Peak Industrial Output and The Limits To Growth As A Consequence of Depleting Natural Resources and Appendices (ACME) v2

Peak Industrial Output and
the Limits to Growth as a

Consequence of Depleting
Natural Resources
The permanent divergence of the real economy

and the fiat economy
Dr Simon Michaux
18th August 2017
1
This report was generated from part of a larger and ongoing study by Dr. Simon Michaux for ACME
Corporation in response to attending a meeting of the Steering Committee of ACME Industrial Operations &
Support division in the town of Huy, Belgium on Monday, June 19, 2017. In that meeting a discussion was
conducted regarding a decision to be made with what to do with some of ACME assets in Germany.
Glossary of Terms
1.0 Introduction & Synopsis Appendix A Waste Incineration in Europe
2.0 Waste generation in Europe

Appendix B Description of Different Energy
Resources
3.0 Energy Consumption in Europe
Appendix C - The Use and Application of Energy

4.0 Stagnation of European Industrial
Resources in Europe
Output and the Real Economy
Executive Summary
5.0 Structural Changes in the

Industrial Business Environment Appendix D ERoEI Comparison of Energy
Resources
6.0 Conventional Mining of Metals
has Fundamentally Changed
Appendix E Quantity of Energy at Point of
Application for Energy Resources
7.0 Energy is the Master Resource
8.0 The Implied Change in the Appendix F - Depletion of Oil Resources and Peak
Industrial Paradigm Oil
9.0 The Response of the Central
Banker Administrations
Appendix G Depletion and Project Reserves of
Gas, Coal, Uranium and Phosphorous Resources
10.0 Prognosis
Appendix H Structural Vulnerability of the

11.0 Recommendations
Financial System & the Printing Money Strategy
References
2
Executive Summary
Synopsis
ACME has 68 incinerator process plants in Germany. One of the products from these process plants is an energy fuel
oil. Demand for energy in general in Europe has been declining. There is a prediction that there will be an energy
supply surplus in or around the year 2020 (due to increased production of oil & gas). If this happens, the value
proposition of running these incineration plants would be reduced. Should ACME Corporation decommission and
asset strip some or all of the fleet of incinerators in Germany?
Influencing and relevant aspects to consider

The real economy (that produces physical goods and services as opposed to financial digital assets) contracted sharply
in 2008 during the Global Financial Crisis (GFC) and has never fully recovered. Instead industrial output has stagnated.
Also, in the period 2007 to 2012, EU-28 consumption of natural resources contracted 18.4%
This means that the 13.5% per capita drop in EU-28 energy use between 2006 and 2015 was not due to an
unprecedented achievement of efficiency, rather a signature that the real economy is undergoing structural change.
The economic stagnation seen both globally and in Europe has been persistent for much longer than conventional
economic models allow for (suggesting they are now irrelevant). There are no accepted useful economic models that
predict low commodity prices (including energy) at the same time as a long period of resource demand destruction
during persistent economic stagnation.
The conventional mining of raw materials underwent a structural change in productivity in 2001. In 2005, there was
a non-linear blowout in metal price (Pb, Ag, Ni, Au, Cu, Zn, Al and Fe ore). Since then that non-linear volatility has been
persistent after the largest economic correction since the Great Depression, which suggests the fundamental causes
of the blowout are still influential.
The modern society is a petroleum driven economy. Oil consumption and oil price have proven to be excellent proxies
for many aspects of industrial activity and society functions (for example food price). Energy is the underpinning
resource that facilitates the capacity to do useful physical work. Oil in particular has proven to be the master resource.
A case is made in this report that energy resource (mostly finite non-renewable natural resources) are only a few years
away from peaking in production and depleting (thus unable to meet market demand for consumption). Oil
production in particular may have peaked a few years ago, or will do so in a few very short years. Currently there is
no credible replacement for oil that can deliver that quantity of energy to the point of application, or has such a high
ERoEI ratio (Energy Returned on Energy Invested). Both Nuclear power and renewable energy have their place, but
are not the answer to this conundrum.
In conjunction to this, current financial monetary systems are extraordinarily fragile, overleveraged and now saturated
with debt. This state of affairs has its origins in unfortunate strategic decisions made decades ago. To survive, this
system must grow in size so existing debt can be serviced. Current status is that all fiat currencies around the world
are nearly completely debased in terms of purchasing power (the $USD lost 97% purchasing power between 1913 to
2016). The money system now cannot sustain even a small setback in public confidence without complete
fragmentation.
The circumstances that lead up to the GFC (inelastic energy supply in the form of conventional crude oil in 2005) forced
the real economy and the fiat economy (financial instruments and digital assets) to permanently diverge. To contain
the GFC and arrest the haemorrhaging of market value, an unprecedented volume of money was created through
quantitative easing (QE). If the GFC severe economic downturn continued, society at large would understand that this
system is virtual and has literally nothing really holding it together beyond the public perception that all is well. Once
it happens that the public understand that the real economy has reached peak industrial output, public confidence is
destroyed and the system becomes paralyzed into irrelevance. The hope behind the QE strategy was to give the real
economy time to resolve its issues and start to grow again.
This did not happen. In 2013 peak global energy consumption per capita was reached. In 2014, peak global GDP was
reached. In 2016, the Baltic Dry index crashed to a historical low. The real economy has peaked in production and is
now contracting due to underlying difficulties associated with the oil price and cost of energy in general.
3
Prognosis
Our industrial society is following the patterns of consumption shown from the 1972 Limits to Growth base case
scenario. In context of this scenario, we have reached or just passed peak industrial production (per captia). This
model predicts a peak in services to society (per capita) a few years later, followed by a peak in food production (per
capita).
There is a compelling case that many of the finite nonrenewable natural resources our industrial society depends upon
have hit practical extraction limits and are now depleting. While energy is the master resource, and where the
difficulties in energy resource production have defined the timing of this peak in industrial output, it certainly is not
the only resource in a supply risk circumstance. That being stated, the flash point will probably be the price of oil,
where if its too low, oil exploration is not economically viable, and if its too high, economic growth is not viable.
Systemic debt saturation of all entities around the world facing these challenges make a certain outcome
mathematically inevitable.
Our monetary systems are not in a fit state to engage in fundamental industrial reform. An unprecedented severe
economic downturn in the form of a global bond crisis, followed by a systemic debt default is now mathematically
inevitable. Moreover, due to the centralized nature of its operational control, the monetary system fragility and its
virtual nature implies a period of paralysis would be inflicted onto the real economy, at a time when the real economy
really needs to evolve in a comparative step change. The debt saturation point of the US and EU has almost been
reached. Further QE will not achieve anything useful. It is clear that political and economic leadership have no Plan B
beyond more QE at unprecedented levels.
This point where our industrial system hit the soft limits to growth (where logistics get more difficult) has been a time
period of transition that has been in progress since the year 2000. This report documents 38 data signatures that
signal structural change is happening in 5 temporal marker clusters.
Recommendations
Once it is understood that structural change is in progress and a step change is immanent, intelligent response can be
formed. ACME processes and recycles waste. As this is a vital function to society, it will always be needed regardless
of circumstance.
The implications of the challenges presented in this report mean our industrial society will require rebuilding and
retooling, which will need an unprecedented quantity of metals and minerals. Sourcing these minerals will become
logistical very difficult, making recycled raw materials much more valuable.
A number of strategic recommendations have been made in this report for ACME management to consider. They
include a series of risk mitigation strategies and preparation to take advantage of unique strategic opportunities that
ACME has (where almost all other corporations do not have). Strategies include, making ACME more resilient in times
of logistical stress, and more capable of producing products that will be needed (inelastic demand of). It also
recommended not decommissioning the incinerators in Germany.
Dr. Simon Michaux

18th August, 2017
4
Table of Contents
1.0 Introduction
1.1 Synopsis
1.2 Contributing influences and relevant aspects to consider
4.0 Stagnation of European Industrial Output and the Real Economy
5.0 Structural Changes in the Industrial Business Environment
6.0 Conventional Mining of Metals has Fundamentally Changed

7.1 What would be required from other energy sources if oil was phased out
7.2 Oil consumption and industrial output
7.3 Energy consumption and industrial agriculture
7.4 Energy and population growth
8.0 The Implied Change in the Industrial Paradigm

8.1 Exponential growth in a finite system
8.2 Limits to Growth for Metal Mining
8.3 Limits to Growth for Energy
8.3.1 Oil
8.3.2 Natural Gas
8.3.3 Coal
8.3.4 Uranium and Nuclear Power
9.0 The Response of the Central Banker Administrations

9.1 Quantitative Easing
9.2 Deteriorating Purchasing Power of Currencies
9.3 European Debt Crisis
9.4 Rising Wealth Inequality
9.5 Divergence of the Real Economy and the Fiat Economy
10.0 Prognosis
10.1 Energy Prognosis
10.2 The Real Economy Prognosis
10.3 Finance and the fiat Economy Prognosis
10.4 Just-In-Time Supply-Chain Failure & Repair
10.4.1 Natural disasters, blockading truckers, and the connectedness of things.
10.4.2 Reverse economies of scale in critical infrastructure
10.5 Geopolitics Prognosis
10.5.1 Political and Big Business Knowledge of Peak Oil
10.5.2 Geopolitical Probable Outcome
10.6 The Big Picture
10.7 Temporal Markers that Diagnose at What Stage of the Transformation is Happening Now
11.0 Recommendations for ACME Corporation
12.0 Future Work
13.0 References
i
14.0 Glossary of Terms
Appendix A: Waste Incineration in Europe

A1 Energy Recovery from Waste Treatment
A2 Emerging Technologies of Incineration
Appendix B Description of Different Energy Resources

B1 Oil and Petroleum Products
B1.1 Use of oil and petroleum products
B1.2 Conventional oil production
B1.3 Oil Refinings Basic Steps
B1.4 Unconventional oil production
B2 Gas
B2.1 Use of gas and gas products
B2.2 Conventional gas production
B2.3 Unconventional natural gas production
B3 Coal
B3.1 Use of coal in power generation
B3.2 Coal production
B4 Nuclear Power and Uranium
B5 Renewable Power
B5.1 Use renewable power sources to generate electricity
B5.2 Renewable Electricity Generation
Appendix C The Use and Application of Energy Resources in Europe

C1 Use of petroleum products in Europe
C2 Use of gas in Europe
C3 Use of coal in Europe
C4 Applications and use of renewable energy in Europe
C5 Use of fossil fuels to make plastics
Appendix D - ERoEI Comparison of Energy Resources

D1 The Oil Industry as an ERoEI Example
D2 The Net Energy Cliff
D2.1 Energy Inputs to ERoEI
D2.2 Energy Outputs of ERoEI
D2.3 Using Energy Proxies
D3 ERoEI of Energy Resources
Appendix E Quantity of Energy at Point of Application for Energy Resources
Appendix F - Depletion of Oil Resources and Peak Oil

F1 Political and Big Business Knowledge of Peak Oil
F2 Oil Production
F3 Oil Resource Discovery
F4 Status of Existing Oil Reserves
F5 Shale Oil (Tight Oil)
F6 Oil Industry Investment
F7 Rising Cost of Oil Production
F8 Peak Oil
Appendix G Depletion and Project Reserves of Gas, Coal, Uranium and Phosphorous Resources
G1 Natural Gas
G2 Coal
G3 Uranium and Nuclear Power
G4 Phosphorous
ii
Appendix H Structural Vulnerability of the Financial System & the Printing Money Strategy
H1 What is Money?
H2 History of the US Financial system and the US Federal Reserve Bank
H3 Monetary Creation and the Fractional Reserve Banking System
H4 Monetary Creation, Debt Creation
H5 Quantitative Easing and the Printing of Money
H6 Consequences: Inflation, Hyperinflation, Deflation and Stagflation
H7 Recent Examples of Inflation and Historical Examples of Hyperinflation
H8 Derivatives
List of Figures
Figure 1. European municipal waste generation and treatment 1995-2013

Figure 2. Energy consumption of Europe EU- 28 nation states 1990-2015
Figure 3. Energy Consumption of Europe EU- 28 nation states for the year 2015
Figure 4. Energy consumption by type in year 1990 for EU- 28 nation states
Figure 7. Dependency on coal, oil and gas for energy source EU- 28 nation states
Figure 9. Population Growth in the EU-28 states of Europe
Figure 10. Energy Consumption per captia of Europe EU- 28 nation states
Figure 11. US and Eurozone Industrial Production Index and MIGs
Figure 12. Raw material consumption per capita EU-28
Figure 13. US and Eurozone Industrial Production Index
Figure 14. Europe Area EU-19
Figure 15. Chart showing the crash in the Dow Jones Industrial average during the GFC
Figure 16. Global Foreign Direct Investments (FDI)
Figure 17. Conventional crude oil has passed the tipping point for easy extraction
Figure 18. World Crude & Lease Condensate Production excluding Canada Oil Sands (million barrels a day)
Figure 19. Conventional crude oil supply and demand did separate 2005-2008
Figure 20. Crude Oil Prices - 70 Year Historical Chart
Figure 21. The Baltic Dry Index
Figure 22. The Baltic Dry Index (Log Scale)
Figure 23. The price of metals indexed to the year 2000-01 and number 100
Figure 24. Caterpillar World retail Sales YOY Change
iii
Figure 25. Mining investment in Australian mining industry
Figure 26. Australia: Business investment & recessions (Bus. Inv. S % of GDP, 2016 prices)
Figure. 27 World Bank Energy (oil, natural gas, and coal) and Base Metals price Commodity price indices,
using 2005 US dollars, indexed to 2010 = 100. Base metals exclude iron.
Figure 28. The Australian Mining Multifactor Productivity Index
Figure 29. Gold mining costs in Australia 2000-2009
Figure. 30 Relationship between raw materials and finished manufactured goods
Figure 31. A simplified flow physical flows that sustain our productive system
Figure 32. World GDP in constant dollars (vertical axis) plotted against the world energy consumption in
million tonnes oil equivalent (horizontal axis), from 1965 to 2014.
Figure 33. Correlation between global GDP, global energy consumption and global oil consumption
Figure 34. Oil pumping jacks operating 24hr/day in Texas USA
Figure 35. Current industrial society is a petroleum driven economy
Figure 36. Chinese industrial output (YoY) and the (%) change in Brent Crude oil price.
Figure 37. Chinese industrial consumption compared to the rest of the world in 2008. Steel production (LHS)
and cement/concrete production (RHS)
Figure 38. Chinese consumption of natural resources as a fraction of global consumption
Figure 39. Chinas oil production surplus and deficit, 1980-2011
Figure 40. Industrial agriculture farming modelled as a system
Figure 42. Competition between biofuels and food for arable land use
Figure 43. FAQ Food Index and incidence of civil unrest
Figure 44. Major outbreaks of rioting in England (red lines) correlate with average price of wheat between
1780- 1822. (Source: Johnson 2011 & Figure using data from Archer (2000)
Figure 45. World population, per capita-, and total energy consumption by fuel as a percentage of 2011
consumption, 1850-2011
Figure 46. Per capita consumption of various fuels
Figure 47. Per Capita Consumption of Various Fuels
Figure 48. Average growth per capita consumption of energy
Figure 49. The base case projected outcome of 1972 systems analysis modelling of global industrial society,
overlaid with observed global data from 1970 -2000.
Figure 50. Feedback loops of population, capital, services and resources from the modelling procedures used
in Limits to Growths systems analysis
Figure 51. Comparing Limited to Growth scenarios to observed global data
Figure 52. World GDP in Current US Dollars, (calculated on 15/08/2017)
Figure 53. The estimated growth of the human population from 10,000 BCE2000 CE.
iv
Figure 54. Exponential growth of consumption of a finite resource
Figure 55. Planet Earth, a finite dynamically adjusting stable system
Figure 56. The resource pyramid conundrum
Figure 57. Grade of mined minerals has been decreasing
Figure 58. Metals and minerals raw material manufacturing landfill cycle
Figure 59. Historical sources of phosphorus fertilizer
Figure 60. (a2) Static: Best Estimate
Figure 63 World energy consumption forecast by economic development and fuel, 2010-2035
Figure 64. World primary energy consumption by region and fuel, 1965-2011
Figure 65. World oil production forecast, 2011-2035 (IEA New Polices Scenario 2012)
Figure 66. Estimated vehicle miles driven on all roads in United States
Figure 67. Weekly U.S. Net Imports of Crude Oil and Petroleum Products
Figure 68. Index of US vehicle miles driven and oil consumption (1970=100)
Figure 69. Estimated ERoEI ratios for energy resources on the Net Energy Cliff chart
Figure 70. Global ERoEI of Oil (1860-2012)
Figure 71. Global ERoEI of Gas (1890-2012)
Figure 72. Global ERoEI of Total Fossil Energy (1800-2012)
Figure 73. Industrial Revolutions IR1, IR2 and IR3
Figure 74. The productivity of the third industrial revolution thus peaked around 2004
Figure 75. Global production and consumption of oil by region, 1965-2011
Figure 76. World Liquids Production (conventional & unconventional)
Figure 77. Conventional oil discovery 1949-2015
Figure 78. Net difference between annual world oil reserves additions and annual consumption
Figure 79. Oil producing countries past their peak
Figure 80. US crude oil production million barrels per day
Figure 81. Global drilling of oil wells
Figure 82. The pyramid of oil and gas resource volume versus resource quality
Figure 83. Mitigation crash programs started at the time of world oil peaking: A significant supply shortfall
occurs over the forecast period.
Figure 84. Delayed wedge approximation for various mitigation options
Figure 85. World natural gas production and consumption, 1965 2011
Figure 86. Natural gas discoveries by decade
v
Figure 87. Global natural gas reserves EWG scenario
Figure 88. OECD Europe supply from natural gas reserves EWG scenario
Figure 89. World hard coal production 1960-2100 by region
Figure 90. World coal production by coal rank
Figure 91. Reasonably assured and inferred resources and cumulative uranium production of the most
productive countries
Figure 92. Required construction starts of new power plants to meet NEA forecast of nuclear capacity and
to sustain current level
Figure 93. Historical uranium production and projection until 2100 with mine-by-mine production profiles
based on Reasonably Assured Resources <130USD/kg
Figure 94. Peak energy resources current paradigm of society
Figure 95. Projected peak oil, gas and coal
Figure 96. Peak total energy, normalized data from oil, NGLs, natural gas, hard coal, lignite and uranium
reserves
Figure 97. Estimate of Future Energy Production
Figure 98. Structural interaction between raw materials, the real economy and the fiat economy
Figure 99. Proportional global volume of major currencies
Figure 100. Money supply expansion to pay interest off a debt (example from Section H3 in Appendix H)
Figure 101. The Federal Reserve Bank Balance Sheet
Figure 102. QE scale of printing of money 12 months after the start of QE1
Figure 103. Global Quantitative easing from 2008 2017
Figure 104. US monetary supply since 1918
Figure 105. European Money Supply M1
Figure 106. S&P 500 index and the US Federal Reserve Balance Sheet
Figure 107. Projection of US Federal debt, Spending and Revenues, 2016-2046
Figure 108. The US debt saturation point
Figure 109. Purchasing power of the US dollar 1913-2013, Calculation based on CPI, August 1913 = 100%.
Data as of August 2013.
Figure 110. Major currencies as valued by gold price, (as of August 31, 2010)
Figure 111. Derivatives volume compared to annual GDP
Figure 112. Debt Levels around the World
Figure 113. The major banks hubs of the international financial network show high levels of connectivity and
interdependence.
Figure 114. The European interlocking sovereign debt conundrum
Figure 115. The 62 richest people in the world have an asset value worth more than the poorest 50% of the
worlds population, and the poorest 50% is stagnating
vi
Figure 116. Global GDP and Crude Oil Production
Figure 117. The real economy vs. financial (fiat) economy
Figure 118. The United States GDP Annual Growth Official vs ShadowStats
Figure 119. The fate of the current system of industrial/commercial management
Figure 120. Progression of financial crisis from financial to economic to political arenas
Figure 121. Fiat currency spiral to sovereign debt default
Figure 122. Event based crisis, financial to economic to political arenas
Figure 123. A timeline of implications for society resulting from a shut-down in trucking
Figure 124. Reverse economies of scale in critical infrastructure.
Figure 125. Trust Radius The slow expansion of trust in an expanding economy, and its fast contraction in a
contracting economy.
Figure 126. The price of oil as a leading indicator and as a lagging indicator
Figure 127. Everything revolves around oil price
Figure 128. The two competing gas pipelines passing through Syria to supply Europe
Figure 129. Example of a game theory study done
Figure 130. The rise and fall of empires and their reign as the global reserve currency
Figure 131. Interaction between human civilization and its environment 500 years ago
Figure 132. Interaction between human civilization and its environment now
Figure 133. The choice before us, both practical and abstract
Figure 134. Transformation of our industrial society through a discontinuity
Figure 135. The Fan systems crisis and transformation project
Figure 136. The Venus Project
Figure 138. Progression of peaks in limits to growth scenario
Figure 139. The new ACME internal technical capability interacting with a fluid and volatile market
Figure 140. Analytics data analysis strategy
Figure 141. Work in progress
vii
List of Tables
Table 1. Energy density and supply in 2016
Table 2. Power generation stations and capacity by type
Table 3. Replacement energy supplied to society by resource oil in the year 2016 by other power generation
resources
Table 4: Conventional gas reserves and estimate of shale gas resources in Europe
viii
1.0 Introduction
The ACME Corporation has an important decision to make regarding the management of some of its assets
in Germany. There conflicting interpretations of business environment that are relevant to this decision.
That being said this decision will have far reaching implications if the concepts in this report prove to be
valid.
1.1 Synopsis
ACME has 68 incinerator process plants in Germany. One of the products from these process plants is an
energy fuel oil. Demand for energy in general in Europe has been declining. There is a prediction that there
will be an energy supply surplus in or around the year 2020. If this happens, the value proposition of running
these incineration plants would be reduced. Should ACME Corporation decommission and asset strip some
or all of the fleet of incinerators in Germany to avoid a future crash in the energy market?
1.2 Contributing influences and relevant aspects to consider

