Energy crisis: Turning-point of humanity

Rudo de Ruijter,

Independent researcher

Updated 12 August 2010

 

After more than 150 years of increasing availability of energy and an explosive growth of the world population, we are now entering an era of always decreasing availability of energy. The world population will shrink. For this new era new economic principles are needed to maintain prosperity. Part of this is a bank-reform, that members of Parliament can compel if they want.

 

 

From January 2007 to July 2008 the oil-price have risen explosivily. This time it was not about some action of OPEC, a threat of war or a cold winter. The rises in price were the result of a turning-point in the oil supply. Demand kept growing and the oil extraction has reached its ceiling. And, as the oil exporting countries use more and more oil themselves, less oil is offered on the export-markets.

 

After July 2008, due to the global recession, demand has dropped below offer, resulting in a sharp drop of oil prices. [1] That is a relief for all those who heavily depend on oil. However, we should remain conscient that in spite of these lower prices, the era of always increasing availability of oil lays behind us.

 

Those who count on alternative energy sources are wrong. Gas, coal, nuclear, hydro, wind and solar energy cannot make up the shortage of oil. The world population will have to do with less energy. .

 

Today's mix of energy use consists of  36 percent oil, 24 percent gas, 28 percent coal, 6 percent nuclear, 6 percent hydro-power and 1 percent renewables, like wind and solar energy.

 

The Canadian researcher Paul Chefurka has made an analysis and a prognosis of each energy source. See the pictures left and beneath. For explanation and details, please read his article World Energy and Population [2] http://www.courtfool.info/en_World_Energy_and_Population.htm

 

 

 

Most big oil fields in the world are "empty" now or slowing down. (Peak-oil.) For the extraction from the remaining smaller fields a lot more investments are needed and the extraction speed is lower. The lowering capacity can only partly be compensated by other sources of energy.

 

The peak in gas extraction is expected within a relative short time. The richest coal (anthracite) is depleted for the most part. The remaining coal is poorer in energy and demands higher extraction cost. Coal has a high CO2 emanation, and solutions to this problem are still in an experimental stage. The capacity of existing and planned nuclear plants is far too small to compensate the fall in energy. A rapid making-up of  arrears cannot be expected with nuclear plants. For hydro-energy the interesting locations are already in use and, here too, a multiplication of capacity cannot be expected. Renewable energy, like wind and solar, hardly represent anything compared with global energy consumption. In spite of hopeful developments, its share will remain insignificant for still a long time.[2]

 

World population

 

The explosive growth of the world population has been possible by the one-time consumption of fossil energy. We now have reached the top of the energy-extraction. The extraction of the remainder demands more cost and efforts for a lower output.

 

The lowering availability of energy will logically lead to a shrinking world population.

 

 

 

 

Big differences per country

 

The world population consumes in average 1.8 TOE (Tons of Oil Equivalence) per person per year. The use of energy in the world varies a lot. The 2.8 billion people in China, India, Pakistan and Bangladesh consume 0.8 TOE per person per year. In the US this is 8 TOE per person per year.

 

If we take a look at the dependency on energy-import, we notice that, calculated per inhabitant, Western European countries, Japan and the United States import more than 2 TOE per year (numbers from 2005).

When there are shortages on the energy export-markets, these importing countries are in trouble first. In this situation the US still has the advantage that most energy is traded in dollars. Financially they can dispose of it freely. Since they abandoned the gold standard in 1971 (the year of Peak Oil in the US), they finance their imports with more and more additional dollars, as shown by their explosively growing external debt. (See "Cost, abuse and danger of the dollar" for more details. [4] )

 

The role of the other energy-importing countries is double. On the one hand their demand for dollars helps to keep the dollar rate upright (and with the dollar rate, the US-imperium). On the other hand, most often they are also military allies of the US, who likewise profit of the submission of countries with big oil reserves, like Iraq [4] or of  countries on transit routes, like Afghanistan, that, by the way, has also enormeous reserves of oil, gas and minerals. [5] Nearly all heavily import dependent countries are united in NATO, and account for 70% of world's military spendings. (The US alone accounts for over 40%.)

 

Oil applications

 

Today's oil crisis makes it painfully clear, that various forms of energy cannot be exchanged easily. Oil is made into diesel oil and fuel (70 percent), petrol/gasoline (13 percent), bitumen, lubricating oil, kerosene, butane, liquid petrol gas, naphtha, benzene and toluene.

 

From these, naphtha, benzene and toluene are the raw materials for chemicals, plastics, synthetic fibers and rubbers.

