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On several occasions we have discussed here on non- -linearity of the processes that are implied by the arrival of Peak Oil or peak oil production. This non-linearity explains that the evolution of the variables we use to diagnose the behavior of the crisis is not a simple rule of three, but sometimes trigger large perturbations small effects, while at other times small perturbations trigger large effects. Worse, our diagnostic variables may have a poor ability to describe the situation. For example, we have discussed here several times the price of a barrel of oil, which is the variable preferred by economists because they expect that market signals unequivocally manifested by changes in price, has a confusing behavior because of the large of market volatility medium term, eg, the duration of the last period of stability until 2000, the price of oil did not exceed 20 dollars, from 2000 to 2007 was rising steadily, to around $ 100 in early 2008, in July of 2008 was worth almost $ 150 to drop to about $ 36 six months later and has since gradually increased again to just over $ 100 today. If 2011 is a remake of 2008 , with its new price spike and subsequent fall, recession means (such calculation with fingers that seemed to anticipate did here) is something that remains to be seen, given the multitude of actors and factors involved, and say anything for sure in this regard, even though it says it is quite impossible. What happens is that the signal sent prices amid global Peak Oil is not what economists expected, ie the same as sent during the 70 crisis: a lasting high prices. The difference is that in the 70's restriction of production was voluntary on the part of the Arab countries, and the variable used to control the restriction was just the price (increasing production if the price rose much, decreasing it if down) thus able to maintain high prices that squeezed a lot but without to choke off the western economy. Currently, no such control over production, so prices go up and up until a sufficiently large bursts importing economies, at that time, demand drops sharply.
So what characterizes the behavior of oil prices in the era of global production constraint is the volatility in the medium term (ie sharp ups and downs when you look within the range of years) with a increasing underlying trend for most of the time in the short term (on a scale of days, weeks and months) and a stable trend in the long term (the average price during periods of several years did not change significantly.) In short, the price series will take the form of irregular sawtooth. In addition, at a later stage and most degraded of the situation, where the proportion of production that OECD countries reduced even more important - by falling production and rising consumption in emerging countries - will have to impose restrictions on oil consumption in importing countries, either by way of ration declared (as the British proposal of TEQ) or discouraging consumption through increasingly complex regulations and laws that are justified to combat pollution, reduce traffic accidents, to promote the deployment of electric cars or any other excuse to use (that way a deterrent to tackle the problem without recognizing it seems to be why it has chosen Spain), there is also the option of doing nothing and let things alone collapse of the invisible hand of the market, but only in countries where democracy is weak we will choose that option. Therefore, no variable is the price that we should look to understand what is happening, but the total oil production.
However, the presence of other nonlinear effects but also make continuous Total oil production is an effective variable in determining what the situation is what really matters to our society and is the amount of net energy available to move our economy. On the one hand, because the effect of increased absorption capacity in emerging economies binds the effect of "Export Land Model" (Export Land Model), which we discussed here whereby producing countries are leading to steady exponential consumption to satisfy its own population, and this entails a reduction in exports (alarming sign of this trend, Saudi Arabia fell nearly 5% of its exports oil during the month of December ; to know what the economic situation and what the structure of this decline will have to wait a few months). To this must be added that the net energy available from various sources of energy, and oil in particular, is decreasing with time, as a result of increasingly poor Energy Rate of Return (ERR, in English the acronym used is EROEI), whose lethal effects were also discussed in this blog . Thus, we have the impression that the production of oil and similar fluids is maintained, even increasing, yet the energy that represents this volume may be decreasing without us noticing. This is for example the case with the production of ethanol from corn as fuel, especially in the U.S.; recent studies show that in the U.S. corn as an energy source has an EROEI of about 1 (with no wins energy produced), maybe even less (so it actually loses energy, but because of the subsidies is a profitable activity.) Taking into account that a quarter of grain production in the U.S. is intended to produce biofuels is another perverse feedback of the energy crisis: they spend X barrels of oil equivalent to produce same X barrels of oil equivalent, or even less, from cereals, for accounting purposes, the same power available has been recorded twice (ie, the official accounting record 2 X barrels of oil equivalent when in fact the first half was used to produce the second half), so that statistics show an encouraging message ("we are increasing our oil production") that is not reflected in the energy available in the street, and worst of all foods on the market retreated international prices exacerbating the crisis and unstabilized countries rely heavily on imported food.