Consideration of only one or two aspects of this business environment is inappropriate. Possible
explanations for the reduction in waste generation and reduction in energy demand could be a general
increase in efficiency in the European society. Another explanation is this could be the outcome of EU
government policy in accordance to the Kyoto Protocol agreement on the reduction of carbon emissions in
2005. This report will examine those explanations but also consider the following:
Generation of waste in Europe
Demand and consumption of energy in Europe
Current state of play for the European real economy in terms of industrial output
Link between energy use and the real economy performance
Prognosis of energy supply to Europe. Current forms of energy and future challenges of supply.
Implications of what these concepts imply to the macro-scale industrial business environment
Limitations of the fiat economy and debt saturation of European economic entities
Probable prognosis for European industrial business environment and future challenges
Strategic opportunities for ACME in this prognosis
All of the above was integrated into one prognosis. Then the market position and opportunity of ACME was
considered.

Waste generation in Europe has been comparatively stable for some time. The industry is heavily influenced
by compliance requirements in accordance to EU governance legislation. Land fill has been banned in some
areas of Europe. Over time this will be become more widespread with the increase of European population.
Figure 1 shows the different kinds of waste generation over time. Note there is a slight but steady reduction
1
of the total volume of waste processed in in 2007, and a steady increase in the fraction of incinerated waste
across the entire time frame shown. One of the reasons for this decline has been postulated that this is due
to increases in efficiency of the European society (to be discussed later).
Figure 1. European municipal waste generation and treatment 1995-2013

(Source: Eurostat)
It is probable that the size and scope of the waste industry in Europe would increase over time due to
impracticalities of land filling and increased population in conjunction with the increased capability to
process waste into a valued product. A more complete discussion on incineration of waste is shown in
Appendix A - Waste Incineration in Europe.

Demand for energy in Europe has decreased over the last decade. This observation in conjunction with a
perceived increase in imported gas has been the trigger to discuss the challenges associated with an energy
surplus. In particular, the energy fuel oil produced by incinerator plants would become a non-viable
commodity in this scenario. A projected time frame to where a possible energy surplus in Europe is the year
2020. It is the authors opinion that this circumstance may be possible but only for a short time, after which
a very serious energy shortage is probable (discussed later in Section 8.3 Limits to Growth for Energy).
Figure 2 shows the energy consumption for Europe (EU-28) from 1990 to 2015. This chart shows the
different energy sources. Note the dependence on fossil fuels, based on non-renewable natural resources
(oil, gas, coal and uranium nuclear). As can be observed there is a peak in consumption in 2006 and then a
steady reduction after that. The next section of this report will examine possible reasons for this peak in
demand.
Figure 3 shows the percentage change between 2006 (peak demand) and 2015. As can be shown, there is
reduction in all consumption of energy resources and an increase in the application of renewable energy.
The increase in renewable energy generation could be the result of EU government policy changes after
2
the Kyoto Agreement in 2005 to encourage their use (UNFCCC 1998). This increase is not enough to
account for the decreases in other energy resource consumption. However, it could account for a
reduction in the use of coal.
Energy Consumption (EU-28 states)

2,000.0
1,800.0
1,600.0
Gross Inland Energy Consumed (Mtoe)
1,400.0
1,200.0 Renewables
Nuclear
1,000.0
Gases
800.0
Petroleum and Products
600.0 Coal &Solid Fuels
400.0
200.0
0.0
1994
1990
1991
1992
1993
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Figure 2. Energy consumption of Europe EU- 28 nation states 1990-2015
(Data Source: EU Commission, DG ENER, Unit A4 Energy datasheets: EU-28 countries)
Change in Energy Consumption Between 2006 to 2015

6.0%
4.6%
4.0%
(%) change between 2008 to 2015
2.0%
Coal &Solid Fuels
0.0% Petroleum and Products

Gases
-2.0% Nuclear
-1.9%
Renewables
-4.0%
-3.7%
-4.6%
-6.0%
-6.5%
-8.0%
3
The data from Figure 2 was further broken down. The peak in 2006 as will be shown later was very
important. The data from 1990 and 2015 was also extracted to show a comparison to 2006. Figures 4 to 6
show the energy use by resource type for 1990, 2006 and 2015. It is relevant to note that from 1990 to
2006, dependency on oil and gas increased where coal use was being reduced.
Renewables,
Energy Use in Europe (EU-28) - 1990
4.3%
Coal & Solid Fuels

Nuclear,
12.3% Petroleum and Products
Coal & Solid
Fuels, 27.4%
Gases
Gases, 17.9%
Nuclear
Petroleum and
Products, 38.0% Renewables

Renewables,
7.0%
Coal & Solid Fuels

Coal & Solid
Fuels, 18.0% Petroleum and Products
Nuclear, 14.0%
Gases
Gases, 24.1% Petroleum and Nuclear

Products,
36.9%
Renewables
4
Renewables,
13.1%
Coal & Solid Fuels
Coal & Solid
Fuels, 16.3% Petroleum and Products
Nuclear, 13.7% Gases
Petroleum and
Products,
Nuclear
Gases, 22.2%
34.7%
Renewables
Figures 4-6 show energy use by resource. Figure 7 shows for the years 1990, 2006 and 2015, the EU-28
dependency on finite non-renewable natural resources (oil, gas & coal).
EU-28 Dependancy on Coal, Oil & Gas

86%
84% 83.3%
(%) of Total Energy Use
82%
80% 79.0%
78%
76%
74% 73.2%
72%
70%
68%
1990 2006 2015
Figure 7. Dependency on coal, oil and gas for energy source EU- 28 nation states
Current industrialization has a foundation in the continuous supply of natural resources. The methods and
processes associated with this foundation has significant momentum. This will not be undone easily.
Currently, our industrial systems are absolutely dependent on non-renewable natural resources for energy
sources. Oil, gas and coal. Will continue to do so for some time. A group of economists (Thomas Covert et
al) explored whether market forces alone would cause a reduction in fossil fuel supply or demand. By
studying the history of fossil fuel exploration and technological progress for both clean and dirty
technologies, they concluded that it is unlikely that the world will stop primarily relying on fossil fuels soon.
5
A more complete discussion on how much energy was consumed in Europe, from what natural resource and
what it was used for is shown in Appendix B - The Use and Application of Energy Resources in Europe.
3.1 Contraction in energy demand in Europe a signature for change
The hypothesis of this report is that the drop in energy consumption shown in Figure 2 is a signature of a
significant change in the industrial business environement. The data from the same source as Figure 2 was
replotted in Figure 8 to examine the peak of energy demand in Europe.
Gross Energy Consumption EU-28

1,900.0
Gros Inland Energy Consumption
1,850.0
1,800.0
1,750.0
1,700.0
1,650.0
1,600.0
1,550.0
1985 1990 1995 2000 2005 2010 2015 2020
Year
Figure 8 shows a clear peak in energy consumption for the EU-28 nation states. The year 2006 was clearly a
turning point. However, this data needs further treatment. Underlying this data is population growth of
where this energy was consumed. There has been a steady increase in European population (2.43% growth
from 2006 to 2015) as shown in Figure 9.
Population Growth EU-28

515,000
510,000
505,000
500,000
Population
495,000
490,000
485,000
480,000
475,000
470,000
1985 1990 1995 2000 2005 2010 2015 2020
Year
Figure 9. Population Growth in the EU-28 states of Europe

6
Integrating the data from Figures 8 and 9, gives the energy consumed per capita as shown in Figure 10.
Energy per Capita - EU-28

3,800.0
Energy per Capita - kgoe/cap 2006
3,700.0
3,600.0
3,500.0
3,400.0
3,300.0
2009 worst
3,200.0 of the GFC
3,100.0
1985 1990 1995 2000 2005 2010 2015 2020
Year
Figure 10. Energy Consumption per captia of Europe EU- 28 nation states
As shown in Figure 10, there was a decrease of 13.5% of the per capita primary energy consumption
between 2006 and 2015 for the EU-28 nation states of Europe. Note, the dip at the year 2009 correlates
with the worst outcomes measured of the Global Financial Crisis (GFC) (Rickards 2014).
Such a large change is a signature for something significant. Energy is the master resource (Martenson
2011 and Bradley & Fulmer 2008) that empowers almost all other activities. Throughout the history of
human civilization and industrial development, human knowledge, creativity, and sweat have overcome
technical, resource, and environmental challenges to convert energy into useful work.
Industrial efficiency cannot explain such a large drop in consumption when the desired economic growth is
2%. If so, what action or new method was undertaken in 2005/2006 to account for such a consistent
decrease? If there was such an action, it would have large and visible footprint. As shown in Figure 3, all
sections of European industry declined, some more than others, with the exception of renewable energy.
The increase of the use of renewable energy could be referenced against a change in EU government policy
(as per the Kyoto Protocol of 2005), but this only affects power generation. As shown in Appendix B (The
Use and Application of Energy Resources in Europe), it would and did impact the use of coal but would not
impact the use of other energy resources like oil and gas.
It is relevant to note that the dip in Figure 10 correlates to the worst outcomes of the GFC in 2008 to 2009.
The GFC was a sharp contraction of the real economy that was contained through the printing of money
(or money creation by the US Federal reserve, some of which was channeled into Europe through the
European Central Bank (ECB). Figures 10, 11 and 12 show that the European Union real economy has not
yet (and may not) recover from the GFC.
As such, this important data measurement is a signature for a change in the real economy.
7
4.0 Stagnation of European Industrial Output and the Real Economy
The date of 2005/2006 (US financial year) correlates to a very significant signature within European
industrial activity. Figure 11 shows US and Eurozone Industrial Production Index. In the year 2006
industrial production output plateaued and then crashed a year later. There is a lag time period between
what was seen in EU energy consumption and EU industrial output. That being stated, they are clearly
linked. The Global Financial Crisis happened a few years later in 2008. The author postulates that this is a
contraction of the real economy (The part of the economy that is concerned with actually producing goods
and services, as opposed to the part of the economy that is concerned with buying and selling on the
financial markets) and was a foreshadow of the GFC itself.
Figure 11. US and Eurozone Industrial Production Index and MIGs

(Data Source: Industrial production (volume) index overview. Data extracted in February 2017. Most recent
data: Further Eurostat information, Main tables and Database. Planned update of this article: February 2018.
http://ec.europa.eu/eurostat/statistics-explained/index.php/Industrial_production_(volume)_index_overview )
As energy is a direct proxy for industrial output, industrial output in turn is a proxy for raw material
consumption. Figure 12 shows raw material consumption per capita for the EU-28 over time. A clear peak
in consumption can be seen in 2007, after which an 18.4% contraction can be seen to 2012. Once again,
the data was corrected to include population growth.
Figure 12. Raw material consumption per capita EU-28

8
(Source: Eurostat)
Figures 11 and 12 show a clear contraction of the real economy. Less physical goods and services were
manufactured or conducted. Less raw material was used after 2007. As such, this addresses the theory that
the decrease in energy consumption seen in Figure 2 was due to efficiency measures.
Figure 13 show the industrial production index data in comparison between Europe and the United States.
2009 worst
of the GFC
Figure 13. US and Eurozone Industrial Production Index

(Data Source: Eurostat + US Federals Reserve https://www.federalreserve.gov/data.htm)
As can be seen, economic output from Europe as calculated by the Industrial Production Index (IPI) peaked
and declined sharply at around 2008 (a full years later than the data shown in Figure 11 this is an example
in the difference between how these indices are calculated). The following dark grey band represents the
Global Financial Crisis, the worst financial crash and depression since the Great Depression in 1929.
After a short period of recovery, the IPI index plateaued and declined. Up until 2011, the US IPI and the EU
IPI were heavily correlated. After 2011, the two indices diverged sharply. It is the authors opinion that this
happened due to two things:
1. A change in how the US IPI was calculated, to include financial assets that originated in the printing
of money.
2. The US real economy is underpinned by military spending in the arms industry, whereas the EU
spends far less.
Clearly, the reduction in energy consumption (Figure 2 & 10) is related to a contraction in industrial output
(Figure 11). This in turn means that less waste is in the industrial system in need of treatment. Figures 10-
12 show the peak and decline of the manufacture of goods which would later become waste. As such, that
ACME understand the fundamental reasons supporting this downturn in waste generation. In doing so, the
following questions must be understood and then answered:
9
Is this economic stagnation of the real economy a temporary state of affairs in the market place, or
is it a permanent decline?
If it is temporary, what would be required change things to start to generate growth again?
How is it that the real economy has not yet recovered after 11 years of operation after the GFC?
What is really happening here and what else does it influence?
5.0 Structural Changes in the Industrial Business Environment

The data and charts shown so far describe a significant change in the industrial environment in and around
2006. This change has been seen in the energy consumed, industrial output and raw materials consumed in
Europe EU-28. This section of the report is to examine other data signatures that suggest something is
structurally changing in the industrial business environment. Figures 14 to 24 show a series of charts that
show a significant change relevant to the industrial business environment. Figure 14 shows the Gross
Domestic Product GDP for the European area group of nations.
Figure 14. Europe Area EU-19

(Source: Datastream, NatixisAM)
The same pattern of a peak and contraction at around 2008 that correlates with the Global Financial Crisis
(GFC). Only some countries have regained all losses from the GFC crash of 2008 (Figure 15). That being
stated, the amount of debt these countries now has is required to understand the true net position of
recovery.
10
Figure 15. Chart showing the crash in the Dow Jones Industrial average during the GFC
(Source: DOW Jones Index AVG [$DJI]: weekly: 20 Jan 2016 01:13 New York)
Figure 16 shows the flow of capital foreign investment flows around the world from 1990 to 2011. This
shows the movement of money from one market to another around the world. There are two clear peaks.
One peak is around the year 2000 which correlates with the rise and fall of the Dotcom Bubble. The other
larger peak is at 2007, just before the GFC happened. Late 2010, a medium sized peak in FDI corresponds to
the mining boom of the Southern Hemisphere, where most raw materials flowed to Chinese industrial
consumption.
Figure 16. Global Foreign Direct Investments (FDI)

(Source: http://www.investopedia.com OECD international direct investment database)
11
Figure 17 shows data from a study (Murray and King 2012) that shows conventional crude oil production
passed its ease of extraction point in 2005. The chart shows the world spot price of crude oil vs. crude oil
production at the time of the spot price. As can be seen there is two clear populations in the data. Prior to
2005, oil supply was elastic and could match demand, thus has a shallow gradient in the data cloud. Post to
2005, the oil supply was inelastic and could not match demand, leading to price swings.
Figure 17. Conventional crude oil has passed the tipping point for easy extraction
(Source: Murray, J. and King, D. Nature 26 Jan 2012, Vol 481 Comment)
The production of oil is a relevant proxy for industrialization as will be discussed in Section 7.0. Figure 18
shows a chart of global conventional crude oil + condensate production plateauing in 2005. (Figure 19, the
blue area is conventional C+C).
Since May 2005, global conventional crude oil + condensate production (C+C) has been constrained to a
bumpy plateau of around 73.2 Mbpd. That limit was breached in December 2014 with a new high of 74.28
Mbpd. This comes on the back of a prolonged period of record high oil price. It seems likely that the reason
for the new high is OPEC abandoning constraint rather than an actual expansion of global conventional C+C
production capacity (Quote from Mearns 2015).
Since 2005, unconventional sources of oil were developed and brought into production to meet demand.
These new sources are not as calorifically rich in energy as conventional crude oil. This is discussed more
fully in Appendix C Comparison of Different Energy Resources.
12
Figure 18. World Crude & Lease Condensate Production excluding Canada Oil Sands (million barrels a day)
(Sources: US Energy Information Agency EIA, North Dakota Drilling and Production Statistics, Railroad Commission
of Texas & Statistics Canada)
(Analyst - Euan Mearns)
Figure 19. Conventional crude oil supply and demand did separate 2005-2008
(Source: Yardeni Research www.yardeni.com )
13
An excellent study to discussion and examine why the year 2005 was decisively important for supply of crude
oil is the presentation: (Kopits 2014a) & associated multi-media presentation on YouTube: (Kopits 2014b).
Figure 20 shows that supply and demand of oil did separate between 2005 and 2008. During this time, price
swings and speculation dominated the market. This created a price spike in the oil markets peaking in 2008.
Figure 20 the oil price from the year 2000 to 2017. This oil spot price spike peaked at a record high above
$USD147 a barrel on July 11th 2008, just before the GFC happened in 2008-2009. The GFC contained by the
start of the first round of Quantitative Easing (QE1) by the US Federal Reserve Bank in December 2008. The
price of oil is an excellent proxy for industrialization. This is discussed more concisely in Section 6.0.
2008
GFC EIA 96%
downgrade of
Monterey
1979 Tight Oil
2nd Oil Shock
End of
1st Gulf QE3
War
Start of
QE1
1973 2nd Gulf

1st Oil Shock War
Dotcom
Bubble
Record low of
Baltic Dry Index
(Jan 2016)
Figure 20. Crude Oil Prices - 70 Year Historical Chart