 

Chemicals are in cleaning products, medicins, anti-freeze, paints, insecticides, fertilizers, soap and explosives. Plastics are used in bags, beer-cases, suit-cases, dustbins, dashboards, pipes, gutters, tubes, floor-coverings and polystyrene. Synthetic fibers and rubbers are made into textiles, silicons and tyres. [6]

 

All those products have their places in our daily life and most of them cannot simply be exchanged by others.

 

Transport and cohesion

 

Everywhere in the world the massive availability of diesel and petrol has determined the organization and cohesion of societies. Distances to be covered, considered normal unto now, will become very expensive, particularly in food-supply, commuting, trade and industry. In social life too, short distances will become more and more important.

 

Food and energy

 

The modern high-output food production swallows a lot of energy. In the US the production of 1 unit of energy in food demands 1.56 unit of fossil energy. When we also take into account transportation, processing, packaging, distribution, conservation and cooking, 1 unit of energy in food demands not less than 7.36 units of fossil energy. [7] The biggest threat for the intensive agriculture in 2008 is the doubling of the price of fertilizers, as a result of the oil-crisis. [8] Products of high-output agriculture will become too expensive for a large part of the world population. The biggest economy in energy can be made with traditionally produced food from farmers in the neighbourhood.

 

Continuing is war

 

With the present size of the world population it is quite certain, that there will not be enough food and energy in the coming 75 years. If the world population does not shrink radically and the strive for economic growth is not banned, more and more of our children will be sent to war to get more food and energy. (Of course these wars will be camouflaged as peace-keeping operations, development aid, democratisations and anything else the leaders of industrialized countries come up with to avoid the nasty taste of murder and robbery to their people.)

 

Growth-model

 

The always increasing availability of energy did not only allow an explosive growth of the population, but also came with economic models that function according to the principal of endless economic growth. They assume an always increasing availability of raw materials, energy, working force and consumers.

 

These models dominate the thinking of politics and economy in most countries of the world. The motor in these models is the money-system, that allows private banks to create digital money for loans. Money originates when a loan is issued and vanishes when the principle is paid back. The amount of outstanding loans increases all the time, leading to a permanent inflation. It is an endless devaluation of the money unit, which forms the impulse for ever more activity to forestall impoverishment. (If you don't use your money, you loose value.) [3]

 

The permanent inflation is an intentionally created effect of today's banking system. The banks need inflation and create it themselves by the permanent increase of outstanding loans. The usual risk for bankers is that loans are not entirely paid back. When there is inflation, the amount the bank creates as principal for the lender becomes less worth over time. For the lender, it becomes easier to pay it back. The bank doesn't care it becomes less worth, for the payback of the principal only serves to reduce the created number in their books to zero again. On the contrary, if the total amount of outstanding loans in the country would decrease, which means deflation, it becomes more difficult for lenders to pay back their loans and all banks would be at risk simultaneously.

 

Seemingly, banks have limits in the amounts of loans they are allowed to issue. They must have capital, that corresponds to a small percentage of the outstanding loans and they must keep enough reserves for the payments of their customers and to hand them out cash money. In the US, until 2009,  each bank had to keep the equivalent of 10% of all deposits as reserves and could create loans up to 9 times these reserves. The hidden effect of this rule is the money multiplier. When the money of a loan is spent and used in society, it will move from bank to bank. Each of them can issue new loans up to 90% of  the received amounts. This ends up with a multiplication of 10 times the initial loan. In fact, banks can collect interest 10 times on the same money then. Henry Ford once said "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning".

 

In the Netherlands, where this 1:9 limitation did not exist, the ING-bank lends out the same money 36 times! However, these limitations are only seeming. Each year, the capital of banks is raised with a part of the profits and the pricing of collateral rises by inflation. This means that the amounts of loans can and will increase indefinitely. There is no end to the impulse for growth. (See "Secrets of money, interest and inflation" for more details.)

 

Although the decrease in available energy becomes visible on the export markets, we still don't have solutions for our economy - except warfare. For the moment there is a lack of consciousness, knowledge and comprehension.

 

Today's money system is unable to deal with a general decrease of economic activities. As soon as the amount of new loans lowers, it means that the value of the money unit rises and, thus, paying back outstanding loans becomes more and more difficult. All banks would be threatened by bankruptcy simultaneously.

 

Slimming-model

 

During our lifetime we never knew anything else but the growth model. That is in use nearly everywhere in the world. That is why we do not realize sufficiently, it is just an economic model. It only applies in a situation of permanent increase of energy, raw materials, working force and consumers.

 

When the economy must function with a shrinking availability of energy, we need another economic model.

