Can the American Lifestyle Survive the End of Cheap, Abundant Oil?

John Michael Greer's essay A Gesture from the Invisible Hand explains why the end of cheap, abundant fossil fuels undermines the economies of the societies that are dependent on oil. This is really bad news for the "civilized" countries — and why denial from our leaders is the norm. Excerpts below.

This "peak oil" aftermath theme also explains why debt is accelerating and China is becoming a dominant economic power.

Link: The Archdruid Report: A Gesture from the Invisible Hand

It’s common, for example, to hear well-intentioned people insist that the market, as a matter of course, will respond to restricted fossil fuel production by channeling investment funds either in more effective means of producing fossil fuels, on the one hand, or new energy sources on the other. The logic seems impeccable at first glance: as the price of oil, for example, goes up, the profit to be made by bringing more oil or oil substitutes onto the market goes up as well; investors eager to maximize their profits will therefore pour money into ventures producing oil and oil substitutes, and production will rise accordingly until the price comes back down.

Energy is one of those places: in some ways, the most important of all. Energy is not simply one commodity among others; it is the ur-commodity, the foundation for all economic activity. It follows laws of its own – the laws of thermodynamics, notably – which are not the same as the laws of economics, and when the two sets of laws come into conflict, the laws of thermodynamics win every time.

This is necessary because energy doesn't follow the ordinary rules of economic exchange. Most other commodities still exist after they've been exchanged for something else, and this makes exchanges reversible; for example, if you sell gold to buy marble, you can normally turn around and sell marble to buy gold. The invisible hand works here; if marble is in short supply, those who have gold and want marble may have to offer more gold for their choice of building materials, but the marble quarries will be working overtime to balance things out.

Energy is different. Once you turn the energy content of a few million bushels of grain into a pyramid, say, by using the grain to feed workers who cut and haul the stones, that energy is gone, and you cannot turn the pyramid back into grain; all you can do is wait until the next harvest. If that harvest fails, and the stored energy in the granaries has already been turned into pyramids, neither the market economy of goods and services or the abstract system of distributing goods and services can make up for it. Nor, of course, can you send an extra ten thousand workers into the fields if you don't have the grain to keep them alive.

The arrival of geological limits to increasing fossil fuel production places a burden on the economy, because the cost in energy, labor, and materials (rather than money) to extract fossil fuels does not depend on market forces. On average, it goes up over time, as easily accessible reserves are depleted and have to be replaced by those more difficult and costly to extract. Improved efficiencies and new technologies can counter that to a limited extent, but both these face the familiar problem of diminishing returns as the laws of thermodynamics, and other physical laws, come into play.

As a society nears the geological limits to production, in other words, a steadily growing fraction of its total supply of energy, resources, and labor have to be devoted to the task of bringing in the energy that keeps the entire economy moving.This percentage may be small at first, but it's effectively a tax in kind on every productive economic activity, and as it grows it makes productive economic activity less profitable. The process by which money produces more money consumes next to no energy, by contrast, and so financial investments don't lose ground due to rising energy costs.

This makes financial investments, on average, relatively more profitable than investing in the kinds of economic activity that use energy to produce nonfinancial goods and services. The higher the burden imposed by energy costs, the more sweeping the disparity becomes; the result, of course, is that individuals trying to maximize their own economic gains move their money out of investments in the productive economy of goods and services, and into the paper economy of finance.

Ironically, this happens just as a perpetually expanding money supply driven by mass borrowing at interest has become an anachronism unsuited to the new economic reality of energy contraction. It also guarantees that any attempt to limit the financial sphere of the economy will face mass opposition, not only from financiers, but from millions of ordinary citizens whose dream of a comfortable retirement depends on the hope that financial investments will outperform the faltering economy of goods and services. Meanwhile, just as the economy most needs massive reinvestment in productive capacity to retool itself for the very different world defined by contracting energy supplies, investment money seeking higher returns flees the productive economy for the realm of abstract paper wealth.