(Source: Interactive charts of West Texas Intermediate (WTI or NYMEX) crude oil prices per barrel back to 1946. The
price of oil shown is adjusted for inflation using the headline CPI and is shown by default on a logarithmic scale. The
current price of WTI crude oil as of August 03, 2017 is $49.20 per barrel.)
Figures 21 and 22 show The Baltic Dry Index from the time it was developed in 1985. The Baltic Dry
Index (BDI) is an economic indicator issued daily by the London-based Baltic Exchange. Not restricted
to Baltic Sea countries, the index provides "an assessment" of the price of moving the major raw materials
by sea. This index is a good proxy for the health of the real economy as it measures the bulk transfer
movement of real physical goods around the world (Rothfeder 2016). It is not subject to variability and
volatility that other retail market measures are and tends to be more stable over time.
Figure 21 shows a breakout around the end of 2003 from the stable pattern from 1985 -2003 where the BDI
was below1800 most of the time. From 2003 till 2006 was an unprecedented volume movement of goods
by shipping container. Then after this small peak, in May, 2008, a second larger peak of 11,793 in the BDI
that eclipses all other measurements before and since. The peak of 2008 was an extraordinary movement
of real physical goods on a global scale. Shortly after this peak, there was a proportional crash to a BDI of
633.
14
Figure 22 show the same data as Figure 21 but shows the BDI on a log scale. As can be seen the BDI continued
to drop from its high peak on 2008. This more clearly than other charts shows that the real economy has
been contracting since 2008 and has not even begun to recover. In February 12th 2016, the BDI crashed to
291, an all-time low, with no new signature to correlate with. As such the issues of the previous decade in
the real economy were never resolved.
Figure 21. The Baltic Dry Index

(Source: InvestmentTools.com)
Figure 22. The Baltic Dry Index (Log Scale)

(Source: InvestmentTools.com)
15
6.0 Conventional Mining of Metals has Fundamentally Changed
Conventionally, the industrial society sources its raw materials from mining. How this happens is an
underlying foundation of the industrial society. Figure 23 is the metal price for eight commonly traded
metals over time. The data trend lines were overlaid by indexing the real price at the financial year
2000/2001 to the number 100. This is the price of metals market. It is the transfer point between metal
mining, heavy industry and manufacturing industry.
700
Au Cu
600
Pb Zn
GFC
Indexed 2000-01 = 100
500
Ag Ni
Real Price
400 Al Fe Ore
300
200
100
Figure 23. The price of metals indexed to the year 2000-01 and number 100
(Source: ABS 1350.0 Financial Markets - Long term
http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/1350.0Jul%202012?OpenDocument
ABARES - Australian Mineral Statistics March 2011)
Figure 23 shows that the metal prices were relatively stable prior to financial year 2005/2006, but after that
point was considerable volatility. After 2005-2006 the metals market underwent unprecedented volatility.
The market forces that created the metals price blowout in 2005-2006 was not resolved by the GFC (the
most severe economic downturn since the 1929 Great Depression), as such was not a bubble. Moreover the
instability patterns continued for years after the GFC. So a large volume of capital investment moved in the
global markets, in conjunction with a blowout of metal price, followed by financial downturn of a severity
not seen in 75 years, from which the current real economy has yet to recover from fully after 9 years.
There are other signatures that can be used to monitor the relative health of the real economy. The
Caterpillar sales record is another useful proxy.
Caterpillar Inc. (NYSE: CAT) is an American corporation which designs, develops, engineers, manufactures,
markets and sells machinery, engines, financial products and insurance to customers via a worldwide dealer
network. Caterpillar is a leading manufacturer of construction and mining equipment, diesel and natural gas
engines, industrial gas turbines and diesel-electric locomotives. With more than US$89 billion in assets,
16
Caterpillar was ranked number 1 in its industry and number 44 overall in the 2009 Fortune 500. In 2016
Caterpillar was ranked #59 on the Fortune 500 list and #194 on the Global Fortune 500 list.
Caterpillar dominate the market in the sales of heavy earth moving equipment. As such if new industrial
projects are started Caterpillar sales increase. If industrial projects are cancelled or shut down, Caterpillar
sales decrease. This is how the retail sales of a single company can be used as a proxy for new industrial
activity. Figure 24 shows the year-over-year change in retail sales for Caterpillar.
Figure 24. Caterpillar World retail Sales YOY Change

(Source: https://seekingalpha.com/article/3996466-caterpillar-still-good-income-stock
Analyst - Johnathan Weber)
As can be observed, sales started to crash in late 2008 and hit a low in late 2009, followed by a significant
recovery (in line with the QE1-3 program by the US Federal Reserve). The recovery here could be seen as
the mining boom of raw metal commodities in the Southern Hemisphere. That mining boom was the largest
in history (Downes et al 2014) and then had a proportional crash starting in 2011. Since 2011, the mining
industry has not recovered. Caterpillar sales have been negative for 50 consecutive months. This is the
longest run of this kind recorded. This is another temporal marker to show that the real economy has been
contracting for some time.
Figure 25 shows the inflow of investment into the Australian mining industry in 2010, which later in
2011/2012 was withdrawn from Australia (Lorkin 2015). This matches the medium peak shown in Figure 15
in 2010. These two graphs show the flight of capital looking for a safe haven on a global scale. The peaks
show the bull run/bear market nature of the global investment market.
17
Figure 25. Mining investment in Australian mining industry
(Source: Reserve Bank of Australia)
Figure 26 shows the capital investment into Australia (most of it from foreign investment flows FDI).
Australia is dominated by the mining industry. This was called the CAPEX cliff in Australia.
Figure 26. Australia: Business investment & recessions (Bus. Inv. S % of GDP, 2016 prices)
(Source: ABS, Macquarie Research, July 2016 )
Figure 25 and 26 show data from the mining industry in the Southern Hemisphere. The purpose of showing
it in this report is to show anything attached to the real economy at all has been through an unprecedented
challenges. The metal markets in general regardless of source (primary raw material mining or secondary
raw material recycling) has been showing signs of a fundamental shift in what drives them. Figure 27 shows
commodity price index data from the World Bank for energy, metals and agriculture (data indexed to $USD
18
real, 2010 = 100). The World Bank uses indices like this to do economic modelling and develop strategic
planning.
Figure. 27 World Bank Energy (oil, natural gas, and coal) and Base Metals price Commodity price indices, using 2005
US dollars, indexed to 2010 = 100. Base metals exclude iron.
(Source: World Bank and Bank of America Meryil Lynch Global Commodity Services
www.bofaml.com/en-us/content/commodities )
(Analyst Gail Tverberg)
The Base Metals Index and the Energy Index prior to the year 2000 were not correlated at all. Then in the
year 2000, they merged for the first time and were strongly correlated after that. This means that the
economic drivers and underpinning measurements for base metals and energy became into alignment. After
2002, both indices rose sharply in an unprecedented fashion. This is a signature of the costs of raw material
extraction becoming more expensive (Tverberg 2014). The reasons why this might be happening is discussed
further in Section 7.0.
The year 2000 correlates with another index turning point for the mining industry. Figure 28 shows a 52%
decrease in the Multifactor Productivity Index (MFP Index) for the Australian mining industry from the
financial year 2000-2001. The MFP reflects the overall efficiency with which labour and capital inputs are
used together in the production process. This means that between the year 2000 and 2012, 52% more
physical work was required to extract the same unit of metal from the ground in the conventional mining
process. A similar pattern was observed in Africa and South America at the same time.
19
110
Indexed 2000-01 = 100 100
90
80
70
60
50
Topp et al. (2008) Australian Bureau of Statistics (2012)
Figure 28. The Australian Mining Multifactor Productivity Index

(Source: ABS 1350.0 Financial Markets - Long term
ABARES - Australian Mineral Statistics March 2011)
Figure 29. Gold mining costs in Australia 2000-2009

(Source: Brook Hunt Metals Cost Service Analysis 2011)
Figure 29 shows a break down in the change in operating costs for gold mining in Australia between 2000
and 2009. While the MFP Index in Figure 27 declined 41% (between 2000 and 2009), the number of
personnel employed increased by 12.1% and the volume of ore moved per unit volume also increased by
17.6%. The amount of ore milled increased by 33% and 20.3% respectively. This is a data signature for
something fundamental.
Figures 28 and 29 show a series of technical challenges that the conventional mining industry now faces all
over the world (Bardi 2013, Michaux 2014 & 2016). Those challenges are not directly related to other issues
presented in this report. However, those same challenges do directly affect the supply of raw material
metals to the market. As a consequence, they exacerbate a number of other problematic issues for the
industrial system. One of the outcomes of this report is to demonstrate how interconnected raw materials,
energy, manufacturing, industrial activity and the finance markets all are.
20
Energy is the master resource. It allows and facilitates all physical work done, the development of technology
and allows human population to live in such high density settlements like modern cities. Continued
economic growth in GDP cannot plausibly be decoupled from growth in material and energy use,
demonstrating categorically that GDP growth cannot be sustained indefinitely (Ward et al. 2014). The
purpose of this section of the report is to examine the role of energy and why it is so important to understand
the implications of a rise or fall in energy demand.
Figure. 30 Relationship between raw materials and finished manufactured goods
Figure 31. A simplified flow physical flows that sustain our productive system
(Analyst - Jean Marc Jancovici)
The modern world is heavily interdependent. Many of the structures and institutions we now depend upon
function in a global context. Energy as a fundamental resource underpins the global industrial system
(Fizaine & Court 2016, Meadow et al. 1972, Hall et al. 2009, Heinberg 2011, Martenson 2011, Morse 2001,
Ruppert 2004 and Tverberg 2014).
Figure 32. World GDP in constant dollars (vertical axis) plotted against the world energy consumption in million
tonnes oil equivalent (horizontal axis), from 1965 to 2014.
(Source: BP Statistical Review, 2015, and World Bank 2015 (GDP).)
21
(Analyst - Jean Marc Jancovici (Jancovici 2011))
Figure 33 shows the strong correlation between the economic activity index global GDP, global energy
consumption and global oil consumption. As the biophysical economists have shown global economic
growth is closely correlated with growth in energy consumption. Professor Minqi Li of Utah Universitys
Department of Economics, shows that between 2005 and 2016, that an increase in economic growth rate by
one percentage point is associated with an increase in primary energy consumption by 0.96 percent.
Figure 33. Correlation between global GDP, global energy consumption and global oil consumption
(Source: OurFiniteWorld.com Analyst Gail Tverberg)
The importance of this cannot be understated. In our current form, industrial society correlates directly with
our ability to consume energy. Oil in particular is important to understand. As can be seen by Figure X
above, oil consumption correlates with both GDP and energy consumption. This is because modern society
is a petroleum driven economy (Heinberg 2011, Martenson 2011, Morse 2001, Ruppert 2004, Tverberg 2014
and Wiedenhofer 2013).
7.1 What would be required from other energy sources if oil was phased out
Shown next is a thought experiment to show how dependent on oil current society is.
Figure 34. Oil pumping jacks operating 24hr/day in Texas USA

22
Oil is energetically very dense and has no real replacement in terms of potential capability. Table 1 shows
the energetic density of oil, gas and coal. It also shows the global supply of each of these resources for the
year of 2016. It is to be remembered that oil is a liquid, natural gas is in a gaseous form and coal is a solid.
As such, standard S.I. units will be different. Those resource quantities were then converted to Watt hours,
as in the quantity of power supplied in terms of Watt hours.
Table 1. Energy density and supply in 2016

(Source: Lide 1991 & BP Energy Outlook 2017)
Energy Natural Resource Energy Density Global supply for year 2016 (units) Energy Supplied in 2016 (units)
Oil 6.117 (GJ/bbl) 3.54E+10(bbl) 6.01E+10(MWh)
Natural Gas 37 (MJ/m3) 3.55E+12 (m3) 3.65E+10(MWh)
Coal 24 (GJ/tonne) 3656.4(mtoe) 4.25E+10(MWh)
Table 2 shows the number of installed power stations of the most common power generation methods used
in 2016 around the World. The total installed capacity and average taken from the raw data listing of name
plate designed installed power was calculated from the documented source. Thus an average power
generation installed capacity was estimated based on what was available and function in 2016. This average
installed power was then used to estimate the power output delivered to the power grid for one calendar
year (365 days). The number of hours in a year is 8760 hr (24 hours in a day x 365 days in a year).
Table 2. Power generation stations and capacity by type

(Source: BP statistical review of world energy 2017 underpinning data, Global Energy Observatory)
Energy Natural
Power Delivered to Point of Power Delivered to Point Average Station Installed Annual Output of
Power Generation Method Resource Application in 2016 of Application in 2016 Power Capacity Average Station
(Mtoe) (MW) (MW) (MWh)
Oil 4418.2 51,383,666,000
Gas fired station Gas 3204.1 37,263,683,000 433 3,793,080
Coal fired station Coal 3732 43,403,160,000 741 6,491,160
Nuclear station Uranium 592.1 6,886,123,000 2,031 17,791,560
Hydro station Water movement 910.3 10,586,789,000 225 1,971,000
Solar thermal station Sunlight heat 1.6 18,414,942 77 674,520
Solar photovoltaic station Sunlight 73.8 858,487,058 78 683,280
Wind power plants Station Wind 217.1 2,523,710,000 37 324,120
Geothermal + Biofuel Natural Heat 127.1 1,477,010,000
Total 13276.3 1.54401E+11
Using tables 1 and 2, it is now possible to consider what is required from other power sources when oil, gas
and coal are phased out of service.
Power and energy supply is taken from other sources gas, coal, nuclear and renewable sources. In the year
2016, oil supplied 6.013 x 1010 MWh to society. So this quantity of energy is now sourced from other power
generation methods. Table 3 shows what is required to replace just 1 year of oil supply, and an estimate of
installed power as a percentage of existing installed capacity of the target replacement source.
Table 3. Replacement energy supplied to society by resource oil in the year 2016 by other power generation resources
Number of new installed Required installed power to replace Number of new installed
Energy Natural stations working all year 1 year of oil energy as a (%) of 1 stations working each year for
Power Generation Method
Resource to replace 1 year (2016) of year of existing installed capacity of 50 years to replace 1 year
oil energy replacement source (2016) of oil energy
Gas fired station Gas 15,855 571% 317
Coal fired station Coal 9,265 943% 185
Nuclear station Uranium 3,380 1625% 68
Hydro station Water movement 30,512 961% 610
Solar thermal station Sunlight heat 89,158 171528% 1,783
Solar photovoltaic station Sunlight 88,015 219424% 1,760
Wind power plants Station Wind 185,545 30423% 3,711
23
Natural gas is the obvious energy resource to consider as a replacement for oil and can be used as an
example. Gas in applications can do similar things to oil. Methods to run internal combustion engines can
be refitted to run with a gas fuel exists now as a mature technology. However, gas is much less effective in
terms of energy density than oil. To replace just 1 year (12 months) of oil supply, using 2016 as an example,
it would require 15,855 new gas fired power stations (average installed power capacity) over and above
existing installed gas fired power capacity (and increase of 571%). This means that 12 months after
delivering this oil based energy of 6.013 x 1010 MWh to society, the leger is reset and a further 15,855 new
gas fired power stations would need to be commissioned and producing power.
Alternatively, to replace 12 months of oil supply at the 2016 supply rate, 317 gas fired power stations could
operate every day for 50 years. To be repeated every 12 months (increasing due to population growth and
required economic growth). A more complete discussion of this thought experiment is shown in Appendix E
(Quantity of Energy at Point of Application for Energy Resources).
This thought experiment shows the vast quantity of energy supplied to society through the use of oil. It
shows not only that the lions share of energy we consume comes from oil but that there is no real
replacement for oil in terms of capability. Then the question becomes, how much of our current society is
possible when oil is phased out?
Figure 35. Current industrial society is a petroleum driven economy
24
7.2 Oil consumption and industrial output
To prove this point, global oil consumption is then examined in context of industrial output. Figure 36 shows
the correlation relationship between Chinese industrial output and a change in oil price on the international
market. Energy is the ability to do work. Industrial output is a measured index of physical work done and
goods manufactured by heavy industry.
Figure 36. Chinese industrial output (YoY) and the (%) change in Brent Crude oil price.
(Source: GaveKal Capital, Market Research Gavekal Money Management Solutions)
As can be observed these is a strong correlation. Note the crash of 2008, followed by partial recovery,
followed by a steady decrease. This is another signature of the contraction of the real economy. China is a
useful proxy for the global industrial market (Figure 37). At the end of World War II, the global industrial
capacity was distributed reasonably evenly across all continents (not perfectly of course). Now,
industrialization and large scale heavy industry manufacture is dominated by just one nation state: China.
Figure 37 shows the market share of global consumption of raw material resources. As can be seen China
consumes enough raw materials and dominates enough heavy industry (steel and cement production are
proxies for this) that Chinese industrial output could be considered as a proxy for the global industrial
market.
Figure 37. Chinese industrial consumption compared to the rest of the world in 2008. Steel production (LHS) and
cement/concrete production (RHS)
25
Figure 38. Chinese consumption of natural resources as a fraction of global consumption
(Source: visualcapitalist.com)
Figure 39 shows the deficit of oil in Chinese supply/demand for oil. This is highly relevant for the discussion
in this report. On one hand, China now represents the bulk of the real economy (similar to the US position
in 1944 when the Bretton-Woods agreement was signed). Oil has can be seen correlates with the ability for
an economy to do useful physical work (the real economy). Chinese industrial output correlates strongly
with the price of oil (Figure 21). Figure 39 shows that China needs to import approximately 60% of its oil
demand (which is why China is unobtrusively present in every geopolitical oil based conflict in the Middle
East and supports pariah nations like Iran and Syria when is against US interests to do so.
This means that when peak oil production happens, Chinese industrial output would decline sharply and
globally, manufacture of goods would also decline sharply.
Figure 39. Chinas oil production surplus and deficit, 1980-2011

(Source: Drill Baby Drill Hughes 2011 Analyst David Hughes)
26
7.3 Energy consumption and industrial agriculture
Oil consumption has an even more fundamental relationship to the functioning of our society. It correlates
strongly with the production of food. Industrial agriculture is operating in a fashion where its operation
destroys future capability to deliver food and is classed at an inappropriately low ERoEI (see Appendix D).
We consume about 2000 or 2500 kcal per day. It is convenient to remember that 2400 kcal equals 10 MJ
(megajoules), so that per year we consume endosomatically about 3.6 GJ (gigajoules). The exosomatic use
of energy in rich countries per person per year reaches 150 or 200 GJ on average, reflecting the fact that
most energy (from fossil fuels, biomass, hydroelectricity, nuclear fission, wind) goes to production and
consumption processes different from those directed to basic food needs (Martinez-Alier 2011). Figure 40.
shows the FAO Food Price Index (an index used by the World Bank to model a basket of food based
commodities in the production of food at a global scale) and the North Sea Brent Oil price.