 

In the slimming model there is a shrinking production and a shrinking consumption, caused by the decrease of energy. When there is less energy available than needed for a big population, we should - logically - strive for a smaller population. If we start the decrease in population early enough, then, counted per inhabitant, prosperity can be maintained at a high level. (When the population is too big, it will be war and economic crisis.)

 

Ideally, we would need a money system that is well suited, both for eras of growth as well as for eras of decreasing economic activity. In fact, the principle for such a system is very simple: restrict money creation to one bank in each country. In a democracy, that bank would, logically, be a state bank.

 

Bank-reform

 

As said, in today's system new money is created by commercial banks each time loans are made. For all commercial banks together, there is no limit in the unbridled money-creation. It can, at best, be stimulated or slowed down a bit by the interest rate of the central bank. As explained in "Secrets of money, interest and inflation", central banks themselves profit from inflation and changing interest rates, which allow them income from monetary operations, that garantee their independence from governments. [3]

 

This system of permanent inflation can be stopped by letting only one bank issue money for loans. In a democracy this should be a state bank, managed by the government. Today's commercial banks would become middlemen between the state bank and the public, and hand the loans to their customers. These banks would not be allowed anymore to create money for loans. They would manage their customers' accounts on behalf of the state bank.

 

The state bank can immediately stop the inflation by limiting the amount of new money-for-loans to the amount of ending loans. When necessary, it can adjust the money stock to the changing needs of society. This limitation will not lead to a lack of money for new loans. Commercial banks will still be allowed to invite their customers to put their money in funds, that can be lent out to the public too. In that case customers can pay money from their deposit account into the funds' accounts. This way the funds use existing money to lend out. This does not increase the money stock and, thus, does not create inflation.

 

In accordance with the priorities decided by the parliament, the state bank can apply different interest rates for different categories of loans. For instance, long term investments for a sustainable society could be financed at extremely low interest, and, the other way around, unwanted investments can be discouraged by high interest. With interest rates used to steer economic activity according to the real needs of the country, this system offers the best basis to provide the maximum of possible prosperity, not only when the economy grows, but also when activities decrease.

 

Today, when the government needs more money than collected by taxes, it must borrow from banks and pay interest. In most countries, the payment of interests on public debt constitutes a relative high share of the taxes. Of course, with a state bank, loans for public expenses would be interest free. Nevertheless, if we want to keep the money stock stable and avoid inflation, we still need to pay back these loans, but we would be freed from the interest on public debt. (Alternatively, the government, instead of borrowing from its state bank, could also create the money itself and spend it directly, with similar result.)

 

Members of Parliament

 

In the past, members of parliament have granted special rights to bankers, without understanding what they were doing. The tricks of the bankers have remained conceiled to the parliament and the public for almost a century now. Bankers make ever more investment and management decisions that shape our society. The permanent increase of the money stock makes everything buyable. Many classical state institutions (energy & water supply, public transport, post and telecommunications, health care, education, security) have been bought by private corporations in an ongoing process that dismantles the institutions and functions of our democratic governments.

 

Today's money system has succesfully accompanied and stimulated the growth of our economies, thanks to the fast consumption of fossil energy resources. Until now, rich countries succeeded to import as much energy as they liked, but with the economic development in exporting countries, demand starts to exceed the offer. We must be prepared for periods (or even an era) with decreasing availablity of energy and less economic activity. We now desperately need a money system that does't collapse when economic activities decrease. With a bank reform like outlined above, we can not only obtain an adequat money system, but also transfer decision power from the bankers to our democratic representatives.

 

"Permit me to issue and control the money of a nation and I care not who makes its laws."

(Mayer Anselm Rothschild)

 

July 2008, updated August 2010

 

 

[1] World Oil Prices 1998 - 2008

      http://www.courtfool.info/USD_World_Oil_Prices_1998_2008.htm

 

[2] Paul Chefurka, World Energy and Population

      http://www.courtfool.info/nl_Wereldbevolking_en_energie.htm

      http://www.paulchefurka.ca/WEAP/WEAP.html

 

[3] Secrets of money, interest and inflation

      http://www.courtfool.info/en_Secrets_of_Money_Interest_and_Inflation.htm 

 

[4] Cost, abuse and danger of the dollar         

      http://www.courtfool.info/en_Cost_abuse_and_danger_of_the_dollar.htm

 

[5] Pipelines to 9/11

      http://www.courtfool.info/en_Pipelines%20to%209_11.htm 

 

[6] Oil-products

      http://proto4.thinkquest.nl/~lld581/index.php?id=14

 

[7] Fact sheets US Food System

      http://css.snre.umich.edu/css_doc/CSS01-06.pdf

 

[8]  New threat to food system: pricey fertilizer

      http://www.reuters.com/article/homepageCrisis/idUSN20324889._CH_.2400