One intriguing detail of this scenario is that it has already affected the first major oil producer to reach peak oil — yes, that would be the United States. It's unlikely to be accidental that in the wake of its own 1972 production peak, the American economy has followed exactly this trajectory of massive disinvestment in the productive economy and massive expansion of the paper economy of finance. Plenty of other factors played a role in that process, no doubt, but I suspect that the unsteady but inexorable rise in energy costs over the last forty years or so may have had much more to do with the gutting of the American economy than most people suspect.

If this is correct, now that petroleum production has encountered the same limits globally that put it into a decline here in the United States, the same pattern of disinvestment in the production of goods and services coupled with metastatic expansion of the financial sector may show up on a much broader scale. There are limits to how far it can go, of course, not least because financiers and retirees alike are fond of consumer goods now and then, but those limits have not been reached yet, not by a long shot. It's all too easy to foresee a future in which industry, agriculture, and every other sector of the economy that produces goods and services suffer from chronic underinvestment, energy costs continue rising, and collapsing infrastructure becomes a dominant factor in daily life, while the Wall Street Journal (printed in Shanghai by then) announces the emergence of the first half dozen quadrillionaires in the derivatives-of-derivatives-of-derivatives market.

Perhaps the most important limit in the way of such a rush toward economic absurdity is the simple fact that not every economy uses the individual decisions of investors pursuing private gain to allocate investment capital. It may not be accidental that quite a few of the world's most successful economies just now, with China well in the lead, make their investment decisions based at least in part on political, military, and strategic grounds, while the nation that preens itself most proudly on its market economy — yes, that would be the United States again — is lurching from one economic debacle to another.

Long Meadow Ranch in the Mayacamas Mountains in Napa County, California

We saw a documentary of this 650-acre ranch on Green TV. Amazing - I'd love to visit the place.

Link: Long Meadow Ranch – About The Ranch

The rammed-earth constructed winery and olive oil facilityLong Meadow Ranch is a 650-acre historic ranch nestled high atop the Mayacamas Mountains above the Napa Valley. Here they produce award-winning wines and handcrafted extra virgin olive oils – as well as grass-fed beef, eggs, and heirloom fruits and vegetables. Their extraordinary food products have been featured by America's top chefs.

Long Meadow Ranch has re-established vineyards first planted on the ranch in the 1870s and they have resumed producing estate-bottled wine from the ranch's distinctive mountain "terroir."

LMR Bear Canyon Vineyard at 1200' elevation as seen from LMR's upper pastures at 1675' The owner's vision is to make wines as food – to create world class wines that truly complement a meal – using sustainable, organic farming methods.

However, their integrated organic farming system is built not only around wine making, but also includes world class estate-produced olive oil, a substantial herd of grass-fed Highland cattle, an organic vegetable garden, and an egg-producing poultry flock. They even breed and work their own Appaloosa and POA horses.

They are creating a modern, commercially successful, version of the family farm – one that is widely acknowledged as a purveyor of fine food. All of the crops are organically produced and are certified by California Certified Organic Farmers (CCOF). Their wines, oils, beef, and vegetables have been featured by America's top chefs.

Our horses in Long Meadow, from which the ranch derives its nameThe award-winning, earth-formed, wine and olive oil facility and the adjacent moist, cool caves allow them to produce handcrafted wines and olive oils entirely on our own estate under carefully controlled conditions. Led by winemaker, Ashley Heisey, the staff is committed to pioneering modern approaches to their centuries-old crafts.

Long Meadow Ranch's solar panel arrays generate enough electricity to supply their energy needs and they employ biodiesel fuels in all of the farm equipment. Protected by easements granted to the Napa Valley Land Trust, the land and that of the neighbors will continue to provide a unique rural environment rich with wildlife for future generations.

Fence post sign at main gate of Long Meadow RanchTheir web site has a virtual tour of this very special place. See how Appaloosa horse breeding, organic vegetable gardening, and waste composting help set new standards for environmental stewardship while producing challengers to the world's finest wines and olive oils.