(Source: Food and Agriculture Organization of the United Nations)
As can be seen, industrial agriculture food production strongly correlates with oil price (which reflects
demand). Initially, the concept of food being dependent on oil seems counter intuitive. For every calorie of
food that is produced in the United States, 10 calories of fossil fuel energy are put into the system to grow
that food in terms of production, storage and transport (Green 1978, Canning et al. 2017). Figure 41 shows
how this happens. This is a systems modelling approach to examine and model farming. The words in red
show the sections that depend on fossil fuels either directly (consumption of diesel fuel) or indirectly
(consumption of electricity generated from fossil fuels).
27
System boundaries
Another Farm
System Inputs Outputs
Throughputs
Phosphate Feed for Milk
livestock
Oil & gas Finance Beef
products Fertilisers Fossil fuel
directly driven
Oil & gas Lamb
Farm transport
Fossil fuels products
System Cheese
power directly
Electricity
generation Electricity Eggs (fossil fuel)
Farm
refrigeration
Fossil fuel Machinery
Labour Fruit
driven
transport Hot
water Vegetables
There is however a complication in the analysis of food to oil correlation. What was considered arable
agricutural land for food prodtcion is now being diverted to the production of biofuels (Muller et al. 2007).
Food versus fuel is the dilemma regarding the risk of diverting farmland or crops for biofuels production to
the detriment of the food supply. The biofuel and food price debate involves wide-ranging views, and is a
long-standing, controversial one in the literature. There is disagreement about the significance of the issue,
what is causing it, and what can or should be done to remedy the situation. This complexity and uncertainty
is due to the large number of impacts and feedback loops that can positively or negatively affect the price
system. Moreover, the relative strengths of these positive and negative impacts vary in the short and long
terms, and involve delayed effects. The academic side of the debate is also blurred by the use of different
economic models and competing forms of statistical analysis.
Figure 42. Competition between biofuels and food for arable land use
28
Biofuel production has increased in recent years. Some commodities like maize (corn), sugar cane or
vegetable oil can be used either as food, feed, or to make biofuels. For example, since 2006, a portion of
land that was also formerly used to grow other crops in the United States is now used to grow corn for
biofuels, and a larger share of corn is destined to ethanol production, reaching 25% in 2007. Second
generation biofuels could potentially combine farming for food and fuel and moreover, electricity could be
generated simultaneously, which could be beneficial for developing countries and rural areas in developed
countries.
With global demand for biofuels on the increase due to the oil price increases taking place since 2003 and
the desire to reduce oil dependency as well as reduce GHG emissions from transportation, there is also fear
of the potential destruction of natural habitats by being converted into farmland. Environmental groups
have raised concerns about this trade-off for several years, but now the debate reached a global scale due
to the 20072008 world food price crisis. On the other hand, several studies do show that biofuel production
can be significantly increased without increased acreage.
However, the ERoEI ratio for biofeuls makes this an irrelevant issues, as discussed in Appendix D (ERoEI
Comparison of Energy Resources). Biofuels are not a credible energy source to replace fossil fuels.
In December 2007, the United Nations Food and Agriculture Organization (UN FAO) calculated that world
food prices rose 40% in 12 months prior, and the price hikes affected all major biofuel feedstocks, including
sugarcane, corn, rapeseed oil, palm oil, and soybeans. On 17 December 2007, the International Herald
Tribune quoted FAO head Jacques Diouf warning of a very serious risk that fewer people will be able to get
food, particularly in the developing world. In the summary proceedings of the First FAO Technical
Consultation Bioenergy and Food Security, held 1618 April 2007 in Rome, authors from a group of UN
agencies cautioned that possible income gains to producers due to higher commodity prices may be offset
by negative welfare effects on consumers, as their economic access to food is compromised. (Welfare
here refers to standard of living, not government payments.)
Studies have found that there is a close correlation between global food prices and the incidence of riots in
North Africa and the Middle East (Figure 43) (Lagi et al. 2011). In 2008 more than 60 riots occurred worldwide
in 30 different countries during a peak in food prices. After declining temporarily in 2009 (mirroring the fall
in oil price), even higher prices at the end of 2010 and the beginning of 2011 coincided with additional food
riots as well as the larger protests and revolts that have become popularly known as the Arab Spring. In
contrast, there were relatively few incidents of collective violence when food prices were low. (This does
not include incidence of rioting in China, or the food index data from China in these time periods).
29
Figure 43. FAQ Food Index and incidence of civil unrest
(Source: Lagi et al. 2011)
Figure 44. Major outbreaks of rioting in England (red lines) correlate with average price of wheat between 1780-
1822. (Source: Johnson 2011 & Figure using data from Archer (2000)
As discssued by (Johnson 2011), Johnathon Archer found the indentical pattern in the Birtish Isles (Figure
44). In nearly all cases the riots were preceded by a sharp rise in price and once the price fell the incidence
of riots fell with it. This isn't to suggest that wheat price alone was the cause, or that a rise in price always
resulted in a riot. But it does suggest that the two were correlated and that a rise in food price promoted the
same kind of social discord that lay behind incidents of collective violence.
So:
Lack of food = civil unrest
Currently, oil = food
In some cases food is replaced by an oil substitute (ethanol)
Oil price directly correlates to society to function in terms of capbility to supply food
30
7.4 Energy and population growth
Population growth is another fundamental driver to this current set of circumstances. Cosumption is a
function of the numer of people who consume. An increase in production or an achieved efficiency has to
be put in context of the population growth across that time frame. Population has grown in a manner that
strongly correlates with the increase in energy consumption once all sources have been summed together
(Bartlett 1994). Since the start of the industial revolution, population ahs been empowered by technology
coupled with increased energy desnity (coal vs biomass wood, followed by the introduction of oil).
Gas
Oil
Coal
Figure 45. World population, per capita-, and total energy consumption by fuel as a percentage of 2011 consumption,
1850-2011 (Source: Data from Arnulf Grubler, Technology and Global Change: Data Appendix, 1998, BP Statistical
Review of the World Energy, 2012, US Census Bureau, 2012)
Note in Figure 45 how the middle chart has Per Captia Consumptionn for energy. This highlights how
increasing complexity of technology has resulted in an increase per person in terms of energy requirements
(the same can be shown for all natural resources). In summary, the energy requirements per capita have
increased over time in line with technological development and complexity. In conjunction to this, human
population consuming and operating this technology is growing at an exponential rate. Figure B shows that
the combination of the two have resulted in a multiplication times 50, the demands on our energy resource
sector (89% finite non-renewable resources).
Figure 46 shows the increase per capita for invidual energy resources.
Oil has sharply increased since its inception and then declined per capita since 1970
Natural gas has increased steadily since its inception
Coal rose steadily from the start of the industrial revolution and plateaued in 1910, was stable till it
sharply increased in the year 2000
31
Figure 46. Per capita consumption of various fuels
(Source: Tverberg 2015, OurFiniteWorld.com)
(Analyst - Gail Tverberg)
Figure 47 show the total global energy consumption normalized for population growth. As can be seen,
energy consumption was on a rough plateau from 1970 to 20001. From 2001 to about 2005 there was an
increase, followed by a bumpy plateau. There was a peak in per capita energy consumption in 2013.
Figure 47. Per Capita Consumption of Various Fuels

32
Figure 48. Average growth per capita consumption of energy
Section 6 and 7 show that the real economy is in a phase of stagnation and even contraction. This stagnation
has been persistent and has lasted much longer than conventional economic models allow for. So the
question becomes, what is happening, and is it a normal economic cycle? Section 8 discusses the concept
that this is a transitionary phase to a fundamentally new set of limitations for the industrial and the human
society it supports.
33
8.0 The Implied Change in the Industrial Paradigm
In 1968 the Club of Rome was formed to study the direction human society was developing. One of the
technical outcomes was a sophisticated system dynamics based analysis of human society and its supporting
resources, published as The Limits to Growth (Meadows et al. 1972). During the course of this study, many
scenarios were considered, where strategic changes in human society were made. The objective was to
stabilize all inputs and outputs to human society. The base case scenario where the existing direction of
human society development in the early 1970s was maintained with no change, then project forward in
time to the year 2100 is shown in Figure 49.
Figure 49. The base case projected outcome of 1972 systems analysis modelling of global industrial society, overlaid
with observed global data from 1970 -2000.
(Source: Meadows et al. 1972)
This remarkable study was one of the first of its kind in that it was conducted on one of the first civilian
available computers. Using a series of well thought out and network of systems in an elegant experimental
34
simulation design, the rates of consumption, population growth and associated pollution were each
predicted. Figure 50 shows an example of the simulation architecture used in this study.
Figure 50. Feedback loops of population, capital, services and resources from the modelling procedures used in Limits
to Growths systems analysis (Meadows et al. 1972)
While this study was done in the early 1970s, recent updates that compare historical data mapped against
the model predictions, show that the base case scenario model was conceptually correct (Turner 2008).
Figure 51 shows some actual historical data from 1970 to 2000 projected onto the original 1970 study.
Figure 51. Comparing Limited to Growth scenarios to observed global data

(Source: Turner 2008)
35
This scenario is troubling for the corporate strategy of endless growth. If a corporation cannot show a profit
each year (growth), it will lose investment as capital would go to more profitable enterprises. But if the
world was to peak and then contract in terms of physical work done, as production of natural resources
becomes more difficult, then basic model of conventional corporate growth cannot function normally.
Figure 52 shows World GDP calculated in $USD. As can be observed, there was a peak at $78.87 trillion
dollars in 2014. While it is too soon to state that this is genuinely peak GDP, it is worth studying as it
correlates with a number of other mechanisms. In particular, it is related to the fall in oil prices since mid-
2014 and to the problems that oil producers have been having since that time, earning too little profit on
the oil they sell. A similar problem is affecting natural gas and coal, as well as some other commodities. These
low prices, and the deflation that they are causing, seem to be flowing through to cause low world GDP in
current US dollars (Tverberg 2017, August 14).
Peak GDP 2014

$78.87 trillion USD
Figure 52. World GDP in Current US Dollars, (calculated on 15/08/2017)

(Source: World Bank national accounts data, and OECD National Accounts data files)
There are a number of temporal markers that signal that society is indeed not only following the 1972 Limits
to Growth Scenario, but is reaching the peak in industrial output per capita in Figure 49. The implications
for other aspects of society are relevant to our attention.
8.1 Exponential growth in a finite system
A fundamental problem that this report has shown is consumption of all the finite nonrenewable natural
resources follows an exponential curve. This is true for consumption of energy, metal and minerals (Bardi
2003, Frimmel & Muller 2011), food products (Muller et al. 2007) and textiles. It is also true that the impact
of how our industrial civilization degrades the environment (biosphere, flora and fauna populations) (Ehrlich
& Ehrlich 2013). The application of industrial agriculture has resulted in the exponential destruction of arable
36
land (Pfeiffer 2006, Lagi et al. 2011 Martinez-Alier 2011) and depleting fisheries (FAO 2016). The application
of industrialization has resulting in the exponential pollution through dumping of waste of all kinds into the
environment (UNEA 2017). The growth of human civilization has resulted in the widespread destruction of
the global environment at large (MEA 2005, Ehrlich & Ehrlich 2013). Deforestation and pollution of the
oceans have also happened at an exponential rate.
Underlying all of this are four fundamental metrics
1 Human population growth has been exponential (Figure 53 below)

2 Human technology requirements have becoming more complex (Figure 45)
3 Requirements from 1 and 2 together are happening much faster than the environment can
replenish
4 The impact of the requirements of 2 compound over time and are cumulative
Figure 53. The estimated growth of the human population from 10,000 BCE2000 CE.
(Source: United Nations)
A real issue is the human inability to have a situational awareness at the historical timescale. This results in
a number of self-defeating problems. At an abstract level, humanity does not understand the implications
to the exponential function (Bartlett 1994 & 1996). This has resulted in a fundamental misunderstanding of
the role of human civilization and its relationship with its environment. Concepts like value of environmental
diversity (Washington 2017) are so abstract to the majority of decision makers that often, actions and
outcomes exclude environmental concerns.
The environment systems are relevant to this report as almost all natural resources this report refers to are
drawn from the environment. Historically and current thinking is growth based consumption, with no
situational awareness. Resource consumption has been exponential in nature. The issue with this is the first
half of that natural resource is consumed over a much longer period of time compare to the period of time
taken to consume the second half (Figure 54). This important concept is made more accessible by the
multimedia presentation:
Chris Martenson 2014 The Crash Course Chapter 3

https://www.youtube.com/watch?v=CvVFTJMUEj4&list=PLRgTUN1zz_ofJoMx1rB6Z0EA1OwAGDRdR&inde
x=4
37
Figure 54. Exponential growth of consumption of a finite resource
Humans like most other biological organisms use the highest quality, richest and easiest to
obtain resources first. (Chris Martenson 2008)
The problem with this kind of approach is that the planet is a finite system, is not growing, and has been
stable for some time.
Figure 55. Planet Earth, a finite dynamically adjusting stable system
38
8.2 Limits to Growth for Metal Mining
The dynamic systems analytical outcomes shown in Figure 49 are an all-encompassing model. A more
targeted example of this could be of metal production from mining (primary resource). The logistical
circumstance the primary mining industry now has is as follows. In the year 1900, copper mine ore grade
was often quoted in the 20-25% range (the concept of a cutoff grade was not really relevant), with deposits
being very small in volumetric scope (small rock outcrop 20m wide to a few hundred meters depth
underground shaft), yet the available ERoEI ratio of approximately 100:1. Energy resource deposits were
huge in size and very easy to convert into useable energy. Copper resources were easy to extract and
required comparatively little energy.
In the year 2014, feasibility study copper mine cutoff grade for future projects is now 0.1%, with deposit size
requiring an open pit 1km deep and 4km in lateral length, yet available ERoEI is now approximately 20:1.
Energy resources are now comparatively quite small, very poor quality and expensive to extract. Copper
resources alternatively are massive in size, very poor quality, requiring vast amounts of energy to process.
This can be described with the resource pyramid conundrum (Figure 56).
More expensive, higher sell price
More tonnes to process,

Onshore, easy to extract liquid oil Cut off Cu grade 20%
higher cost of mining

Shallow water liquid oil
Cut off Cu grade 10%
Onshore heavy liquid; oil sands
Ultra deep water oil Cut off Cu grade 3.0%
Polar oil (Artic oil)
Cut off Cu grade 0.7%
Oil shale (fracking)
Tar Sands oil Cut off Cu grade 0.1%
Figure 56. The resource pyramid conundrum
Figure 57. Grade of mined minerals has been decreasing

(Source: (Mudd 2009) Analyst- Gavin Mudd)
39
Figure 57 shows the decreasing metal grade of mined ore. There will come a point when the economics of
copper production will simply become unviable and peak copper production will be reached, then decline.
Figure 58 shows a graphic representation of the metal/mineral cycle from the point of extraction to the point
of waste treatment/landfill.
(Source: Valero & Valero 2014 - A Thermodynamic Cradle-to-Cradle Assessment)
Peak phosphorous mining is a concept that is relatively new but very important as industrial agriculture
depends on it. This it is to be included in the basket of vital non-renewable finite natural resources that
current society depend upon. Figure 59 shows historical consumption of phosphorus to make industrial
fertilizer.
40
Figure 59. Historical sources of phosphorus fertilizer
(Source: Cordell et al. 2009)
Figure 60 shows a best estimate of demand and production of phosphorus (Mohr and Evans 2013). The
implications for agriculture are enormous (but beyond the scope of this report). A more complete
presentation of the phosphorus resource is shown in Appendix G.
Figure 60. (a2) Static: Best Estimate

Demand-production interaction country-by-country projection phosphorus production
A useful way to quantify resource materials like metals in context of energy consumption or embedded
energy previously consumed, is exergy. In thermodynamics, the exergy (in older usage, available work
and/or availability) of a system is the maximum useful work possible during a process that brings the system
41
into equilibrium with a heat reservoir. After the system and surroundings reach equilibrium, the exergy is
zero.
Figures 61 and 62 show the known reserves of various metals, minerals and energy resources, in terms of
exergy.
Figure 77
Much like oil extraction, once you get to the peak of production the start of difficulties to deliver product
become common place. These difficulties in production are more of an inefficiency rather than a genuine
problem, resulting in stagnation in output. Then there is the downward slide of production on the back side
of the peak. This same pattern will be observed in metal mining.
42
8.3 Limits to Growth for Energy
Energy allows society to physical useful work. Energy consumption correlates directly with the real economy.
Future projections of global energy demand are usually developed on past behavior, with no understanding
of finite limits or depleting resources. Generally, reserves have been projected on by past production and
demand has been defined by population growth and economic GDP.
The reference case forecast of the U.S. Energy Information Administration (EIA) for future growth in world
energy consumption through 2035 is shown in Figure 61. Overall consumption is projected to grow by 47%
over 2010 levels by 2035. Although fossil fuels are forecast to decline in market share they still constitute 79
percent of consumption in 2035. Such forecasts assume unfettered access to the resources which will
underpin strong economic growth. Clearly this is not a reasonable forecast.
Figure 63 World energy consumption forecast by economic development and fuel, 2010-2035
(EIA Reference Case, 2011)
(Source: Drill baby drill Hughes 2011 Analyst David Hughes)
Figure 64 shows energy consumption for the last several decades. This is steeply growing trend, which shows
an addiction to energy for society to function. Over this period, world energy consumption grew 227%.
Approximately 85 to 90% of this energy has come from finite nonrenewable natural resources (oil, gas and
coal). Future world consumption over the next 15 to 20 years is forecast to grow 48% from the 2012 levels
of consumption (EIA Energy Outlook 2016). Oil in particular is a decisively important energy resource for our
current industrial society.
43
Figure 64. World primary energy consumption by region and fuel, 1965-2011
The IEA developed a prediction scenario (IEA 2011) to predict how the demand shown in Figure 63 would be
met (Figure 65). By 2035, nearly two thirds, or 39.4 mbd, of current conventional crude oil production would
have to be replaced with new production. Note the grey section Crude oil Yet-to-find and Found-but-yet-
to-be-developed. This has been termed as the wedge of hope by many analysts. It is clear that there is
not enough new oil discoveries being made to meet future demand. Now that oil price has declined, there
is significantly less capital investment on new development of extraction on existing deposits. This shows
that the oil production peak is not that far off.
Figure 65. World oil production forecast, 2011-2035 (IEA New Polices Scenario 2012)
44
A good temporal marker to determine if human society is indeed progressing into a period of stagnation in
physical work done (a fore runner to contraction in the limits to growth scenario) is activity of the human
population driving automobiles. The United States is by far the worlds largest consumer of oil, accounting
for 20% of global consumption. Figure 66 shows the rate of driving in the United States.
Figure 66. Estimated vehicle miles driven on all roads in United States
(Source: DS Short, US Department of Transportation)
Note the clear and persistent peak in 2005. The same peak can be seen in Figure 67. Remember, the US is
the largest consumer of oil in the world, and holds the current global reserve currency.
Weekly U.S. Net Imports of Crude Oil and Petroleum Products