If all these nonlinear effects complicate the understanding of the phenomenon we are experiencing a global scale, other effects affecting our ability to predict future events rigor and show that our security in our daily lives can be completely unfounded. Effects are denominated in Physics phase transition. A phase transition is a point in the evolution of one of the variables of the system, which the system reached radically change their behavior. All the world has ever experienced what is a phase transition: if you look at the temperature of a glass of water and lowered, to reach 0 degrees Celsius water behavior change radically stops flowing and becomes in a solid, ice. If one heats the water in a kitchen fire when it reaches 100 degrees Celsius will experience a change and turn to steam, which will be leaving the pot. The formation of rain, seed germination, death, all these natural processes are phase transitions. What characterizes phase transitions is that they are like a wall, a discontinuity, it was worth before remains true, and things become radically different. The reality is that our system has so much tension built up inside, so many things that hang by a thread, a small-or no-alteration much extra can trigger such a wave of changes that alter the landscape permanently.
a few weeks ago we analyzed the case of the current food riots in North Africa. Decades of bloody dictatorship, misery for most people, just exploiting synchronously in a dozen countries, and many others are in a very tense situation. Why now, why all at once? As already explained, the sudden rise in food prices in these countries with the removal of subsidies at the beginning of the year has been the most over the edge, despair, and despair, to revolt. In Tunisia and Egypt their leaders have been deposed, and in the West that has no conscience and attention has turned to other bastions of fueled us oil and gas could fall: Libya, Algeria , Oman, Yemen, Iran, Bahrain, Saudi Arabia, Morocco (which has no oil but phosphate) ... the list is endless. However, the game is not over in Egypt or Tunisia, followed by strikes and riots in developing countries. In essence, the iron falling to their princes, these countries have gone straight near the end of phase 3 of the collapse at least over large areas. Libya can be concluded from a stroke this stage, if it ends up in the civil war that could unleash. And no one knows where to complete this process.
In our previous analysis , we found a strong correlation between oil prices and food seems to be the trigger for these riots, after long decades of brutal repression. But it is also that in order to maintain our global oil production will need to discover and develop new fields, continuously, to be offsetting the decline of the wells already in operation; Look in the graphs that showed dramatic the last report of the International Energy Agency . But amid the current unrest, not only has nullified the Formula 1 Grand Prix of Bahrain, but the oil companies are evacuating their staff in Libya, which produces 1.8 million barrels per day, 2.1% of world production. If the situation is normalized in the coming months we will find that oil production next year will, of necessity, significantly lower than this. Following this loop, that will push oil prices upwards, dragging the food and worse, further, the stability problems of the countries. Eventually the tension is such that a new country to fall will not result in a small variation of the situation, but an abrupt, large-scale disruption, a regional war that blocking access to a new product but oil to the West ... any of those things would be a phase change, the move to a different state in which things no longer work as they had become accustomed in recent decades. At the moment it is transferred to that point of no return, things will change in a more sharply than many people realize.
Dimitri Orlov argues that the Hubbert curve, the model used to describe the evolution of oil production, is an idealization that is far from reality, especially in regard to the decline global production. The key is to make the system work as expected each subsystem must operate in an equally reliable, and that means that it continues to look for new wells, building new production facilities, keeping the lines of distribution and refining, etc. However, all facilities which are all depends on the physical world, and apart from those that were damaged by the riots, others will be affected by the volatility of prices listed above and do not invest enough in them, just when most needed. Therefore, the ideal limit of Hubbert will be difficult to accomplish, and most likely we rushed on that side much more quickly than we would like. Because the problem is fed back, and when lower the production cost significantly overcome it. This will lengthen the time that oil will last, but based on creating a greater or earlier shortages.
The final problem of this phenomenon is the predictable tendency of economists to guard explanations focus on the symptoms, without going into the substantive issues, and that leads to an inability inability to understand that the economic crisis / social / humanitarian perceive on the surface is at bottom a crisis resources. And that continually focus on the symptoms and not the illness we will likely lead to ineffective implementation of measures, focusing heavily on the productive side, not understanding that the raw materials now lost and can not recover. As Vesper complaint Nada, unconscious or deliberate misinformation on the structural component of this crisis that never ends inevitably leads to another vicious cycle that will aggravate the problems to reach the phase transition and the collapse of our system.
The fights its kind since the oil shortages of the fate of each country will depend on whether a producer or not, how close it is to the producers and their relationship with them ... Also, if you know how to implement measures decided on savings, contingency against shortages and social protection. That, or wait our particular Tahrir Square. Hopefully for once we are smart.
Salu2,
AMT
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