LMR CompostLong Meadow Ranch set out to prove that they could produce world class wine using sustainable, organic farming methods. Among the pioneers in establishing an organically farmed vineyard in the Mayacamas Mountains, Long Meadow Ranch is still one of less than thirty organically certified vineyards in the County of Napa.

They are not former hippies in tie-dyed T-shirts. They do not make eclectic slightly "off-quality" products that you have to "believe-in" to value. They are committed to proving that world class quality and responsible farming go hand-in-hand.

They do not approach organic farming theologically. They do not have a belief system they are trying to evangelize. Instead, they have learned that organic farming methods produce higher quality at lower cost, with real consumer benefit. Every farming practice they have adopted at Long Meadow Ranch is grounded in scientific first principle and they hold a well-developed point of view why it works. They are committed to the highest quality and organic farming is the mechanism that allows us to achieve extraordinary results.

Napa Valley's Oldest Olive OrchardsInstead of the "mono-culture" that has emerged in the Napa Valley, at Long Meadow Ranch they have developed an integrated farming system that relies on each part of the Ranch contributing to the health of the whole. Vineyards and wine making, olive orchards and olive oil making, and horse breeding all work together in complementary fashion (not to mention the egg-laying poultry flock and the organic vegetable gardens).

They make their own fertilizers on the Ranch through an extensive composting operation that relies on organic material from each segment of the Ranch. Soil erosion is controlled and new soils are built through the extensive use of permanent cover crops made up of carefully selected grasses, clovers, and legumes.

The poultry flock located at LMR Rutherford Gardens helps illustrate one of the central concepts of farming at Long Meadow Ranch – the notion of "integrated" farming or beneficial inter-related "loops" As described by owner, Ted Hall: "As we raise the many varieties of rare heirloom tomatoes, the finest, most uniform fruit is sold to fine restaurants. One of our best accounts in the Napa Valley is Auberge du Soleil. The chef there will buy the tomatoes. If they aren't first quality, we'll sell them at their roadside stand or at the farmers' market. Our third-quality tomatoes are sold to a great little drive-in restaurant, where they're made into gazpacho."

"If the tomatoes aren't good enough for that, they'll be fed to their organic chickens. Because they eat fabulous tomatoes and veggies, the chickens lay spectacular eggs with yolks almost neon-like in their color. We then get to sell the eggs back to Auberge du Soleil! There are even more efficiencies here. Since we raise the poultry near the vegetable production, we have no cost of poultry feed because we're feeding them their leftover vegetables. When we're done with the crop season, we have all the organic matter – old pumpkin vines, dead tomato plants – that then goes into a nearby compost pile. This time we use the chicken manure as the source of essential nitrogen. And, by spring the compost is ready to go back on the field as fertilizer. The cycle begins again."

They do not use herbicides or pesticides and all crops are certified by California Certified Organic Farmers.
 

Leopard Seal Adopts Photogapher

Link: Watch: Leopard seal teaches photogapher how to hunt | MNN – Mother Nature Network

Photo: Brian Lam/National Geographic
Brian Lam calls the time he spent being taught hunting by a leopard seal in the chilly waters of Antarctica "the most incredible experience I've ever had as a National Geographic photographer". While photographing the giant sea predator, he was adopted by a large female leopard sea who spent four days trying to teach him to hunt penguins. At first the seal would bring him live healthy penguins. After Mr. Lam failled to catch them, she brought weakened penguins, then dead penguins before finally ripping apart a penguin in a last ditch effort to show the photographer how to eat.
 
Watch this, it's pretty amazing:
 
 
It's fasinating behavior, you might think that the last thing a predator wants to have around is competition, but maybe sometimes the desire to have a buddy to play around with overrules that. Having easy to catch penguins around probably makes it easier to invite a new mouth into the local scene.
 
via Chris Anderson

Energy and the Future of the Invisible Hand

John Michael Greer makes some sobering observations about our energy future. Excerpts below. This is not fun reading.