15000
Nov 4 2005
13000
14,370 kbbl/day
(Thousand Barrels per Day)
11000
9000
7000 Sept 19 2008

9,176 kbbl/day
5000
3000
Feb Feb Feb Feb Feb Feb Feb Feb Feb Feb Feb Feb Feb Feb
08, 08, 08, 08, 08, 08, 08, 08, 08, 08, 08, 08, 08, 08,
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Figure 67. Weekly U.S. Net Imports of Crude Oil and Petroleum Products
(Source: EIA statistics, petroleum and other liquids)
45
Figure 68. Index of US vehicle miles driven and oil consumption (1970=100)
(Source: US Department of Transportation, EIA, Douglas-Westwood analysis)
Figure 68 shows the US miles driven vs. US oil consumption. Shown in Figure 68 is the clear peaks around
the first two oil shocks (1973 Oil Crisis or First Oil Shock, 1979 Oil Crisis or Second Oil Shock), and the
plateauing of crude oil production in 2005. These are clear signatures that something fundamental has
changed. Previously in this report, the correlation of oil consumption and many other physical measures of
human society. Also in this report (and supporting appendices) is presented data showing that the capacity
and capability to supply energy to society is deteriorating.
Energy is the master resource (Section 7). Oil in particular has shown to be highly relevant and influential
in understanding the capability of the industrial grid (Weber 2010).
The deepest global recession in the entire post-war period can cut oil prices lots of slack while demand is
contracting; peak oil isn't a problem if the economy it powers is shrinking. For the first time since 1983, world
oil demand fell last year, bringing oil prices tumbling down. But recessions, even the deepest, only last so
long. The first thing to be noticed about a recovering economy is that it starts burning more fuel. The second
is that oil prices are suddenly rising again. Yet the current Great Recession has been persistent, where the
real economy contracted in 2008 and 11 years later in 2017, still has not recovered. This suggests something
fundamental in the energy sector has changed.
Resource depletion can be modelled with Hubbert Curve analysis to predict peak production (Appendix F -
Depletion of Oil Resources and Peak Oil). This does not cater for some aspects of demand, nor economic
viability of price. It also does not allow for the impact of credit money creation (printing of money) to make
unviable projects viable. As finite non-renewable natural resources deplete, cost of ERoEI ratio declines
(Appendix D- ERoEI Comparison of Energy Resources) and cost of extraction increases. As cost of extraction
increases, the sale price of the commodity also increases. There comes a point where the real economy
cannot function smoothly as the fundamental raw materials that allow it to function are too expensive. This
leads to a price crash. Currently in 2017, there are low commodity prices in conjunction with persistent
stagnation of the real economy. This has been punctuated by severe economic downturns as the fiat
economy has been printing money to continue to grow at its needed 2% per annum (to service existing
46
debts) in this business environment. There is a serious risk that a significant drop off in oil production as the
market sustainable oil price drop too low to make production viable.
What makes all this inevitably difficult is the steady deterioration of the quality of energy resources available.
A method of analysis that describes this deterioration is the Energy Returned on Energy Invested (ERoEI).
The ratio of energy extracted to the energy expended in the process is often referred to as the Energy Return
on Energy Investment (ERoEI or EROI). Should the ERoEI drops to one, or equivalently the Net energy gain
falls to zero, the oil production is no longer a net energy source. The ERoEI ratio is defined in Equation 1.
Energy Returned to do useful physical work from resource

ERoEI = (Equation 1)
Energy Invested through consumption of energy to gather resource
A graphical method to describe the relevance of ERoEI has been developed by a number of analysts on the
internet blog The Oil Drum (http://www.theoildrum.com/) (Mearns 2016) called the Net Energy Cliff (Figure
69). The dark grey section is the net energy available for society to use. The pale grey section is proportion
of energy consumed in collecting that energy to make it useable. Declining ERoEI will exacerbate the
problem of peak fossil fuels.
Coal
Net energy as (%) of total energy expended
Conventional Oil & Gas

Wind Power
Shale Gas (Fracking)
Shale Oil (Fracking)
Nuclear
Tar Sands Oil
Solar Power
Corn based ethanol
Biodiesel
(ERoEI)
Net energy for society Energy consumed to gather energy
Figure 69. Estimated ERoEI ratios for energy resources on the Net Energy Cliff chart
When oil extraction first started and oil gushers were observed, ERoEI for oil was an extraordinary 500:1
In the 1900-1930 era, ERoEI for oil was still 100:1
In 1970, ERoEI for oil was approximately 30:1
47
Currently useful to society as an energy resource
Coal ERoEI 50-80:1
Conventional Oil & Gas ERoEI 11-25:1
Wind Power ERoEI 18:1
Hydro Power ERoEI 40-100:1
Solar power Concentrating Collector heating ERoEI 12:1
Not useful to society as an energy resource in their current form

Shale Gas (CSG fracking) ERoEI 6.5:1
Shale Oil ERoEI 5:1
Tar Sands Oil ERoEI 1.8-4.5:1
Solar power PV based, off grid ERoEI -0.9-3:1
Corn based Ethanol ERoEI 0.8-1.6:1
Biodiesel ERoEI 1.3:1
Biogas ERoEI 1.3:1
There are two ERoEI thresholds below which the modern western society will struggle to function at:
1. ERoEI 11:1 The minimum to maintain complex technology and information based structures like
the internet, credit banking finance transfer system, just in time supply grid, integrated electronics
manufacture, regional continuous grid supplied smooth sinusoidal wave quality electrical power
supply, tertiary level hospitals, etc.
2. ERoEI 7:1 The minimum to maintain the bare necessities of public utility services like potable
drinking water supply, sewerage sanitation, localized intermittent supply poor quality rough wave
electrical power supply, intermittent goods supply grid with 6 month lag times, etc.
Current Western society is comparatively fragile compared to historical societies. Once current society falls
below one of these thresholds for a relatively short time (estimated 3 - 6 months), and/or does not receive
aid from an external source, transformation and evolution of that society will be desired/required/forced.
Figure 69 shows an estimate of where current energy resources project onto the Net Energy Cliff.
Energy is the master resource (Section 7). Oil in particular has shown to be highly relevant and influential in
understanding the capability of the industrial grid.
Recent studies suggest that the EROI of fossil fuels has steadily declined since the early 20th century,
meaning that as were depleting our higher quality resources, were using more and more energy just to get
new energy out. This means that the costs of energy production are increasing while the quality of the energy
were producing is declining (Ahmed 2017). A recent study (Court and Fizaine 2017) find that the EROI values
of global oil and gas production reached their maximum peaks in the 1930s and 40s.
Through a price-based approach Court and Fizaine (2017) assessed the global energy-return-on-investment
(EROI) of coal, oil, and gas. This is done from their respective beginning of reported production (respectively
1800, 1860, and 1890) to 2012.
Global oil production hit peak ERoEI at 50( 15):1; while global gas production hit peak ERoEI at 150( 20):1.
Since then, the ERoEI values of oil and gas, the overall energy were able to extract from these resources for
every unit of energy we put in,is inexorably declining. It is estimated that the maximum ERoEI of global coal
production will most likely be around 95( 15):1 around the 2030s.
Figures 70 to 74 show that ERoEI for all fossil fuels had their peak efficiency decades in the past.
48
Figure 70. Global ERoEI of Oil (1860-2012)
(Source: Court and Fizaine 2017)
Figure 71. Global ERoEI of Gas (1890-2012)

49
Time (year)
Figure 72. Global ERoEI of Total Fossil Energy (1800-2012)

The benefits that a certain society obtains from its own investments in complexity do not increase
indefinitely. Once a certain threshold has been reached, the social organization as a whole will enter a phase
of declining marginal returns, that is to say, a critical phase, which, if ignored, may lead to the collapse of the
whole system (Bonauiti 2017 and Ahmed 2017).
This threshold appears to have been reached by Europe, Japan and the US before the early 1970s, (Bonauiti
2017). The US economy, he shows, appears to have reached the peak in productivity in the 1930s, the same
period in which the EROI of fossil fuels reached an extraordinary value of about 100.
The US and other advanced economies are currently tapering off the end of what Bonauiti calls the third
industrial revolution (IR3), in information communications technologies (ICT). This was, however, the
shortest and weakest industrial revolution from a productivity standpoint, with its productivity
evaporating after just eight years.
In the US, the first industrial revolution (IR1) utilized coal to power steam engine and telegraph technology,
stimulating a rapid increase in productivity that peaked between 1869 and 1892, at almost 2%.
The second industrial revolution (IR2) was powered by the electric engine and internal combustion engine,
which transformed manufacturing and domestic consumption. This led productivity to peak at 2.78%,
remaining at around 2% for at least another 25 years.
50
After the 1930s, however, productivity continually declined, reaching 0.34% in the period 197395. Since
then, the third industrial revolution driven by computing technology led to a revival of productivity which,
however, has already tapered out in a way that is quite tepid compared to the previous industrial revolutions.
Figure 73. Industrial Revolutions IR1, IR2 and IR3

(Source: Bonauiti 2017)
The highest level of productivity was reached around the 1930s, and since then with each industrial
revolution has declined. The decline period shown by Bonauiti (2017) also approximately corresponds to
the post-peak ERoEI era for total fossil fuels identified by Court and Fizaine (2017).
Thus, Bonauiti concludes, the empirical evidence and theoretical reasons lead one to conclude that the
innovations introduced by IR3 are not powerful enough to compensate for the declining returns of IR2.
The implication is that the 21st century represents the tail-end of the era of industrial economic expansion,
originally ushered in by technological innovations enabled by abundant fossil fuel energy sources. The latest
stage is illustrated with the following graph which demonstrates the rapid rise and decline in productivity of
the last major revolution in technological innovation (IR3).
Figure 74. The productivity of the third industrial revolution (IR3) thus peaked around 2004
(Source: Bonauiti 2017)
51
The peak in Figure 74 pre-dates the peaks seen in 2005 as shown in this report (Figures 10, 17, 18, 19, 23,
66, and 67).
A more complete examination of oil and peak oil is shown in Appendix F (Depletion of Oil Resources and
Peak Oil) and in Appendix G (Depletion and Peak Production of Gas, Coal, Uranium and Phosphorous
Resources).
8.3.1 Oil
Globally there is great hope for vast increases in oil production from underdeveloped regions such as Iraq,
Iran and Syria. However, the reality of what oil exploration costs, what oil production costs and the hard
fact that much fewer oil deposits are being discovered today compared to 50 years ago.
A more complete discussion of oil, investment in oil and peak oil production is shown in Appendix F
(Depletion of Oil Resources and Peak Oil). Production of oil correlates strongly with all indices associated
with the real economy (manufacture, production of goods and services). Over the last decade, world primary
energy consumption grew at an average annual rate of 1.8 percent. Its important to note, that in per-capita
terms the rate of energy growth has significantly slowed since the 1980s, increasing at an average annual
rate of 0.4% since that time, compared to 1.2% in the century prior (Jancovici 2011).
Since first oil crisis of 1973, global energy consumption has doubled. Figure 75 shows oil consumption by
region. Oil production increased by 163% in this period. There is no apparent pattern that suggests
conservation or even efficiency by the global society that consumes this resource.
Figure 75. Global production and consumption of oil by region, 1965-2011

52
Where will these fossil fuels come from? There has been great enthusiasm recently for a renaissance in the
production of oil and natural gas, particularly for the United States. Starting with calls in the 2008
presidential election to drill, baby, drill!, politicians and industry leaders alike now hail one hundred years
of gas and anticipate the U.S. regaining its crown as the world's foremost oil producer. Much of this
optimism is based on the application of technologies like hydraulic fracturing (fracking) and horizontal
drilling to previously inaccessible shale reservoirs, and the development of unconventional sources such as
tar sands and oil shale (Hughes 2011 & 2013).
Demand for oil is very inelastic. It is a vital product that e now absolutely depend upon and need instantly
on demand. In 1973, the so-called oil embargo happened, which reduced oil supply to the USA by
approximately 3% to 4%. It disrupted the US economy, caused the largest stock market crash since the great
depression, doubled gasoline prices, and severely damaged US industry. Politically, the response was to
change national speed limit to 55 MPH, which remained in effect for ten years. The government also put
rationing restrictions on how much gasoline citizens could purchase. There were fist fights and even a couple
murders between the public at gas stations. Imagine then when we experience a 10% or 20% drop in oil
supplies.
Unconventional Liquids
(Tight Oil/Gas, Tar Sands Products)
Conventional Liquids Peak

Conventional Liquids
Jan 2011
(Oil & Gas Products)
86.2 mbpd
Figure 76. World Liquids Production (conventional & unconventional)

(Source: EIA, Drilling info, Statistics Canada & Labyrinth Consulting Services, Inc.)
As can be observed (Figure 76), global conventional liquids production plateaued in early 2005.
Unconventional liquids (tight oil, shale gas, etc.) started to make up the gap in global oil demand (oil supply
and demand separated between 2005 and 2009, see Figure 19). Conventional liquids peaked in 2011.
Increases in oil production since have all come from unconventional sources like Tight Oil (fracked oil shale,
tar sands, etc.).
53
A peak in total oil production was observed in 2015. Whether this is the real date for total peak oil cannot
be determined until it is four to five years in the past (approximately 2019). Peak Oil is around now,
perhaps a few years in our past.
The situation for oil is particularly critical, especially given that it is by far the worlds major source of liquid
fuel, powering 95% of all transport. At this time, approximately 6080% of conventional oil fields are in
terminal decline (Fustier et al. 2016). It is estimated that to maintain current supply rates of oil by 2040 the
world would need to find four Saudi Arabia Ghawar elephant fields (the largest to date single producing oil
field) worth of additional oil just to maintain current rates of supply. If the projected demand in 2040 is to
be met, eight Saudi Arabia Ghawar elephant fields would need to be found and operating by that date.
Figure 77 shows historical oil discovery. Most oil was discovered in the 1960s with a persistent decline since
a peak in 1962. The huge Ghawar field was discovered in Saudi Arabia in 1949. For every barrel of oil that
is now discovered, four to five barrels of oil are consumed. This is a declining trend.
Samotlor
(Siberia)
Cantarell
Ghawar (Mexico)
(Saudi Arabia)
Prudhoe Kashagan
(Alaska) (Kazakhstan)
North Sea
(Scotland)
Figure 77. Conventional oil discovery 1949-2015

(Source: US Energy Information Agency EIA, North Dakota Drilling and Production Statistics, Railroad Commission of
Texas & Statistics Canada)
And yet, as the same report showed, new oil discoveries have been in long term declinelately reaching
record lows notwithstanding record investments between 20012014. New discoveries are invariably
smaller fields with more rapid peak and decline rates. It is estimated that 81% of world liquids production
is already in decline (excluding future redevelopments) (Fustier et al. 2016). The HSBC study (Fustier et al.
2016) quoted a projected probable range for average decline rate on post-peak production is 5-7%,
equivalent to around 3-4.5mbd of lost production every year from 2016 forward. Small oilfields typically
decline twice as fast as large fields. Figure 78 shows the net difference of oil reserves as consumption
happens, not being replaced with new discoveries. Figure 79 shows the countries that have passed peak oil
production (As modelled in 2008, since then there will have been more).
54
Figure 78. Net difference between annual world oil reserves additions and annual consumption
(Source: Hirsch et al. 2005 report commissioned by US DOE)
Figure 79. Oil producing countries past their peak

(Source: Ludwig-Bolkow Systemtechnik GmbH 2007 HIS 2006; PEMEX, petrobas ; NPD, DTI, ENS(Dk), NEB, RRC, US-
EIA, January 2007 Forecast: LBST estimate, 25 January 2007)
The recent boom in US tight oila bubble fueled by low interest rates and record oil industry debtshas
been responsible for most additional supply since the peak in conventional oil in 2005. US tight oil has been
a growth area and it is expected to see a strong recovery, but at 4.6mbd currently it represents only 5% of
global supply. US tight oil peak production is projected to be the year 2021 (See Figure 80). While this date
is an approximate estimate due to the nature of modelling life cycles of shale oil deposits, it is likely to be in
terminal decline within the next 510 years, with the possibility that it has already peaked due to contraction
of upstream capital investment. Industry quoted projections of tight oil production not been able to stand
up to independent analysts (Hughes 2016).
This means that Tight Oil while a short term investment bonanza, is not a long term solution to maintaining
oil supply to meet global demand. Underneath that Tight Oil (with its low ERoEI of 6.5:1), conventional oil
still declines. Tight Oil does not invalidate peak oil, it merely postpones it for a few years.
55
Figure 80. US crude oil production million barrels per day
(Source: EIA, Annual Energy Outlook 2014)
Oil demand is still growing by ~1mbd every year, and no central scenarios that are publically accessible see
oil demand peaking before 2040. The global supply mix relies increasingly on small fields, where the typical
new oilfield size has fallen from 500-1,000mb 40 years ago to only 75mb in just this decade. New discoveries
are limited. In the year 2015, the exploration success rate hit a record low of 5%, and the average discovery
size was 24mbbls. Improved production & drilling efficiency can reduce declines, but only temporarily as
the North Sea example shows (Fustier et al. 2016).
The projected volume of US Tight Oil shown in Figure 80 is highly uncertain and may be based on fraudulent
data. Approximately 80% of the tight oil shale reserves in the US are in the Monterey formation. On March
21st 2014, the EIA conducted an audit of this deposit and found that most of the oil in this formation was not
extractable with current technology (in 2014). This in turn required a 96% volume downgrade of Monterey
shale oil reserves (4/5 of US reserves). The Monterey Tight Oil reserve is now quoted at 600 million barrels
down from 15.4 billion barrels (McAllister 2014). The appropriately audited projected long term production
against required infrastructure, capital and logistics show oil shale is not viable. This was seen by investment
analysts as the death blow to the U.S. fracking industry.
It is also now clear that political leadership and corporate leadership have knowingly mislead the public
regarding the impact of fracking to the environment and to the societies that are local to fracking wells
(Mobbs 2017, Lowe 2014, Fox 2010, Fox 2013 and Heinberg 2013). Without fracking, peak oil would have
happened sometime between 2005 and 2009, which would have led to the devastation of all monetary,
industrial and corporate systems. In exchange for the environmental devastation (destruction of arable land
in an era of projected food shortages), pollution of underground fossilized water reserves (in an era of
projected drinking water shortages), and devastated communities, the date of peak oil has been pushed
back 10 years.
From a business model perspective, Shale oil is not economically viable in a challenging market environment.
Oil from fracked Shale deposits cannot even be processed without the addition of a lot of conventional crude
in support. It requires 3 to 5 barrels of conventional crude to refine 1 barrel of Light Tight Oil (LTO). LTO
cannot be put through a refinery by itself. It takes somewhere between 70-80% of the inputs to be
conventional for refineries to operate if they include shale.
Also it takes tens of thousands of fracked shale wells to equal a mere hundred conventional wells (Heinberg
2013) as is shown in Figure 81. A fracked well, has approximately a 90% drop in productivity after 36 months,
where a conventional well can last 10 years or more. So for the US Tight Oil production to maintain its level
56
of oil delivered to the market, more wells need to be drilled at the rate of approximately 7000 producing
fracked wells each year. This is known in the industry as the treadmill to hell.
Figure 81. Global drilling of oil wells

(Source: IEA, EIA, Spears, SLB Analysis)
Peak Oil is a date that has been predicted by many analysts. Most of these predictions have been
unsuccessful due to the complex and dynamic interactions of a number of issues around the oil industry
(most notably geopolitical actions and the effect on Quantitative Easing Section 9). The actual date of peak
oil is defined by the cost of production vs. the market ability to sustain a high price. There is plenty of oil left
but it is increasingly expensive to access. The current economic system cannot sustain oil prices above $100
a barrel for very long (Tverberg 2017). Alternatively, producers cannot sustain oil prices as low as $45 a
barrel and still make a profit (Tverberg 2017). The ability to bring oil to the market becomes more difficult
as peak production is found and then passed. The decade of the 2020s are projected to be somewhat
chaotic in terms of oil production (Cunningham 2017).
The dependency of oil by the industrial grid has been demonstrated. The 2008 spike in oil price reaching
$147 a barrel has been likened to a massive stroke for industrial civilization (Casey 2017). Once next
turning point for oil supply vs. economic output happens, capability to operate in general will start
deteriorating much more quickly. The second phase of the thermodynamic collapse starts when the growing
ineffectiveness of these financial measures against stark net energy realities hits a brick wall (paraphrased
from Casey 2017).
From a geological point of view peak oil is predicted in a range from to be around 2012- 2020 (Zittel 2013,
Hughes 2011). Whatever the real date, is, it is around now, give or take a few years. Considering the scale
of the problem, the precise date is not really that important. The true peak oil date cannot be correctly
defined until it has been passed by 5-6 years of reliable data. The longer the peak production record holds
for, the more difficult it becomes to beat (Simmons 2005).
57
Golden era of industrialisation
built on resources like this
Declining ERoEI
Figure 82. The pyramid of oil and gas resource volume versus resource quality
In 2005, a report was published that was commissioned by the United States DOE (Hirsch 2005) to examine
the issue peak oil and make recommendations to mitigate risk. Figure 83 shows the basic mitigation model
Hirsch proposed.
Peak Oil
Figure 83. Mitigation crash programs started at the time of world oil peaking: A significant supply shortfall occurs
over the forecast period. (Source: Hirsch et al. 2005 report commissioned by US DOE)
Figure 84. Delayed wedge approximation for various mitigation options

