It amazes me how the market fails to realize that the global oil industry is sleepwalking over the ENERGY CLIFF. Instead of being deeply concerned about our future, investors believe this is a temporary energy crisis solved by just investing more money in finding oil. And… it’s even worse than that…
GLOBAL OIL INDUSTRY SLEEP-WALKING OVER THE ENERGY CLIFF: Killing The Oil Industry 10 Million Barrels At A Time
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36 responses to “GLOBAL OIL INDUSTRY SLEEP-WALKING OVER THE ENERGY CLIFF: Killing The Oil Industry 10 Million Barrels At A Time”
Some really good information even if it is sobering in nature. As I sit here listening to your video, life just seems so normal. It is hard for me to compute that in 2-3 years time things will be so different. The truth is the best way to go and will help me to prepare physically and mentally for the future. Best hopes
PS It looks like Sri Lanka has completely collapsed in just 2-3 years time and may be a canary in the coal mine. Is this our future in 5-10 years time?
Perhaps more like 10-20 years.
The U.S. is not an island and has some energy reserves, and land to produce food.
DocRich,
While I have stated the ENERGY CLIFF will likely roll over in 2025, that is my forecast. My timing could be off a bit, but I doubt it. However, it has been 14 years since the 2008 Financial Crisis. I can assure everyone that the next 14 years will not be anything like the last 14 years… LOL.
steve
Steve, you’re not over using the term and it’s not hyperbole. I think your timing is dead on. The energy cliff is clearly in sight. And that’s a problem in and itself. You can’t have an armada headed for the falls without a chaotic frenzy to escape the current.
This has been in the making for years. The Asian Infrastructure Investment Bank (AIIB), the Shanghai Cooperative Organization (SCO), the rapidly expanding BRICS, and so many other cross boarder agreements. The Belt Road Initiative is order(s) of magnitude larger than the Marshall Plan.
In 2015 the PBOC launched the Cross-Border Interbank Payments System (CIPS). Now, banks from BRICS nations can connect to the System for Transfer of Financial Messages (SPFS), Russia’s alternative to SWIFT. Crude oil payments are even being made using UAE Dirhams, for Christ’s sake. People don’t understand the relentless rise of the dollar. And yet, even this was projected, forecast – for when the dollar dies. The petrol-dollar died in 2022.
“Just like the formation of galaxies and hurricanes and nautilus shells, the universe of the macro-economy operates through non stochastic fractal growth progression and nonlinear decay. Expect the unexpected.” Gary Lammert
dale not to nitpick over small details — but the energy cliff is going to get china as well, even russia (although I suspect, there still is some stuff there.)
I think you’re absolutely correct.
China is in deep S___.
Yes, but at least the Chinese government basically does everything it can to INCREASE its country’s supply of energy, unlike American and European governments.
However, China’s export economy is based on cheap energy, not current market prices of energy.
AndreasVienna,
I believe China will likely see the LARGEST overall Collapse because it became a High-Tech Metroloplis in 20 years vs 75-100 years for the USA & Europe.
steve
Russia has got to be one of the best prepared places in the world. They can produce their own food AND their own energy. They can defend themselves also. The middle east is a looming catastrophe though. I was really struck by one of Steve’s videos pointing out how many middle east countries import over 90% of their food AND natural gas imports for electricity production. They simply have too many people relative to the amount of water available which will become unsustainable when their oil wells tap out.
dale,
Agreed on the upcoming death of the DOLLAR. However, that may still take a bit of time. Also, while China and the BRICS are trying to do a DOLLAR workaround, they are still going to be in serious trouble when it comes to ENERGY. I believe the collapse of the CHINESE MIRACLE will be breathtaking, to say the least.
steve
Yeah, agree with every word. The dollar death could take longer, it could take additional years. Acknowledged. My proposition is that the tenants of the petro-dollar are gone, this year. Dragons be here.
Maybe a better way to state it –
The dollar ‘unwinding’ could take longer, it could take additional years.
If the FRN dollar has lost its “backing” then what exists at this point to keep it going? Inertia, I guess. I struggle with ways to conceptualize it. Dead FeRN Walking? Zombie FeRN Walking?
dale,
The reason for the Dollar’s strength, besides being the World’s Reserve Currency, has to do with the United States now being a NET ENERGY EXPORTER. However, as we peak in shale oil & gas production, that will change dramatically. This is when the Dollar will come under increased weakness as the U.S. Govt will have to borrow more to continue BUSINESS AS USUAL.
steve
When I was young, in the mid-seventies, we had (for some reason) two copies of Limits to Growth lying around. I still have them. The books were too difficult for me, but I understood the gist from the ugly computer-generated graphics, and I wondered how old I would be when the downturn began: about 60 years old.
https://makewealthhistory.files.wordpress.com/2010/11/limits-to-growth.jpg?w=597
My parents, who had bought the books, had almost completely forgotten them and their content. Perhaps it was ultimately not relevant enough for them, while it would become relevant for me.