Link: The Archdruid Report: A Gesture from the Invisible Hand

It’s been a long road, but we’ve finally reached the point in these essays at which it’s possible to start talking about some of the consequences of the primary economic fact of our time, the arrival of geological limits to increasing fossil fuel production. That’s as challenging a topic to discuss as it will be to live through, because it cannot be understood effectively from within the presuppositions that structure most of today’s economic thinking.

It’s common, for example, to hear well-intentioned people insist that the market, as a matter of course, will respond to restricted fossil fuel production by channeling investment funds either in more effective means of producing fossil fuels, on the one hand, or new energy sources on the other. The logic seems impeccable at first glance: as the price of oil, for example, goes up, the profit to be made by bringing more oil or oil substitutes onto the market goes up as well; investors eager to maximize their profits will therefore pour money into ventures producing oil and oil substitutes, and production will rise accordingly until the price comes back down.

That’s the logic of the invisible hand, first made famous by Adam Smith in The Wealth of Nations more than two centuries ago, and still central to most mainstream ideas of market economics. That logic owes much of its influence to the fact that in many cases, markets do in fact behave this way. Like any rule governing complex systems, though, it is far from foolproof, and it needs to be balanced by an awareness of the places where it fails to work.

Energy is one of those places: in some ways, the most important of all. Energy is not simply one commodity among others; it is the ur-commodity, the foundation for all economic activity. It follows laws of its own – the laws of thermodynamics, notably – which are not the same as the laws of economics, and when the two sets of laws come into conflict, the laws of thermodynamics win every time.

Consider an agrarian civilization that runs on sunlight, as every human society did until the rise of industrialism some three centuries ago. In energetic terms, part of the annual influx of solar energy is collected via agriculture, stored in the form of grain, and transformed into mechanical energy by feeding the grain to human laborers and draft animals. It's an efficient and resilient system, and under suitable conditions it can deploy astonishing amounts of energy; the Great Pyramid is one of the more obvious pieces of evidence for this fact.

Such civilizations normally develop thriving market economies in which a wide range of goods and services are exchanged. They also normally develop intricate social abstractions that manage the distribution of these goods and services, as well as the primary wealth that comes through agriculture from the sun, among their citizens. Both these, however, depend on the continued energy flow from sun to fields to granaries to human and animal labor forces. If something interrupts this flow — say, a failure of the harvest — the only option that allows for collective survival is to have enough solar energy stored in the granaries to take up the slack.

This is necessary because energy doesn't follow the ordinary rules of economic exchange. Most other commodities still exist after they've been exchanged for something else, and this makes exchanges reversible; for example, if you sell gold to buy marble, you can normally turn around and sell marble to buy gold. The invisible hand works here; if marble is in short supply, those who have gold and want marble may have to offer more gold for their choice of building materials, but the marble quarries will be working overtime to balance things out.

Energy is different. Once you turn the energy content of a few million bushels of grain into a pyramid, say, by using the grain to feed workers who cut and haul the stones, that energy is gone, and you cannot turn the pyramid back into grain; all you can do is wait until the next harvest. If that harvest fails, and the stored energy in the granaries has already been turned into pyramids, neither the market economy of goods and services or the abstract system of distributing goods and services can make up for it. Nor, of course, can you send an extra ten thousand workers into the fields if you don't have the grain to keep them alive.

The peoples of agrarian civilizations generally understood this. It's part of the tragedy of the modern world that most people nowadays do not, even though our situation is not all that different from theirs. We're just as dependent on energy inputs from nature, though ours include vast quantities of prehistoric sunlight, in the form of fossil fuels, as well as current solar energy in various forms; we've built atop that foundation our own kind of markets to exchange goods and services; and our abstract system for managing the distribution of goods and services — money — is as heavily wrapped in mythology as anything in the archaic civilizations of the past.

The particular form taken by money in the modern world has certain effects, however, not found in ancient systems. In the old agrarian civilizations, wealth consisted primarily of farmland and its products. The amount of farmland in a kingdom might increase slightly through warfare or investment in canal systems, though it might equally decrease if a war went badly or canals got wrecked by sandstorms; everybody hoped when the seed grain went into the fields that the result would be a bumper crop, but no one imagined that the grain stockpiled in the granaries would somehow multiply itself over time. Nowadays, by contrast, it's assumed as a matter of course that money ought automatically to produce more money.