(Source: Hirsch et al. 2005 report commissioned by US DOE)
58
Once a credible set of solutions to replace fossil fuels (oil in particular) have been identified, Hirsch
recommended that it would take time to prepare and implement those replacement solutions (Figure 84).
For oil, this process would take society about 20 years at a comfortable but seriously invested rate. This
process could be shortened to 10 years if society undertook the forced industrialization like what the United
States did in preparation for World War II.
As such, the precise date of peak oil is not that relevant. If peak oil is around now or possibly a few years in
our past (masked by economic stagnation), and no credible solutions to oil replacement, let alone steps to
retool the energy supply system have been undertaken, then the exact date no longer matters. This
diagnoses a certain outcome.
8.3.2 Natural Gas
Natural gas follows a very similar profile to oil, but while oil supply is just starting to come into peak
production, gas supply is projected to easily meet demand for another 5-6 years before having troubles
meeting market demand. Figure 85 shows global natural gas production and consumption. In this time
period, production increased 227%.
Figure 85. World natural gas production and consumption, 1965 2011
Appendix G (Depletion and Peak Production of Gas, Coal, Uranium and Phosphorous Resources) shows a
more complete discussion of the gas resource net position. Peak gas discovery happened sometime in the
1970s decade (Figure 86).
59
Figure 86. Natural gas discoveries by decade
(Source: BP Statistical Review of World Energy June 2008)
Figure 87 is the estimated global net position of natural gas supply to meet projected demand. Peak Gas is
predicted to be around 2020 with potential to be pushed out to 2025 if technology efficiencies are applied.
Figure 87. Global natural gas reserves EWG scenario

(Source: (Zittel 2013) Fossil and Nuclear Fuels the supply outlook Energy Watch Group, Ludwig-Bolkow
Systemtechnik)
Figure 88 and Table 4 show the natural gas supply from deposits in Europe. Europe is a relatively small
volume supplier on the global market and the majority of its gas needs are sourced externally.
60
Figure 88. OECD Europe supply from natural gas reserves EWG scenario
Systemtechnik)
Table 4: Conventional gas reserves and estimate of shale gas resources in Europe
8.3.3 Coal
Coal is often quoted as being infinite in quantity with no end in sight. Coal geologists would often tell the
author that there is no issue with coal supply as there is billions of tonnes in the ground, they have seen
them. Coal is a bulk commodity industry. The volumes handled are extraordinary in size. The numbers tell
a very different prognosis. Appendix G (Depletion and Peak Production of Gas, Coal, Uranium and
Phosphorous Resources) shows a more complete discussion of the coal resource net position.
61
Figure 89. World hard coal production 1960-2100 by region
Systemtechnik)
Even if the world's coal reserves are twice as large as reported this does not postpone the peak in production
more than two decades. The coal that is left to mine is of poorer quality rank, where the higher quality
reserves were mined historically. There are strong reasons for thinking that the rate of increase in gross
energy availability will slow further in coming decades. This surprising early peak estimate is substantially
associated with the recent radical down-scaling of estimated economically and technically recoverable coal
reserves.
Figure 90. World coal production by coal rank

Systemtechnik)
62
8.3.4 Uranium and Nuclear Power
Nuclear power is often seen as the savior in that once fossil fuels are phased out, it is the only power source
that is currently capable of delivering large amounts of electricity. Apart from the issues of processing and
storing spent fuel rods (Appendix B), there is the issue that nuclear technology cannot deliver the needed
volume of electrical power to replace fossil fuels (Appendix E). Also, nuclear power as it presents now has
an ERoEI of approximately 5:1 (Appendix D), which is too low to be useful to society as a fundamental
underpinning energy source to support industrial civilization. Appendix G (Depletion and Peak Production
of Gas, Coal, Uranium and Phosphorous Resources) shows a more complete discussion of the Uranium
resource net position.
In addition to these challenges, Uranium (fuel for nuclear power) is a finite natural resource. Figure 91 shows
the spread and quantity of uranium resources globally.
Figure 91. Reasonably assured and inferred resources and cumulative uranium production of the most productive
countries (Source: (Zittel 2013) Fossil and Nuclear Fuels the supply outlook
Energy Watch Group, Ludwig-Bolkow Systemtechnik)
Nuclear power has a number of complications. The infrastructure to support it is quite complex and
expensive. Power stations can take many years to build. The informally planned for incubation time between
a proposed nuclear power plant submission, government administration processing, construction and then
commissioning is about 15 years (many case studies are longer). Once these expensive industrial sites are
operational they must be kept producing power at a steady capacity, or have serious maintenance issues
and premature aging. Once a nuclear power plant has reached the end of its useful life it must be
63
decommissioned. Failure to do this correctly can lead to accidents. There have been relatively few nuclear
power plant accidents, but they have been spectacularly difficult in their impact.
The Three Mile Island accident

The Chernobyl disaster
The Fukushima Daiichi nuclear disaster
Just so, there is a decommissioning schedule. To maintain the existing nuclear power station fleet, new
reactors need to be built. Figure 92 shows the required construction of new plants to replace the
decommissioned plants in the existing schedule, just to maintain existing supply.
Figure 92. Required construction starts of new power plants to meet NEA forecast of nuclear capacity and to sustain
current level (Source: (Zittel 2013), Ludwig-Bolkow Systemtechnik,
International Atomic Energy Agency (PRIS), Sept 2012)
To increase the power supplied by nuclear station fleet to the point where the energy supplied to society by
just 1 year of oil consumption is replaced, 2,390 more reactors need to be built (using 2016 global oil
consumption as an example). 12 months later another additional 2,390 would have to be commissioned.
This is not practical. Nuclear technology in its current form is not a viable solution. This example is shown in
Appendix E (Quantity of Energy at Point of Application for Energy Resources).
64
Figure 93. Historical uranium production and projection until 2100 with mine-by-mine production profiles based on
Reasonably Assured Resources <130USD/kg
(Source: (Zittel 2013) Fossil and Nuclear Fuels the supply outlook
Figure 93 shows historical uranium production (up till 2013) and then projected future production. So
uranium is a finite resource that its consumption will result in its peak production then depletion. Figure 88
shows a scenario where consumption of uranium is increased as much as the market would allow (at a U
price of $130 USD per kg). Not only would production not be enough to replace fossil fuels (approximate
double the 2012 production rate), peak uranium would be somewhere around 2020-2025. After this,
uranium would deplete just like all other resources human society has consumed. The issue with nuclear
technology though is spent fuel rods need to be kept in powered cooling facilities for approximately 10 years
due to excess heat and radioactivity (Appendix B). So, after oil, gas and coal have all been depleted and are
not useful as an energy source, society would be required to consume energy to prevent an environmental
disaster and radioactive fallout at a time when energy sources are at a much lower ERoEI (Appendix D). Not
only is this not viable, it is dangerous to consider starting.
65
Figure 94. Peak energy resources current paradigm of society
Production (Gb/Year)
Years
Figure 95. Projected peak oil, gas and coal
(Source: Maggio, G., Cacciola, G. (2012)
Figure 95 shows a modelled prediction of peak production for oil, gas and coal. The there are several
predictions, many of them are clustering the predictions for peak oil to be around now (2012 -2020) and
peak gas is projected to be around five to ten years away (2022-2027). Figure 96 shows an estimate
prediction of peak total energy. This prediction was made in 2012.
66
Where
1 Mtoe = 1 million tonnes of
oil equivalent
1 Mtoe = 7.1 millon barrels
of crude oil and condensate
1 Mtoe = 10 million barrels
of natural gas liquids
1 Mtoe = 1.16 billion m3 of
natural gas
1 Mtoe = 1.5 Mt hard coal
(1.8 Mt sub-bituminous
coal)
1 Mtoe = 3.5 Mt lignite
1 Mtoe = 58 t of uranium
Figure 96. Peak total energy, normalized data from oil, NGLs, natural gas, hard coal, lignite and uranium reserves
Systemtechnik)
Figure 97 shows the outcome of an analysis done to include the effect of the price of oil and other
commodities to influence when production declines. Fossil fuels, nuclear and renewables projected
production in terms of what is able to be delivered to the market. An estimate of peak total energy
production is to peak in 2015. What is remarkable is that this prediction of peak energy was made in 2014
(2014 Jan 29 Tverberg). It matches the data shown in Figure 76 (production of global total liquids), which
also shows a peak oil & gas in 2015.
Figure 97. Estimate of Future Energy Production

(Source: OurFiniteWorld.com Analyst Gail Tverberg)
The actual date of the peak will be obscured by economic stagnation. This peak date is driven by oil
production. It is to be understood that Figure 97 is a combination of the ability to extract these natural
resources in conjunction with the cost of extraction exceeding what is practical economically. A
67
fundamental thesis of this report is that what is being observed in the dynamic interaction between four
basic concepts (Figure 98).
Finance Markets & Money

(Fiat Economy must grow at approx. 2% p.a.)
ERoEI Exergy
based limits to
growth in a stable
finite system
Depleting Raw Material Supply

(Non-Renewable Natural Real Economy Work Done
Resources) (Goods & Service)
A very valid question to ask is if there has been a contraction on the real economy in 2008, and measureable
data indicates that the global economy has yet to recover, 9 years later, why does conventional indices like
the stock market claim things are better than ever?
9.0 The Response of the Central Banker Administrations

The current financial monetary system is more fragile, vulnerable and over leveraged than any monetary
system in history. Appendix H (Structural Vulnerability of the Financial System & the Printing Money
Strategy) gives a more complete discussion of how and why this is. Its current state is something that has
been developing for decades. The structural problems of the current system were created decades ago,
which has allowed the consequences several decades to develop and mature.
Any set back to this system at all would result in first extraordinary volatility but there is a high risk of a
severe economic downturn of unprecedented nature. Once started, this down turn would continue until
the system is reduced to its intrinsic tangible value. The problem with this, is the current system is virtual in
nature, with its wealth contained on electronic ledgers only, and backed by public confidence. Public
confidence will only be stable while the system works. The bulk of this report has shown that the real
economy has stagnated and the underlying energy supply resources are approaching (or have just past) peak
production, and are now depleting. Thus all efforts have been made to shore up public confidence that all
is well and the prognosis for the future is prosperous.
Figure 99 shows the proportion of the major currencies. As can be observed, the US dollar has dominated
the world currency market for some time. The Euro is the second dominant currency. The two currencies
account for approximately 90% of global liquidity. If there was a structure problem or down turn in either
currency the global market would crash due to the financial interdependence of the backing reserves behind
each currency. If/when one falls, all other would soon follow.
68
Figure 99. Proportional global volume of major currencies
The world economy is now dominated by the U.S. dollar and U.S. geopolitical interests. The US system is
based on what is termed a fiat currency (as is the European Euro, the Japanese Yen and the British pound).
Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical
commodity. The value of fiat money is derived from the public confidence in the relationship between supply
and demand rather than the value of the material that the money is made of. The US central bank, the
Federal Reserve Bank has had the authority to engage in money creation (printing of money out of nothing).
The Federal Reserve has been doing just that steadily since its genesis in 1913. In 2008, the Quantitative
Easing (QE) program printed more money than ever before.
Figure 100 shows the outcome of an thought experiment example of fractional reserve banking shown in
Appendix H (Structural Vulnerability of the Financial System & the Printing Money Strategy), where a an
initial deposit of $1,000 was leveraged fully into new loans (creating an additional $8,999.76), which were
subject to 3% per annum interest, compound monthly (accruing an additional $3,493). The interest money
(an extra 35%) has to come from somewhere outside the principle $10,000, which was leveraged off the
original $1,000 (fully described in Section H3 of Appendix H).
The amount of debt in the system will always exceed the amount of money. Thus the wholes system must
grow, to service the interest repayments. Perpetual expansion is a requirement of the system. Not a legal
requirement or a desire to support a business model, but a systemic requirement. Without expansion of
money supply, past debts cannot be serviced, which to a default on debt. As the whole system is based on
the nebulous concept of public confidence, as opposed to hard assets, one default would lead to a chain
reaction of debt defaults. Once something like a banking panic, or bank run, it could very quickly lead to a
systemic financial crisis, then sovereign debt default. As the whole monetary system is a virtual agreement
social contract, this would very quickly destroy the whole finance and currency apparatus. All institutions
and political forces are geared to prevent this from happening.
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10 year loans leveraged off a single $1000 deposit
$16,000
An extra $3,493 needs to be sourced
$14,000 from somewhere to pay the interest $13,493.21
on top of the principal loans
$12,000
$9,999.76
$10,000
$8,000
$6,000
$4,000
$2,000
$1,000.00
$0
Original starting $ reserve Money loaned out by bank Money owed to the bank
(principal debt+interest)
Figure 100. Money supply expansion to pay interest off a debt (example from Section H3 in Appendix H)
In 2008, the Global Financial Crisis (GFC) happened. A chain reaction that started in the United States that
very quickly became a severe economic downturn on a global scale. As has been shown previously in this
report, the GFC was the outcome of a series of forces in the real economy showing signatures for several
years beforehand. This was the steepest decent in economic wealth in history. The response of the Federal
Reserve Bank was proportionally unprecedented.
The interest groups behind the current monetary system will aggressively pursue their own interests and
will pursue economic growth at all costs, as they have done since the birth of the capitalist system in Britain
300+ years ago (Dimmock 2014).
The power brokers of the existing system would then be subject to The Shock Doctrine where an overnight
and fundamental economic reset from one system of administration would form from the ashes, creating its
own administrative structures. The Shock Doctrine is a book by Naomi Klein (Klein 2008) who examined the
ideas of US geopolitical strategists testing and applying some of Milton Friedmans ideas in South America in
the 1970s. This would mean most of the existing structures would be dethroned, along with the power
brokers that depend upon them.
Just so, if an economic crash was to start, it must be arrested in movement and recovered at all costs. In
2008, the Global Financial Crisis triggered an unprecedented in speed collapse (more wealth was lost in a
faster time frame than in the Great Depression crash of 1929). The Wall St Stock exchange had the greatest
one day drop ever recorded and ceased trading for a few hours. The entire US credit banking system came
within 6 hours of seizing up and collapse.
9.1 Quantitative Easing
The United States Plunge Protection Team (formally The Working Group on Financial Markets) was formed
with representatives from US Treasury, US Federal Reserve Bank, the Securities and Exchange Commission
(Wall St stock exchange) and the Commodity Futures Trading Commission. Together, they were able to
70
engage in money creation which later became termed Quantitative Easing (QE). Over a period of 4 years the
US treasury and US Federal Reserve printed trillions of dollars which was successful in maintaining the
illusion and restoring public confidence. With 20/20 hindsight, no physical change happened to stop and
recover from the GFC. This could serve as a warning flag to the nature of the system that this is even possible.
In 2013, the US Federal Reserve Bank was printing $85 billion USD a month (Finger 2013), which has to be
done or else the US administration could not pay its civil service administration costs. The US population of
325 million people has 50.5% receiving some kind of social security benefit, from the US government (with
$107 trillion dollars in unfunded liabilities), having only a 47.1% participation rate in the workforce, of which
15.3% are employed by the government (which now owes $19.97 trillion dollars in debt, which is a 103.1%
Debt/GDP ratio) (Williams 2017 Shadowstats and usdebtclock.org). The net position of the United Sates is
untenable. The only option to keep it functioning, is to continue to print money and hope that the tax payer
will consent to taking on more debt at an exponential rate.
Figure 101. The Federal Reserve Bank Balance Sheet

(Source: Federal Reserve Board, TD Economics, Shadowstats)
From the Federal Reserves Own publications:

"When you or I write a check there must be sufficient funds in out account to cover the
check, but when the Federal Reserve writes a check there is no bank deposit on which
that check is drawn. When the Federal Reserve writes a check, it is creating money." --
Putting it simply, Boston Federal Reserve Bank
While the US economy dominates the global economy, it is not the only economy engaging in these
strategies. Central banks around the world together (including the US Federal Reserve) are now printing
$200 billion US dollars equivalent a month (Phoenix Capital 2017). This means that currently, every 5 months
another 1 trillion $USD is added to the global debt profile, while humanity at large is not engaging in any
unusually large projects. This is the road to Zimbabwe (see Section H6 and H7 of Appendix H).
The Federal Reserve System is the primary reason why the US dollar currency has declined in value by well
over 95% and US national debt has gotten more than 5000 times larger over the past 100 years. Figure 96
shows the Federal Reserve Bank balance sheet. As can be observed, what was started in 2008 has been
continued, dwarfing all historical precedents. Prior to 2008, the Federal Reserve balance sheet had $880
billon USD ($ 0.88 trillion USD). In 2017, it is a little under $4.5 trillion dollars USD. To be clear, that extra
71
$3.62 trillion dollars debt was literally mouse clicked into existence, 97% of which only exists as numbers in
an electronic ledger. This money is not associated with any large asset or physical outcome.
To put these volumes in historical context, Figure 102 shows the volume of money printed in the 206 years
prior to 2008 in the United States and what large project they were associated with, compared to what was
printed in the first 12 months of QE1.
Historical cost of
major US projects
Reference
Volume
First 12 months of QE1
Figure 102. QE scale of printing of money 12 months after the start of QE1
To put this in context, the money created (printed) shown in Figure 102, is represented in Figure 103 inside
the dotted red ellipse (US only). Since then, larger amounts of money has been created, by the US Federal
Reserve, the Japanese Central Bank and most of all by the European Central Bank. We genuinely are living
through the largest financial experiment ever attempted.
72
Figure 103. Global Quantitative easing from 2008 2017
(Source: Quartz analysis)
This has resulted in the spectacular increase in monetary supply. Figure 104 shows the US Base Money
supply since 1918 (the US Federal Reserve started operation in 1916). Figure 105 shows the increase in
European monetary supply, which has more than tripled in volume since 2001.
Figure 104. US monetary supply since 1918

(Source: Incrementum Research, and (Yellen 2017))
73
Figure 105. European Money Supply M1
(Source: European central bank, www.tradingeconomics.com )
The effects were remarkable however. In 2008 a severe economic downturn started (The Global Financial
Crisis - GFC), which as has been shown in Appendix H, had the capacity to fundamentally destroy the entire
monetary system and came within a few hours of permanently paralyzing the banking credit system
(Mathiason 2008 and Kingsley 2012). Since then however, the stock market has become addicted to QE to
function. Figure 106 shows the S&P 500 index and the US Federal Reserve Balance Sheet.
Figure 106. S&P 500 index and the US Federal Reserve Balance Sheet
(Source: STA Wealth Management https://www.stawealth.com/ )
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Figure 107. Projection of US Federal debt, Spending and Revenues, 2016-2046
(Source: US Congressional Budget Office)
The US Congressional Budget Office (CBO) has newly released a projection of Federal debt 2016-2046 (Figure
107). Note the US National debt shown in 2016 is different to the $19.01 trillion dollars, which placed
Debt/GDP ratio at 105% (Durden 2016). Currently United States National debt is $19.97 trillion dollars (USD)
which gives a Debt/GDP ratio is 103.1%. Figure 107 shows a Debt/GDP ratio of something like 75%, again
showing that most officially released statistics are debased to the point of irrelevance.
Figure 102 shows what US Federal Reserve thinks it is going to do to keep the US economy going. Clearly,
more quantitative easing is planned, at a scale not seen to date. Figure 107 demonstrates that the US Federal
Reserve no longer has control of the situation and does not have a credible alternative to QE.
9.2 Deteriorating Purchasing Power of Currencies
The debt saturation point will make this difficult (not possible). Figure 108 shows the change in GDP to
change in debt ratio. It show a convergence where the debt taken on no longer achieves anything. While
this chart was generated in 2010, seven years ago, the numbers do support it basic premise.
Figure 108. The US debt saturation point

