices fall below what can be supplied above the marginal cost of production and delivery, and oil price is what can be afforded in the context of decreased purchasing power, the energy for growth is again available. Of course local and national differences (for example energy import dependence, export of key production such as food) could be expected to have shifted how regions have fared in the recession and in their general ability to pick up again. Growth then might be assumed to kick off again, focusing maybe on more „sustainable‟ production and consumption.
    However, as growth returns, the purchasing power of the economy will not be able to return to where it was before. Natural decline limits to oil production, lack of investment and entropic decay of infrastructure will reduce the supply-demand price point further. Again higher oil, food and energy prices would then drive another recession.
    In the oscillating decline model: economic activity increases→energy prices rise→a recession occurs→energy prices fall→economic activity picks up again but to a lower bound set by declining oil production. In this model the economy oscillates to a lower and lower level of activity. From our discussion about the origins of the current recession, we see this process has already begun.
    5.4 Systemic Collapse
    This model draws on ideas from the general dynamics of complex systems and networks, and tends to see our civilisation as a single complex adaptive system by virtue of its connectedness and integration. Indeed the concept of globalization is about integration with a common singular network.
    We associate systemic collapse of civilisation with a catastrophic bifurcation. The State of civilisation at a time is by necessity dependent upon the State of the globalised economy. The State of the global economy is dependent on the infrastructure that integrates the operational fabric. The state of the globalised economy may be parameterized by GWP, which implies a level of complexity. And GWP (and complexity) is absolutely dependent upon energy flows.
    To argue that civilisation is on the cusp of a collapse, we need to be able to show that there are tipping points that, once passed, drive the system rapidly towards another contrasting state through a process of positive feedback; that may in turn drive other feedback processes. We need to also demonstrate that it is a catastrophic bifurcation in which the state of the globalised economy is driven through an unstable regime where the strength of the feedback processes is greater than any stabilizing process. It acknowledges that there may be an early period of oscillating decline, but that once major
    structural components (international finance, techno-sphere) drop or „freeze‟ out, irreversible collapse must occur.
    In the new post-collapse equilibrium state we would expect a collapse in material wealth and productivity, enforced localization/ de-globalisation, and collapse in the complexity as compared with before, an expression of the reduced energy flows.
    The collapses in the Roman Empire occurred over centuries; collapse of the Greenland Viking settlements in decades. We suggest a hypothesis here that the speed of collapse is a function of the level of integration, coupling, and the key operational speeds of the systems that support the stability of the pre-collapse state. For us that includes the behavioral change in financial markets, food flow rates, and replacement lifetime of key components in infrastructure. In discussing the feedback processes in the next chapter we will see processes are indeed fast.


  3. Author
    ptsp 8 years ago

    Oil reserves ‘exaggerated by one third’

    The world’s oil reserves have been exaggerated by up to a third, according to Sir David King, the Government’s former chief scientist, who has warned of shortages and price spikes within years.

    The scientist and researchers from Oxford University argue that official figures are inflated because member countries of the oil cartel, OPEC, over-reported reserves in the 1980s when competing for global market share.

    Their new research argues that estimates of conventional reserves should be downgraded from 1,150bn to 1,350bn barrels to between 850bn and 900bn barrels and claims that demand may outstrip supply as early as 2014. The researchers claim it is an open secret that OPEC is likely to have inflated its reserves, but that the International Energy Agency (IEA), BP, the Energy Information Administration and World Oil do not take this into account in their statistics.


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