That habit of thought has its roots in the three centuries of explosive economic growth that followed the birth of the industrial age. In an expanding economy, the amount of money in circulation needs to expand fast enough to roughly match the expansion in the range of goods and services for sale; when this fails to occur, the shortfall drives up interest rates (the cost of using money) and can cause economic contractions. This was a serious and recurring problem in the late 19th century, and led the reformers of the Progressive era to reshape industrial economies in ways that permitted the money supply to expand over time to match the expectation of growth. Once again, the invisible hand was at work, with some help from legislators: a demand for more money eventually give rise to a system that produced more money.

It's been pointed out by a number of commentators in the peak oil blogosphere that the most popular method for expanding the money supply — the transformation of borrowing at interest from an occasional bad habit of the imprudent to the foundation of modern economic life — has outlived its usefulness once an expanding economy driven by increasing fossil fuel production gives way to a contracting economy limited by decreasing fossil fuel production. This is quite true in an abstract sense, but there's a trap in the way of putting that sensible realization into practice.

The arrival of geological limits to increasing fossil fuel production places a burden on the economy, because the cost in energy, labor, and materials (rather than money) to extract fossil fuels does not depend on market forces. On average, it goes up over time, as easily accessible reserves are depleted and have to be replaced by those more difficult and costly to extract. Improved efficiencies and new technologies can counter that to a limited extent, but both these face the familiar problem of diminishing returns as the laws of thermodynamics, and other physical laws, come into play.

As a society nears the geological limits to production, in other words, a steadily growing fraction of its total supply of energy, resources, and labor have to be devoted to the task of bringing in the energy that keeps the entire economy moving. This percentage may be small at first, but it's effectively a tax in kind on every productive economic activity, and as it grows it makes productive economic activity less profitable. The process by which money produces more money consumes next to no energy, by contrast, and so financial investments don't lose ground due to rising energy costs.

This makes financial investments, on average, relatively more profitable than investing in the kinds of economic activity that use energy to produce nonfinancial goods and services. The higher the burden imposed by energy costs, the more sweeping the disparity becomes; the result, of course, is that individuals trying to maximize their own economic gains move their money out of investments in the productive economy of goods and services, and into the paper economy of finance.

Ironically, this happens just as a perpetually expanding money supply driven by mass borrowing at interest has become an anachronism unsuited to the new economic reality of energy contraction. It also guarantees that any attempt to limit the financial sphere of the economy will face mass opposition, not only from financiers, but from millions of ordinary citizens whose dream of a comfortable retirement depends on the hope that financial investments will outperform the faltering economy of goods and services. Meanwhile, just as the economy most needs massive reinvestment in productive capacity to retool itself for the very different world defined by contracting energy supplies, investment money seeking higher returns flees the productive economy for the realm of abstract paper wealth.

Nor will this effect be countered, as suggested by the well-intentioned people mentioned toward the beginning of this essay, by a flood of investment money going into energy production and bringing the cost of energy back down. Producing energy takes energy, and thus is just as subject to rising energy costs as any other productive activity; even as the price of oil goes up, the costs of extracting it or making some substitute for it rise in tandem and make investments in oil production or replacement no more lucrative than any other part of the productive economy. Oil that has already been extracted from the ground may be a good investment, and financial paper speculating on the future price of oil will likely be an excellent one, but neither of these help increase the supply of oil, or any oil substitute, flowing into the economy.

One intriguing detail of this scenario is that it has already affected the first major oil producer to reach peak oil — yes, that would be the United States. It's unlikely to be accidental that in the wake of its own 1972 production peak, the American economy has followed exactly this trajectory of massive disinvestment in the productive economy and massive expansion of the paper economy of finance. Plenty of other factors played a role in that process, no doubt, but I suspect that the unsteady but inexorable rise in energy costs over the last forty years or so may have had much more to do with the gutting of the American economy than most people suspect.