The book remained a constant background presence to me. Not dominant, but enough to keep in mind with all my long-term decisions. So now, my wife and I are prepared well but isolated in our preparedness. Half of the people who visit our farm notice that we are well prepared for “the zombie apocalypse” or an energy crisis. But it still means very little to them. “When we get a crisis we know where to go” many say.
Likely they will come. We are ready to teach and help them a lot. But I’m sure only a few will come just before the crisis, the majority in the midst of it.
I fear I’m one of the very few whom the book truly impacted. It is ultimately the reason why I am a subscriber.
Core,
We are likely about the same age.
I didn’t know about the book “Limits to Growth” back in the ’70s, but I read similar books as a young teen.
As you say, those books “remained a constant background presence to me. Not dominant, but enough to keep in mind with all my long-term decisions.” We probably have a lot more in common, too.
It’s reassuring to see good folks like you, “brothers in arms” so to speak, posting their thoughts on this site.
Thanks
make sure you can defend your place in addition to your graciousness.
CoreCognition,
I also read the LIMITS TO GROWTH, which was before its time. But, all the negative factors presented in that book are coming true. While I focus on the ENERGY CLIFF, it doesn’t take a BRAIN SURGEON to look around and see that the oceans are being destroyed and millions of acres of farmland are turning into a barren wasteland. Thus, we are heading into the very same COLLAPSE DYNAMICS as the Late Bronze Age and Ancient Roman Empire.
That is why I get a REAL KICK from DOOMBERG and these guys that believe Nuclear will save us… LOL. We are destroying the very environment we need to survive in.
steve
Thankfully those guys collapsed without nuclear weapons. This is going to be a whole new level to the same old story.
TaxDonkey,
Agreed… 100%.
steve
Excellent post!
Your situation shows the global situation in microcosm.
There are two sides to the “Collapse Coin”. The energy crunch has unavoidable biophysical causes, but whether it leads to collapse in any society depends on the resilience of that society.
The petrodollar has enabled the US to live beyond its means for a couple of generations. Few Americans have the fortitude and resilience to live in good mental health without (under-priced) air conditioning, supermarkets, take-away meals, home deliveries, pharmaceuticals, reliable sewage and waste-disposal services, pensions/welfare, regular news of national events, screen-based entertainment, servicemen on call etc. Americans generally (not you) have a long, long way to fall.
A collapse in China of similar biophysical dimensions would strike a population that has living memory of peasant life and deprivations, national upheaval and police state oppression. So the Chinese may do it tough, but they have the potential to take it in their stride. Russia, too, can rely on its vast Siberian wilderness, and national spiritual and psychological toughness within living memory.
Europe approaches the US in its distance of fall, and because Europe imports so much of its food and energy and is overcrowded, it may experience a collapse first. Europe will experience its “nine missed meals leading to chaos” at a national level as early as will the residents of US cities.
Thanks
Can you blame the oil industry for not wanting to invest in more exploration when:
1) They already know there are few finds of significance to be made? They’ve done sophisticated aerial surveys including satellites.
2) A delusional ideologue-heavy administration can come in and shut down what’s been invested in?
Have you heard a few sentences from the mouth of the U.S. secretary of energy? Profoundly ignorant, and my bet is she has little to no background in geology, physics, chemistry, etc.
She’s among those who must believe wind turbines, solar panels, and batteries mine their raw materials, build, transport, install, and maintain themselves without energy from coal, diesel, gas, or gasoline.
You’re right. And just think, that foreign-born “person” is the former governor of the U.S. State that includes the metro area known throughout the world as the “Motor City”.
I’m not sure if you saw that recent situation where she was asked by an interviewer what was the daily oil consumption of the U.S. and she had no clue!
I think that is one fact that she should know. Actually, that one fact should be at the heart of any Energy Secretary’s daily existence. Yet she had NO CLUE.
The Department of Energy was created by none other than Pres. Jimmy Carter. Very telling. The man who shut off Iranian oil imports, and under whom we experienced the most expensive inflation adjusted gas prices in history. He wanted us all to wear sweaters to solve the Energy Crisis (history echos).
Apparently she needs a teleprompter, so she embarrasses herself, the administration, and the U.S. less.
It’s truly breathtaking in its carnival quality. What’s next under the big top as the Federal government dissolves? These various heads of state may just be the greatest of all time scapegoats.
DisappearingCulture,
I don’t blame the Oil Industry for not investing much in new Discoveries. They know the writing on the wall. However, the STUPID PEOPLE I get into debates with are the ones who blame the lack of Oil Investment on Peak Oil… LOL.
steve
The entire administration is stunningly incompetent. There are now words to describe their lack of qualifications for the positions they hold. This is terrifying given the predicament that we are in.