(Source: US Treasury Z1 report 11 March 2010, EconomicEdge Blog)
(Analysts Christopher Rupe and Nathan Martin)
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In the US golden era of prosperity (1950s and 1960s), for every dollar of debt created, a ratio of $1 to $2.41
was in effect. That is, for every $1 printed, $2.41 in economic growth was generated. In 1970, just before
President Nixon decoupled the gold standard to the US dollar, the ratio was $1 to $0.41. For every dollar of
debt created, $0.41 of economic growth was generated. In 2014, that ratio had fallen to $1 to $0.03. For
every dollar of debt created, $0.03 or 3 cents of economic growth was generated. This is not sustainable or
even useful in the short term. The current state of the US economy is that its currency is now so debased
that its purchasing power has been reduced by 97%.
Figure 109. Purchasing power of the US dollar 1913-2013, Calculation based on CPI, August 1913 = 100%. Data as of
August 2013. (Source: Merk Investments, Bureau of Labour Statistics)
For the last 40 years, US government debt creation has been approximately twice the rated economic growth
(Rickards 2014). This spirally volume of debt since the 1970s has been unprecedented till then. What has
facilitated this to continue working is the Saudi Arabian commitment to price all of their oil contracts in
$USD. For the last 20 years, the increase in debt can be related to the higher cost of energy. As the cost of
energy went up, there was a need to increase the volume of debt to the system to maintain growth.
If the QE program was to be stopped or even tapered, the stock markets in the US and around the world
would be devastated. This has been a remarkable deal for those favoured institutions in the US (and Europe).
For the US government (and European Government) demand for government debt has been maintained at
a high rate, in conjunction with low interest rates. The larger private banks (Bank of America, JP Morgan,
Citibank, Deutsche Bank, etc.) have been able to make unprecedented profits at no risk, have been bailed
out by public money, and have been given preferential treatment in terms of accountability (legal and social)
all while being given insider information from central banks. Central banks like the Federal Reserve Bank
enjoyed higher Treasury Bond prices in conjunction with higher stock market prices, and higher housing
prices.
Figure 110 shows the decline and devaluing of all major currencies in terms of gold price. Current society
has not really noticed this due to the fact all currencies are devaluing together.
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Figure 110. Major currencies as valued by gold price, (as of August 31, 2010)
(Source: Bullion Management Group Inc. 2010)
Much of the money created was used to purchase financial derivatives. One of the biggest risks to the
worlds financial health is the $1.2 quadrillion derivatives market. Its complex, its unregulated, and it ought
to be of concern to world leaders that its notional value is 20 times the size of the world economy. But
quantitative easing is now required for the survival of the global economy, and as much as risk managers
and regulators might want to limit that risk, they lack the power or knowledge to do so.
A quadrillion (1,000 times a trillion) is now the unit of measure appropriate when examining the derivatives
market. This is of concern as global GDP is $70 to $80 trillion. If even a fraction of these derivatives were to
be cashed in at same time, the whole global economy would be declared insolvent and would default into
bankruptcy.
Derivatives Volume and GDP (2014)

Derivatives Volume Annual Gross Domestic Product
German GDP 3.88

India GDP 2.26
Russia GDP 1.28
China GDP 11.2
Europe GDP 18.59
US GDP 17.4
Global GDP 78.87
Deutsche Bank exposure to derivatives 75

US exposure to Derivatives 538
Derivatives 1280
1 10 100 1000
Trillions of $USD equivalent
Figure 111. Derivatives volume compared to annual GDP

(Source: USDebtclock.org, Durden 2014, Cohan 2010, OECD statistics)
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It is important to remember that Figure 111 has a log scale. The German economy has derivatives exposure
19.3 times the German annual GDP. The most exposed economy is the United States with exposure 30.9
times GDP (which is appropriate as this is a US banking device). If the derivatives problem was attempted
to be resolved at the global scale, the global economy has derivatives exposure 16.2 times global GDP (which
means that Germany has a higher proportion of derivatives exposure than the rest of the world).
There are two forms of printing money. The quantitative easing referred to above and the use of fractional
reserve banking in the private banking sector. Fractional reserve banking is a banking system in which only
a fraction of bank deposits are backed by actual cash on hand and are available for withdrawal (Gonczy
1992). This is done to expand the economy by freeing up capital that can be loaned out to other parties.
Banks are required to keep a certain amount of the cash depositors give them on hand available for
withdrawal. That is, if someone deposits $100, the bank can't lend out the entire amount. That stated, it isn't
required to keep the entire amount either. Most banks are required to keep 10% of the deposit, referred to
as reserves. This reserve requirement is set by the Federal Reserve.
Since 1970 and since 1913, the standard forms of market correction normally seen in economic downturns
have been neutralized. Things are now so fragile that a correction that was allowed to continue to its natural
course would systematically destroy the entire system, leaving no structure left standing. Wealth has now
been transferred away from physical assets since the United States decoupled its currency the US Dollar
from the gold standard in 1971 (Rickards 2004 and Martenson 2011). Wealth is now a virtual system based
on this nebulous term public confidence.
But printing money can only go so far. It is not possible to sustain this. It is not possible to print up prosperity.
Money is an agreement and a social contract where the banking system is trusted by society to administer
wealth on their behalf (the same could be said for the law).
Money though is not real wealth but a claim on real wealth. These systems can work but if some of the
stakeholders in authority debase the rules of administration, the whole system deteriorates very quickly to
its intrinsic value. In a fiat paper monetary system, that intrinsic value is not something physical but instead
public confidence. If the trust of the public is destroyed by their own government breaking the law (where
very few benefit and large numbers of people have their livelihood destroyed), then that monetary
apparatus will be systematically destroyed. One of the outcomes of this is hyperinflation. This has had many
historical precedents.
9.3 European Debt Crisis
The European monetary position is more precarious than the US positon due to internal political tensions.
The European Central Bank (ECB) has been printing more money than any other institution (see Figure 98).
However, this is not a politically stable situation. Not only the ECB, but all member nation states are at
saturation levels of debt (greater than 90% Debt/GDP ratio, where to operate their economy and service the
debt, that nation state has to go further into debt), as shown in Figure 112. Many EU nation state members
are at a very high risk of sovereign debt default, and have been so for years (Investopedia 2017). Southern
Europe in particular is economically out of phase with Northern Europe.
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Figure 112. Debt Levels around the World
(Source; USdebtclock.org)
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The Catch 22 situation the European Union and the ECB finds itself in is as follows. Historically and according
finance theory, if any nation state passes the point of debt saturation, while having their real economy
persistently contract, that nation state must at some point default on its sovereign debt. Bailing out that
nation state will only be useful if the real economy returns to a growth profile. The geopolitical agreement
that is the basis of the European Union is the EU will protect its member states (financial bailout in this case).
In return, the member states will not default on their EU commitments, economic and political. If a nation
state is not bailed out, the EU charter is violated. If too many of the member states need bailing out, then
the whole EU network will be pushed into insolvency and will default. As such the wealthier Northern
member states have been pushed to economically support the less robust nation states to prevent the failure
of the EU political group.
It is to be remembered however, that each of these nation states are not in debt to each other, but the
private banking sector, where each central bank is actually a politically separate and privately owned
enterprise (like the US Federal Reserve). So if Spain owes Portugal 40 billion and Portugal owes Spain 40
billion, they cannot just cancel the debts out as in reality 80 billion is owed to the private banking sector.
This is especially relevant when it is understood that almost all private banks are linked and have interlocking
ownership share holdings (Upbin 2011, and Glattfelder 2010).
Figure 113. The major banks hubs of the international financial network show high levels of connectivity and
interdependence. (Source: Schweitzer, F. et al. Economic Networks: The new Challenges Science V325/ 422 July 2009)
For Figure 113, the links are weighted to represent the strongest relations between banks. The colours
represent different geographic areas, European Union (red), North America (blue), other countries (green).
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From study done by David Korowicz (Korowicz 2012):
Something sets off an interrelated Eurozone crisis and banking crisis, a Spanish default say, which spreads panic
and fear across other vulnerable Eurozone countries. This sets off a Minsky moment when overleveraged
speculators in the banking and shadow banking system are forced to unwind positions into a one-sided (sellers
only) market. The financial system contagion passes a tipping point where governments and central banks
start to lose control and panic drives a (positive feedback) deepening and widening of the impact globally. In
our tropic model of the globalized economy, the banking and monetary system keystone hub comes out of its
equilibrium range, crosses a tipping point, and is driven away by positive feedbacks to some new state.
This directly links to another keystone-hub, production flows. Failing banks, fears of currency re-issue, fears of
further default, collapse in Letters of Credit, and growing panic directly quickly shut down trade in the most
affected countries. As the week progresses factories close, communications are impaired, social stress and
government panic increases. After a week almost all businesses are closed, there is a rising risk to critical
infrastructure.
Almost immediately internal trade and imports stops in the most affected countries, and there is impairment
in a growing number of other countries. Trade is impaired globally via a credit crunch. This undermines exports
from some of the most trade-central countries, with some of the most efficient JIT dependencies in the world.
This cuts inputs into the production and trade into countries that were initially weakly affected by direct
financial contagion. Globally, the spread of trade contagion depends on complexity, centrality, and inventory
times and once a critical threshold is passed spreads exponentially until the effect is damped by a large-scale
global production collapse (implying another keystone-hub, economies of scale is driven out of equilibrium).
Trade contagion and its implications feed back into financial system contagion, helping drive further
disintegration. The interacting and mutually destabilizing effects of keystone-hubs coming out of equilibrium
destroy the equilibrium of the globalized economy initiating a systemic collapse. Growing risk displacement in
an increasingly vulnerable system is increasing the risk of system failure.
Once the financial system contagion crosses a particular threshold the de-stabilization of the globalized
economy will be exceedingly difficult to arrest; this point may be in as little as ten days. Once a major system
collapse occurs, scale, hysteresis, entropy, loss of critical functions, recursion failure, and resource diversion is
likely to ensure that the features associated with the previous dynamic state of the globalized economy can
never be recovered.
Figure 114 shows the nature of this conundrum. This graphic was made in 2011. Since then the levels of
debt have all increased, but the basic structure and situation remains the same in 2017 (which implies that
nothing of consequence has been achieved). Greece has been the subject of a great deal of internal pressure
to default and has received multiple bailouts from the ECB. Most of the Greek debt is owed to French private
banks. If Greece defaults, those French banks would become insolvent (they are that close to insolvency).
If those French banks default on their debts and responsibilities, the French economy would crash and a
French Sovereign debt default and French Treasury bond (also known as OATs or Obligations Assimilables
du Trsor) crisis would be triggered. This in turn would create a chain reaction which the ECB would not be
able to contain.
Iceland
While not widely reported in the western mainstream media, is the sovereign debt default of Iceland in 2011.
When it became clear to the tax paying public, that the people they had entrusted to administer their
banking monetary system had committed fraud, instead of bailing them out, they charged, tried and jailed
senior bankers and politicians (BBC Business 2016 and Sheffield 2015). The economy was reset and their
recovery was considered extraordinary. Central bankers around the world would probably prefer this
strategy not be employed ever again. As such, this remarkable example was given almost no mainstream
media coverage.
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Figure 114. The European interlocking sovereign debt conundrum
Recently:
Spanish banking giant Santander has stepped in to the rescue ailing rival Banco Popular by taking
over the failing lender for 1 (Martin 2017)
Shares in Deutsche have lost more than half their value so far this year (Dakers 2016).
Portuguese banks, already undercapitalised and loaded with bad debt, are bracing for heavy losses
from Lisbons so far unsuccessful attempts to sell Novo Banco, the lender salvaged from the collapse
of Banco Esprito Santo (Wise 2016)
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Italy has been given the go-ahead to side-step rules and inject billions into Monte dei Paschi to help
the bank avoid a devastating collapse, without inflicting losses on ordinary savers. Europe's rules
forbid taxpayer money being used to rescue lenders without investors also taking a hit. But Italy has
been allowed to bend the rules amid fears a hit on savers could fuel already-strong anti-Brussels
sentiment among Italians (Clements 2017).
The report into the collapse of Irish banking between 2008 and 2010, by the parliamentary
committee of inquiry was perhaps the last official word on what caused the systemic failure of almost
all of Irelands big private financial institutions, one of the worlds most destructive banking crises.
Its aim was to find out what went wrong inside the Irish banks, and what decisions were or were not
made by the authorities at a moment of acute emergency.
Among other things, the report found that there was an explicit threat from the European Central
Bank that emergency support for Irish banks would be withdrawn if losses were imposed on senior
bondholders. The ECBs stance contributed to the inappropriate placing of significant banking debts
on the Irish citizen, it concluded (Boland 2016).
Eurozone finance ministers have failed to agree a debt relief plan for Greece, raising the prospect of
a summer crisis for the single currency bloc if Athens misses a loan repayment. IMF and eurozone
states fail to bridge their differences on Greeces ability to repay its debts in the long run. Greek debt
relief is now unlikely, raising prospect of a summer crisis for the single currency if Athens misses
repayment. A meeting of the eurozones 19 finance ministers broke up late on Monday night, amid
a row with the International Monetary Fund about Greeces debt burden. The standoff came just
hours after France and Germany pledged to deepen co-operation in the single currency and seize
Brexit opportunities for their banking industries (Rankin 2017).
IMF admits disastrous love affair with the euro and apologizes for the immolation of Greece. he
International Monetary Funds top staff misled their own board, made a series of calamitous
misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs
of impending crisis, and collectively failed to grasp an elemental concept of currency theory. This is
the lacerating verdict of the IMFs top watchdog on the funds tangled political role in the eurozone
debt crisis, the most damaging episode in the history of the Bretton Woods institutions (Evans-
Pritchard 2016).
It is highly unlikely that the Eurozone will be able to pull free of this debt spiral. This unfortunate situation
is made more accessible by the following YouTube link. While it is a comic skit released in Australia in 2010,
it is still relevant to describe the 2017 European debt situation.
Clarke and Dawe - European Debt Crisis

https://www.youtube.com/watch?v=I5QwKEwo4Bc
9.4 Rising Wealth Inequality
Historically, persistent inflation is a relatively new development. Most people living today would consider
inflation as normal as this is all that they have known. Inflation is a normal outcome and should be planned
for. When Central Banks print money, those that benefit most are those closest to the source of creation
(large private banks, military contractors, and large corporations). This leads to a hidden but accepted form
of corruption called seiniorage. This in turn has led to an unprecedented level of wealth disparity. At the
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time of the writing of this report, 83% of all stocks and shares was owned by 1% of the population. It was
from similar forces and stresses that created the French Revolution.
Figure 115. The 62 richest people in the world have an asset value worth more than the poorest 50% of the worlds
population, and the poorest 50% is stagnating
(Source: Oxfam/Forbes, Hardoon et al. 2016)
Oxfam did a study to examine the wealth inequality that has been building globally for decades (Hardoon et
al. 2016). From the Oxfam report:
The gap between rich and poor is reaching new extremes. Credit Suisse recently revealed that the
richest 1% have now accumulated more wealth than the rest of the world put together. Meanwhile,
the wealth owned by the bottom half of humanity has fallen by a trillion dollars in the past five years.
This is just the latest evidence that today we live in a world with levels of inequality we may not have
seen for over a century. The Oxfam report looked at how this has happened, and why, as well as
setting out shocking new evidence of an inequality crisis that is out of control. Oxfam has calculated
that:
In 2015, just 62 individuals had the same wealth as 3.6 billion people the bottom half of humanity.
This figure is down from 388 individuals as recently as 2010.
The wealth of the richest 62 people has risen by 45% in the five years since 2010 that's an increase
of more than half a trillion dollars ($542bn), to $1.76 trillion.
Meanwhile, the wealth of the bottom half fell by just over a trillion dollars in the same period a
drop of 38%.
Since the turn of the century, the poorest half of the worlds population has received just 1% of the
total increase in global wealth, while half of that increase has gone to the top 1%.
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The average annual income of the poorest 10% of people in the world has risen by less than $3
each year in almost a quarter of a century. Their daily income has risen by less than a single cent
every year.
9.5 Divergence of the Real Economy and the Fiat Economy
The monetary system must grow of be destroyed (through systemic debt default). The real economy has
stagnated and has been so for some time. Printing money has been the solution by the political
administrations around the world to meet the requirements for the monetary system to grow at the required
rate. Thus the fiat economy becomes the driving force that allows the global economy at large to function.
The purpose it would seem, was to buy time to either allow the real economy to resolve its issues, so it can
start to grow again, or give the political class time to organize their response to the bursting of the largest
asset bubble in recorded history.
As Figure 116 shows, the real economy has been stagnant for some years. Alternatively, GDP has been
growing steadily (through quantitative easing). Figure 117 shows similar but in a different form. Just so,
the divergence can be observed.
Figure 116. Global GDP and Crude Oil Production

(Source: US Energy Information Agency for oil, IMF WEO Database for Global GDP (PPP weights)
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Figure 117. The real economy vs. financial (fiat) economy
(Source: Bloomberg, MSCI, Analyst David Matthews)
Nobody left to bury here. Nobody left to dig the holes. - Dave Matthews
The question then becomes, how is it that the voting public remain unaware of this circumstance? The whole
finance system is held together by public confidence. The perception that everything is OK and the future
looks prosperous. That the people they have democratically elected, then entrusted to administer these
vital institutions of society, are doing their jobs correctly and with an appropriate moral and ethical code of
practice.
For example, citizens in the United States currently are being told that all is well and above board. State
Pension and Federal funds accounts for much of the invested wealth that supports US society. While the
State Pension Fund Plans have $4 trillion in assets and $1.9 trillion in liabilities, the Federal Pension Funds
only have $1.6 trillion in assets versus $1.9 trillion in liabilities (source: Investment Company Institute). This
means that Federal Pension Funds are actually insolvent and will require the assistance of the State Pension
Funds. This does not bode well for the bulk of the demographic the baby boomers for when they wish to
retire (as they are the largest demographic and will leave a much smaller work force to fund the economy
when they stop working and retire).
Another unfortunate example is the largest asset class on the US Federal Reserve balance sheet is student
debt (Yellen 2017). When the average person understands all this, public confidence will be permanently
damaged.
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Figure 118. The United States GDP Annual Growth Official vs ShadowStats
(Source: shadowstats.com Published June 25, 2014)
Instead, the metrics used to report on the relative health of the economy have been completely debased
and are now meaningless. This is true for Europe as well as the United States.
Gross Domestic Product (GDP)

