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Peak oil and national debt

March 11, 2010

debt and oil

Malthus may end up being right after all.

If peak oil theory is correct, we are in for a significant population contraction.  Once we’re farther along the downslope of energy supply, we won’t be able to support the existing population, let alone, projections factoring in inevitable pop. growth. The double whammy of peak oil and crippling national debt is a pretty nightmarish scenario.

Our national debt is so massive that the interest payments alone will outstrip most other expenditures in the federal budget in less than a decade.   Even worse, most debt figures don’t  include social security and medicare that will be insolvent by the time baby boomers start drooling on themselves.  Currently, the number one cause of personal bankruptcies is medical bills and in 10 to 20 years that number will probably skyrocket to horrific levels.

At the current trajectory, we are really, really fucked.  Expanding the money supply might ease the pain temporarily but that solution will eventually lead to inflation.  Likewise, Keynesian fiscal stimulus will temporarily increase employment levels but will further drive up our debt.

The problem is pushing a few easy policy levers will not get us out of the clusterfuggle.  Policy makers resort to these tactics because they’re easy.  Increasing standards at schools, raising taxes, and cutting spending simultaneously, simply aren’t feasible because they won’t get re-elected.  The voting public has to grow up and accept and support temporary pain for long term gain.  What we have now is temporary gain for long term pain.

The best way to escape our debt calamity is by increasing productivity and stop acting like a teenager with their first credit card.  How do you increase productivity?  I think the best approach is education and developing a skilled work force, which has been slowly eroding over time, relative to other industrialized nations.

Peak oil states we have already hit our production peak according to ex-oil industry physicist, M Hubbard.  Most oil analysts that know what they’re talking about, agree with this.   A price shock (caused by oil) combined with our national debt, is a recipe for disaster.

On the other hand, maybe necessity is the mother of invention.  If someone bet me – all we had to do is spend 2 billion dollars, hire 130,000 people, and we could split the atom in 4  years – I would have bet against it (and been wrong).

Ultimately, the only chance we have are alternative energy breakthroughs, to be able to sustain projected population growth with finite dwindling resources.

4 Comments leave one →
  1. charlotte permalink
    March 11, 2010 7:10 pm

    i, for one, look forward to hearing more from chimp.

  2. The_Liquid_Laser permalink
    April 15, 2010 2:48 am

    You make a good point about a coming energy crisis. Energy prices are going to skyrocket unless there are sufficient alternative sources to replace oil, or we find ways to become more energy efficient. That spike in gas prices we saw right before the recession is just a taste of what is to come.

    However it may not have quite the effect on population that you are suggesting (depending on what you actually mean). In modern countries population growth is limited more by economic factors than biological ones. If there is a population decline it will be because people stop having children, but there won’t be a huge death toll or anything like that. The bigger issue involving population demographics has more to do with Social Security and Medicare. I.e., there won’t be enough young people to finance the number of soon-to-be retirees.

    • April 17, 2010 1:56 am

      Yes, in most of the older industrialized nations that is the case. But the increase in future demand (that we didn’t face in the oil shocks from the 70’s); will come from India, China and SE Asia.

      Even if there was no population growth, peak oil would still be in effect. The difference is in that scenario, gas might not hit $300 per barrel for another 40 to 100 years. Which would give us a better chance to come up with a technological solution to cushion or possibly avert the calamity.

      The social security/medicare issue is more about our debt which in itself is bad, but would mostly just deepen, prolong or a create a double dip recession. Peak Oil makes it exponentially worse when it occurs at the same time as massive crippling debt caused by many things (military spending, healthcare, and prolonged and consistent deficit spending).

      As far as the death toll or painful population contraction, I guess it depends on how much faith you have in societies to allocate scarce resources (when it becomes dire) peacefully. Based on history, I’m pessimistic.

      • The_Liquid_Laser permalink
        April 17, 2010 9:59 am

        Heh, you might have a point. I’m pretty sure there will be enough food, but people might still shoot each other over a gallon of gas. 😉

        Really though I don’t this problem is the end of the world (or even the worst problem we’re looking at), because there are alternative fuel sources. The main repercussion will be that a larger % of a person’s income will go toward fuel in the future. The real concern is how much of an increase that % will actually be. Now is the time to get into alternative fuels for anyone who is so inclined. Even if you have to sell biodiesel for $4-$5 a gallon, that will seem like a real bargain in a few years.

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