There’s still something I don’t quite understand about the lack of investment by the Oil Industry in new discoveries and that is the stance of the U.S. Government. On the one hand, it seems many in the current Administration are ecstatic over the lack of investment, such as the incompetent and foolish Energy Secretary. On the other hand, the President opened up the spigots of the strategic oil reserve due to political pressure caused by soaring fuel prices. So which one is it? Are they happy to see the oil industry not invest or do they fear the consequences of soaring prices caused by supply issues? Because if it’s the former then they will hasten the decline of supply via ESG and “Green” initiatives and if it’s the latter they should encourage capital investment and exploration via policy incentives. But what I currently witness is a mish-mash in which the overarching goal is to hurt and punish the oil industry, but the political and economic reality of that desire is clearly untenable when gas prices approach or exceed $5 per gallon. So why is this relevant when Steve ably points out that we’re in the decline mode no matter what we do at this point? For me it is relevant because I attempt to project life here in the next 5 years, 10 years, etc. And it seems to me we are screwed a lot sooner without serious investment in exploration by the oil industry because even expensive projects are better than no options. And yet I can understand the reluctance to spend huge sums of money on such projects during the reign of such a schizophrenic Administration. So for me the conclusion is that we’ll be experiencing the downside of the Energy Cliff on the sooner end of Steve’s projection because of the ignorance of current senior government officials. Also, in my humble opinion, CoreCognition and Brothers in Arms and probably most other subscribers are spot on in preparations for harder and leaner times. I am of your ilk and when I discuss such issues with acquaintances and some family I think I provide a source of amusement for them. One day in the not too distant future, however, they may think otherwise and I remain confounded that they cannot yet see this coming. Perhaps it is a normalcy bias or a simple case of denial or simply that if one travels on U.S. Interstate roadways there is very heavy traffic and few or no signs of any cutbacks in travel or lifestyles. At least that’s what I witnessed in two recent road trips.
DHawk, I could have written exactly the same….. but you put it down so much clearer and concise. I speak with no one about all this any longer, as I have said here and there. They are all so use to our “advanced” society, that they can only see it getting more advance. And, they all think we have unlimited oil & gas, and that we are on the cusp of great energy technology. I live in Florida, and we travel the roads a lot. The roads are full, and construction everywhere. Went to Georgia last week, and the same. Born in 51, and had a great life. I believe we will have a brutal turnaround.
RonPaul91,
AGREED 100%. It seems pointless to try to talk to family or the public about these Energy Dynamics because they can’t accept the reality or they are too conditioned to believe TECHNOLOGY will solve all problems. However, I am beginning to see more folks in the Financial Industry follow my work on Twitter.
Here are some of my new Followers:
Hugh Hendry
Luke Gromen
Hugh Hendry was a big Hedge Fund guy a decade ago, but has moved to Saint Bart’s Island to surf and invest in real estate. And, I’d imagine you know who Luke Gromen is. I found it quite interesting that these two Financial Guys are allowing some of my Energy Analysis to SINK IN.
steve
Deficithawk,
Yes, it is a crazy situation with the U.S. Govt policy talking out of both sides of their mouth in regards to the Oil Industry. They want MORE OIL and LESS OIL at the same time. However, even if we disregard all of that WHITE NOISE, we don’t have much in the way of oil reserves remaining. The United States peaked in Conventional High-quality High-EROI oil in 1970, and that steadily declined until it reached 4.8 mbd in 2005. Then the VUNDER-DRUG of Shale Oil came on the scene, and we added 8.5 mbd from shale oil.
Unfortunately, that was the same as a Gold Boom & Bust Discovery cycle. We had the Boom, and now we are going to see the BUST. And, there is nothing the oil industry can do to stop it because there are only so many high-quality drilling locations.
Lastly, the one thing that is being totally disregarded is that the environment that we need to survive is being destroyed at a much more rapid rate. There is no coincidence that Deforestation, Drought & Famine took down Late Bronze Age & Ancient Roman Empires as we are witnessing right in front of our eyes today as the WESTERN part of the United States DRIES UP AND BLOWS AWAY. We get the majority of our produce-food from the West, and if we run low on water… we can KISS THAT GOODBYE.
So… we need to put it all into perspective. Even if the oil companies decided to spend trillions on new discoveries, that doesn’t change the fact that we are DEGRADING THE ENVIRONMENT at such a fast rate; that will do us in as well… LOL.
steve
Deficit, I think part of it is that many of them made the critical mistake of believing their own BS. A huge percent of them (e.g, Pete Buttplug) truly believe that solar, wind, EV will revolutionize energy and save our economy. It’s pretty disturbing to realize that they don’t understand even the basics about energy despite holding positions like Energy secretary, transportation secretary, etc….When things don’t pan out, they throw temper tantrums and do stupid stuff like bleed the SPR for political purposes or scream at the Saudis. I always thought we’d see the energy crisis but I certainly never predicted that our “leaders” would actually hold our feet to the accelerator to make it happen that much faster while we all try to figure out what gender we are. You can’t make this stuff up.
The movie Idiocracy is up there with the novel 1984 in the sense that it’s coming true.
“On the other hand, the President opened up the spigots of the strategic oil reserve due to political pressure caused by soaring fuel prices. So which one is it? Are they happy to see the oil industry not invest or do they fear the consequences of soaring prices caused by supply issues? Because if it’s the former then they will hasten the decline of supply via ESG and “Green” initiatives and if it’s the latter they should encourage capital investment and exploration via policy incentives”
Right now the energy schizophrenia is tied to moving their perceived position in hopes of winning the midterm election. That plus total ignorance of energy, what it is, and where it REALLY comes from.