If this is correct, now that petroleum production has encountered the same limits globally that put it into a decline here in the United States, the same pattern of disinvestment in the production of goods and services coupled with metastatic expansion of the financial sector may show up on a much broader scale. There are limits to how far it can go, of course, not least because financiers and retirees alike are fond of consumer goods now and then, but those limits have not been reached yet, not by a long shot. It's all too easy to foresee a future in which industry, agriculture, and every other sector of the economy that produces goods and services suffer from chronic underinvestment, energy costs continue rising, and collapsing infrastructure becomes a dominant factor in daily life, while the Wall Street Journal (printed in Shanghai by then) announces the emergence of the first half dozen quadrillionaires in the derivatives-of-derivatives-of-derivatives market.

Perhaps the most important limit in the way of such a rush toward economic absurdity is the simple fact that not every economy uses the individual decisions of investors pursuing private gain to allocate investment capital. It may not be accidental that quite a few of the world's most successful economies just now, with China well in the lead, make their investment decisions based at least in part on political, military, and strategic grounds, while the nation that preens itself most proudly on its market economy — yes, that would be the United States again — is lurching from one economic debacle to another.

It is unfortunately also the case that many of the nations that have extracted their investment decisions from the hands of a self-terminating market system are not exactly noted for their delicate care for human rights. If that proves to be the wave of the future — and it may be worth noting that Oswald Spengler, among others, predicted that outcome — then the invisible hand may end up giving us all the finger.

Video of Moving Train hit by Tornado

Don't mess with Mother Nature.

Camera mounted in rear facing locomotive (I am told it was 4th out in consist of 4 engines).

It occurred in Illinois, earlier this year. Watch, especially to the left — watch the trees bend, debris in the air, and you can actually see the tornado pass from right to left.

The trestle seen at the end of the video was moved out of alignment to the left 18 inches — the tank car was a load of Ethylene Oxide — nasty stuff.

via Chris Anderson

Chickens come home to roost in backyards around the USA

Two of our neighbors have chickens. Chris and Leigh Ann, recent converts to backyard chickens, like the healthy eggs and enjoy watching the chickens. Their 3-year-old son gets lots of exercise chasing the hens.

USA Today describes the unfolding trend. Excerpts below.

Link: Chickens come home to roost in backyards around the USA – USATODAY.com.

A trend in backyard chicken farming is taking hold as urbanites, eager to scoop up flavorful organic eggs, discover how easy it is to get started. A simple coop, a pen and a little feed are such a low entry bar that people are flocking to try their hand at keeping chickens in a tough economy.

About 150 communities have launched Meetup.com networks of hobbyist chicken farmers in the past two years, says Andy Schneider, host of Backyard Poultry With the Chicken Whisperer on blogspot radio.

Outfitting chickens costs about $200 for lumber, plus $5 a month for feed. Chickens earn their keep by offering many benefits, Rudin says, including a tick-free backyard and lots of fun for her children, Ted, 9, and Finnian, 5, and her husband, Jon. What's more, they make free-range eggs an affordable part of the family diet.

A low entry bar for chicken farming helps explain why some communities, such as Caledonia, Wis., have blocked recent campaigns to permit backyard chicken farming. Among the concerns: Negligent practices can lead to odors and attract rodents.

But Schneider, the backyard-poultry-show host, insists the risks are no greater than those associated with owning dogs.

Some observers believe that concerns about undercutting farmers are overblown, too.

"People who have chickens or who farm in their gardens are more interested in getting to know where their food comes from" than those who don't, Heike Mayer, professor of economic geography at the University of Bern in Switzerland, said in an e-mail. "Those who have chickens will be more likely to buy a piece of meat from the local small farm."

Meanwhile, organic eggs from local providers are commanding high prices. Joseph Heckman, a Rutgers University soil scientist and proprietor of River Birch Micro Farm in Monroe Township, N.J., gets $5 a dozen for his eggs. But in terms of backyard agriculture, he, too, would like to become more self-sufficient.