Stock market indices (Dow Jones Index, S&P 500, FTSE Index, etc.)
Unemployment rate
All of these measures have been quietly changed in how they are calculated. Figure shows the difference
between how GDP is calculated in the United States compared to how it was calculated in 1980 (now shown
on the ShadowStats website). The stock market is now propped up with the purchase of stocks through the
use of Quantitative Easing. The unemployment rate is the most clearly debased. The number quoted is not
a reflection of the actual number employed. Instead, in the US, only those claiming food stamps are counted.
Anyone who has not found a job after a period of 12 weeks is considered a lost cause as they do not wish to
work. Quoted unemployment in the United States is 4.3% (Source: United States Bureau of Labor Statistics
14/08/2017). In reality, unemployment in the United States is approximately 23% (Source: ShadowStats).
To put that in context, US unemployment at its peak in the Great Depression was in 1933, at a rate of 25%
(Source: United States Bureau of Labor Statistics, historical).
So it can be shown that the real economy is in a state of stagnation and in some areas, contraction. When
the voting public have trouble meeting the costs of living, and have contraction stress applied to their
livelihood, and they observe for themselves this is a widespread problem, with no clear cause, they are less
likely to believe the official statistics. Once the official statistics like GDP, and unemployment are no longer
credible, public confidence starts to quickly deteriorate. Once this deterioration passes a certain point, a
financial crisis is inevitable (as the supporting metric of value for finance is public confidence).
So it goes. The next economic downturn is not only mathematically inevitable but could be immanent
(Tverberg 2017). Once the next financial crisis starts, there is no more capacity to arrest its momentum.
The central banks around the world have nearly exhausted their capacity to print money with quantitative
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easing. Once the next financial crisis passes a certain point, it will become painfully obvious that
underpinning fundamentals of this whole system is fraudulent. As such, the crash will be the bursting of the
largest asset bubble in history, involving all aspects of the economy. As it will become clear that politically
trusted institutions have been engaging in fraud for some decades, it is conceivable that there will be a
fundamental restructuring of society, where a number of social contracts will be revoked by society.
There are warning signs and temporal markers all around us that support this concept. Now that
transformation is inevitable, the prognosis can be examined and the net position for ACME Corporation can
be examined (which is much better than most other corporations).
10.0 Prognosis
Energy is decisively important and oil is the master resource
Many necessary finite natural non-renewable resources are approaching peak extraction rates and
are depleting
Fundamental transformation of industrial civilization is mathematically inevitable
This transformation has been happening since 2001
A transformative tipping point is immanent
The finance monetary system is the weakest link and will be the first to break
Advanced capitalist societies have entered a phase of declining marginal returnsor involuntary
degrowthwith possible major effects on the systems capacity to maintain its present institutional
framework (Bonaiuti 2017). Economic stagnation is here at a global scale. This is not a temporary phase
though, it is a signature of a structural change.
Complex civilizations tend to accelerate the use of resources, while diminishing the quantity of resources
available for the civilizations continued expansionbecause they are continually being invested in solving
the new problems generated by increasing complexity (Tainter 1988).
10.1 Energy Prognosis
Current society is a petroleum driven and oil dependent culture. Oil supports all aspects of current human
endeavor and over the last century, most of our industrial systems have become dependent on oil products.
There is no credible replacement for oil. Once a replacement for oil is found, it would take current society
10-20 years of war time style industrialization to transition from an oil based system to the replacement
system.
Peak Oil is around now (2012-2020) but may be masked by economic stagnation
Peak Gas in 5-10 years into the future (2022-2027)
Peak Coal in 8-10 years into the future (2025-2027)
World energy consumption per capita peaked in 2013
These dates of peak production are defined by a combination of below ground and above ground limitations.
Geological limitations define how much of the resource is physically there, and technology to extract it is
always improving. However, cost of resource extraction and processing are increasing. So the peak date is
an interaction between cost of production going to high, and the resource price being too high for the market
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to afford, in a fashion were economic growth is possible. Everything ultimately evolves around resource
price (oil price in particular).
Nuclear is not viable long term due to issues with disposal of spent fuel rods. It also has an ERoEI ratio too
low to be useful as a fundamental energy source.
Fracking of shale to extract oil and gas is not viable beyond short term. The environmental damage it causes
is out of proportion to its short term benefits. It is not economically viable once the cost of infrastructure is
accounted for. It also has an ERoEI ratio too low to be useful as a fundamental energy source. Tight Oil
(fracking) will peak and decline much faster than conventional oil.
Renewables are not the solution to replace fossil fuels:

Short term, they are too expensive
Medium term, they are not able to deliver the needed quantity volume to the point of application
Long term, their ERoEI invested is too low to be useful to society in its current form
None of the above energy alternatives are capable of delivering the required volume quantity of energy to
the point of application in a way where oil, gas or coal could be replaced. The real underlying problem is the
Energy Returned on Energy Invested (ERoEI) ratio for all of these energy sources has been steadily
decreasing, while energy requirements for society have been increasing per capita.
In practice, there are many pieces that go into determining the total quantity of net energy required to keep
the economy expanding, making the calculation difficult to perform. These include (from Tverberg):
1. The extent to which population is rising.

2. The extent to which globalization is taking place, and with it, access to other, higher EROEI, energy
supplies.
3. The extent to which the economy is getting more efficient in its use of energy.
4. The extent to which EROEI is falling for various fuels (on a calendar year basis).
5. The extent to which average EROEI is falling, because the mix of fuel is changing to become less
polluting.
6. The extent to which it is taking more energy to extract other resources, such as fresh water and
metals.
7. The extent to which it is taking more energy to make pollution-control devices, and workarounds
for problems with energy.
A contraction of available energy will mean that all other human activities, industrial or otherwise will
become much more logistically difficult/impossible. Prognosis for the future is one of very low energy use,
with scarce resource availability.
10.2 The Real Economy Prognosis
The real economy (the generation of physical goods and services through the application of physical work)
has passed a series of milestones that have resulted in stagnation, and is some sectors contraction. In 2005
and then later in 2008, all metrics associated with the real economy either plateaued, stagnated or
contracted. The real economy still has not recovered to pre-2008 levels, nine years later.
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World GDP peaked in 2014
The gap between rich and poor is reaching new extremes. In 2015, just 62 individuals had the same
wealth as 3.6 billion people the bottom half of humanity.
Global patterns are following the base case scenario of the 1972 Limits to Growth systems study.
Population has been exponentially increasing, putting pressure on all other sectors except finance.
In macro scale terms, global economic growth has stopped and a transition phase into contracting
economics has begun.
Currently, the materials and goods just-in-time supply network is very vulnerable to any kinds of disruption
or setback. The whole system now has exchanged short term efficiency for long term resilience, where its
foundation premise is its support systems will always work and do so instantly. Any kind of delay is seen as
shockingly traumatic to all associated businesses to the delay. There is a general perception that supply
shocks could never happen and it is irrational to even consider the possibility.
Currently the corporate world is heavily entwined and interdependent. A systems theory study done at the
Swiss Federal Institute of Technology in Zurich (Upbin 2011, and Glattfelder 2010) have taken a database
listing 37 million companies and investors worldwide and analysed all 43,060 transnational corporations and
share ownerships linking them. A model was built of who owns what and what their revenues are and
mapped the whole edifice of economic power.
It was discovered that global corporate control has a distinct bow-tie shape, with a dominant core of 147
firms radiating out from the middle. Each of these 147 own interlocking stakes of one another and together
they control 40% of the wealth in the network. A total of 737 control 80% of it all.
The two supporting systems of energy supply and the financial monetary system are showing signs of stress
and this has resulted in the real economy response. Things will not improve until both the energy sector and
the financial sector resolve their issues or transform into something more viable. This is not the end of
industrialization but the end of the current way of doing this. A new system will inevitably be developed
through necessity.
Figure 119. The fate of the current system of industrial/commercial management
Prognosis suggests that the current industrial society will have to be rebuilt and retooled according to a very
different set of requirements to what is in place now. This will require an unprecedented amount of metals
and minerals at a time when primary raw materials will be seriously supply stressed. Waste streams will
become more valuable, with some metals/plastics at a premium due to external sourcing logistical problems.
There is a high probability of a Black Swan event(s) manifesting, which will directly influence the real
economy in measureable terms. The industrial grid is about to evolve in a step change. In parallel to this,
society with also socially evolve into something unprecedented.
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10.3 Finance and the fiat Economy Prognosis
The financial monetary system is extremely fragile. This state of affairs was created decades ago, well before
the possibility of limits to growth was even considered. The nature of this system is virtual. The majority of
wealth that underpins our society exists only on an electronic ledger, backed by an abstract concept, public
confidence.
At this time, all fiat currencies (in particular the current world reserve currency, the US dollar) have been
seriously debased by quantitative easing (or the printing of money). The purchasing power of the US dollar
has now been decreased by 97% compared to before the formation of the US Federal Reserve Banking
System, in 1913. The European currency is in a similar position and is also entwined with the $USD.
In 2008, as a byproduct of other influences, a severe economic downturn was triggered, with the US housing
market being the weakest link and the first to break. Very quickly, this spread to every sector in the global
economy. This became termed the Global Financial Crisis (GFC). If this crash was allowed to run its course,
the whole system would have been fragmented back to its physical, non-negotiable value, nothing. This the
case due to shortsighted and self-serving choices made decades before hand. To prevent this from
happening, a historically unprecedented volume of quantitative easing was done. About 12 trillion dollars
was added to US national debt, and the Federal Reserve Bank balance sheet is overleveraged at 113:1. The
crisis was contained but only just so. Much of the QE was directed into the financial derivatives market,
which in scope, dwarfs global capacity for economic activity. Projected derivatives volume exceeds 1
quadrillion US dollars (1,000 trillion dollars).
All systems will work as long as the stake holders do not deviate from the agreed upon rules of engagement.
If the authority establishment entrusted to administer this system engages in fraud for self-benefit, that
system will be fragmented back to its physical, non-negotiable value. In the case of the modern monetary
system, this happened in stages decades ago. Since then, there has been decades of time to accumulate
delayed consequence.
The current system is now so overleveraged, that one relatively small setback will trigger a full scale
economic panic and multiple sovereign debt defaults. A number of signals define the progress of this coming
setback. Negative interest rates are now being applied in some parts of the global market. The Japanese
central bank, bank of Japan (JOP) 10 year bond yields are now 0% and for a while in 2016, they had a negative
yield.
All existing predictive financial models are flawed. There is no accepted model that accounts for the low
price of commodities in conjunction with persistent economic stagnation (the current circumstance). With
the benefit of 20/20 hindsight, it is clear that current conventional economic models are somewhat
inadequate to describe the present, let alone accurately predict the future. A new business model for the
monetary system is required, along with a new theoretical model base to administer it.
Currently, risk and debt levels are much higher than what they were in 2008. All of this has resulted in
paralysis in future investment. Ironically, US Federal Reserve Chairperson, Janet Yellen testified before
congress in 2017, stating that there will never be another financial crisis.
Money is the overlay across the top of the resource base. Money on its own is meaningless without the
primary resource base. To understand the monetary system in operation, it is necessary to model it as a
complex dynamic system, where such systems are prone to collapse. Looking back over the last 20 years,
each financial bailout (of private corporations with public tax funds) is bigger than one before, mapping
across an exponential function of scale. This is complexity theory, where if the size of the crisis doubles, the
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consequence of the crisis increases by a factor of 10 (or larger). Cause and effect are not a linear scale up in
this context.
This national and private debt is now so large, that it will never be paid back and a systemic default is
inevitable. The entire global financial market is about to have a systemic sovereign bond crisis. Analysts are
terming the current circumstance as the largest asset bubble in history, encompassing all economic activity.
Due to a contracting real economy and the need for the fiat economy to expand, QE is used to fill the gap.
This strategy is approaching the saturation point and will soon not be able to be continued. For the first time
since 1937 the US Federal Reserve Bank is tightening fiscal policy into a market of weakness (where
traditionally the Fed tightens fiscal policy when the economy is strong).
So the next financial crisis is mathematically inevitable, and is overdue. When this happens, central banks
around the world will not be able to print any more money. That capacity has been depleted and debt
saturation is now a very real limit. Only one balance sheet is left in the global market that is large enough to
attempt a further bailout. That is the International Monetary Fund (IMF). The IMF has the capacity to print
money in its own right using Strategic Drawing Rights (SDR), which is the proposed replacement of the US
dollar as the world reserve currency. This is not a practical replacement as all participating currencies to
back it are seriously overleveraged in debt (the two principle currencies being $USD and the Euro, which are
intimately entwined). There is an entrenched insolvency problem in the United States and Europe.
Insolvency is not illiquidity, insolvency is about income that can't service debt burden.
It is the authors opinion that QE4 will attempted in unconventional circumstances, where the QE will not be
a bailout of the banking system. In times of stress or extreme self-interest, governments (in particular the
US government) have a precedent of changing the law to suit its short term purposes. So it is predicted that
the law of what the Federal Reserve can purchase will be quietly changed, which will allow the direct
purchase of US Treasury Bonds, in a form that will allow off balance sheet activity. That being stated, it is
unlikely that this will be successful and the global market will go into a fully-fledged systemic financial panic.
Figure 120. Progression of financial crisis from financial to economic to political arenas
(Source: Gordon T. Long 2010)
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Figure 121. Fiat currency spiral to sovereign debt default
A credible prediction is a 50-70% price correction across the board as the market crashes and the petro dollar
comes to an end. Figure 120 to 122 show a possible sequence of events once the next financial crash starts.
While these graphics were generated in 2010, they are still relevant as they were made to predict the
outcome if the GFC in 2008 was allowed to progress naturally. The massive QE bailouts of the banking
systems did contain the crisis but it has not resolved it. The next crisis will follow the same path as the GFC
only at a faster rate of contraction (due to the debt saturation of all sectors, including now, central banks).
What was started in 2008, is at very high risk of proceeding after a 10 year pause.
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Figure 122. Event based crisis, financial to economic to political arenas
10.4 Just-In-Time Supply-Chain Failure & Repair
The whole Section 10.4 is an excerpt of the excellent study done by David Korowicz (Korowicz 2012).
The Korowicz study considers the relationship between a global systemic banking, monetary and solvency
crisis and its implications for the real-time flow of goods and services in the globalized economy. It outlines
how contagion in the financial system could set off semi-autonomous contagion in supply chains globally,
even where buyers and sellers are linked by solvency, sound money and bank intermediation. The cross-
contagion between the financial system and trade/production networks is mutually reinforcing.
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It is argued that in order to understand systemic risk in the globalized economy, account must be taken of
how growing complexity (interconnectedness, interdependence and the speed of processes), the de-
localization of production and concentration within key pillars of the globalized economy have magnified
global vulnerability and opened up the possibility of a rapid and largescale collapse. Collapse in this sense
means the irreversible loss of socio-economic complexity which fundamentally transforms the nature of the
economy. These crucial issues have not been recognized by policy-makers nor are they reflected in economic
thinking or modelling.
As the globalized economy has become more complex and ever faster (for example, Just-in-Time logistics),
the ability of the real economy to pick up and globally transmit supply-chain failure, and then contagion, has
become greater and potentially more devastating in its impacts. In a more complex and interdependent
economy, fewer failures are required to transmit cascading failure through socio-economic systems. In
addition, we have normalized massive increases in the complex conditionality that underpins modern
societies and our welfare. Thus we have problems seeing, never mind planning for such eventualities, while
the risk of them occurring has increased significantly. The most powerful primary cause of such an event
would be a large-scale financial shock initially centering on some of the most complex and trade central parts
of the globalized economy.
The argument that a large-scale and globalized financial-banking-monetary crisis is likely arises from two
sources. Firstly, from the outcome and management of credit over-expansion and global imbalances and the
growing stresses in the Eurozone and global banking system. Secondly, from the manifest risk that we are at
a peak in global oil production, and that affordable, real-time production will begin to decline in the next few
years. In the latter case, the credit backing of fractional reserve banks, monetary systems and financial assets
are fundamentally incompatible with energy constraints. It is argued that in the coming years there are
multiple routes to a largescale breakdown in the global financial system, comprising systemic banking
collapses, monetary system failure, credit and financial asset vaporization. This breakdown, however and
whenever it comes, is likely to be fast and disorderly and could overwhelm societys ability to respond.
One scenario that was considered, to give a practical dimension to understanding supply-chain contagion: a
break-up of the Euro and an intertwined systemic banking crisis. Simple argument and modelling will point
to the likelihood of a food security crisis within days in the directly affected countries and an initially
exponential spread of production failures across the world beginning within a week. This will reinforce and
spread financial system contagion. It is also argued that the longer the crisis goes on, the greater the
likelihood of its irreversibility. This could be in as little as three weeks.
This study draws upon simple ideas drawn from ecology, systems dynamics, and the study of complex
networks to frame the discussion of the globalized economy. Real-life events such as United Kingdom fuel
blockades (2000) and the Japanese Tsunami (2011) are used to shed light on modern trade vulnerability.
Real life examples of major supply-chain damage, from earthquakes say, show that the impacts can be
transmitted globally through intermediate links in supply-chains. What is surprising is how vulnerable
complex societies are to even a partial shut-down in trade for just a few days. Growing complexity and speed
in processes has increased vulnerability. However, the globalized economy is remarkably resilient to such
'rips' in the fabric of trade, but when they do occur the economy can generally self-repair very effectively.
10.4.1 Natural disasters, blockading truckers, and the connectedness of things.
The disaster damaged these firms and stopped their production activities; it also stopped or diminished the
production activities of non-disaster-affected firms that used the products of the disaster-damaged firms,
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because of the shortage of those intermediate inputs. This phenomenon of disrupted supply-chains
amplified the impacts of the disaster on manufacturing production and expanded the impacts broadly to
other (non-damaged) regions in the country.
Isao Kamata
The Great East Japan Earthquake: A View on Its Implication for Japans Economy8 Amid the human suffering
following the earthquake and tsunami in Japan in 2011, an economic shock was transmitted across the world.
This simple outcome, that production failure can be transmitted along supply-chains to companies across
the world a long way from the primary impact of a crisis represents the first stage of supply-chain contagion.
The economic benefits and competitive advantage from carrying low inventories with the evolution of just-
in-time (JIT) logistics left companies with little resilience to shocks originating in distant production failures.
It is not surprising that some of the most complex production processes those in the electronic and
automotive industries - were affected. They carry the most extensive and diverse supply-chains into their
production, and so carry a greater risk of any link being severed. They also have some of the most complex
and specialized inputs, which are the hardest to substitute. For example, Toyota had difficulty obtaining 150
components six weeks after the tsunami, down from 500 components in the first weeks. Another company
produces 40 percent of the control microprocessors used by car manufacturers worldwide. These are very
complex and customized for particular cars, so substituting for them takes time to find other plants with free
production capacity, and time for re-calibration of production lines.
In a desk study, Alan McKinnon explored the impact on a sudden week-long freeze in truck distribution by
all trucks weighing over three tonnes across the UK. The study was useful in pointing out just how road
haulage tied together a myriad of casual complacencies, and how the failure of one thing can cascade across
the economy. He wrote after a week, the country would be plunged into a deep social and economic crisis.
It would take several weeks for most production and distribution systems to recover. Some vulnerable
businesses would never recover.
In a report by the American Trucking Association the implications of a complete trucking shut-down were
assessed for the US economy and society. This report gives a timeline of the impacts (shown in Figure 123).
Again, it emphasizes how the web of interdependencies that underpin our basic welfare can become unstuck
if a fundamental hub of the economy fails, leading to rapid cascading failure.
There are a myriad important things not included. For example, the inability to access key parts or staff, or
to ship coal to power plants, could shut down the grid affecting water/sewage, telecommunications,
emergency services, and command and control capabilities. Furthermore the population and government
would most likely be completely at a loss as to how to begin managing personal and community welfare.
A recent report by Chatham House, London, looked at a range of events and noted both the vulnerability of
JIT, and importantly, following the end to a disruption, the inability of companies to just pick up where they
left off:
Evidence from a range of recent events, notably the 2010 ash cloud, the March 2011 earthquake and
tsunami in Japan and the floods in Thailand in 2011, indicates that key sectors and businesses can be
severely affected if a disruption to production centres or transport hubs persists for more than a week.
This was confirmed by a survey of businesses about the 2010 ash cloud many said that had the
disruptions continued for a few days longer, it would have taken at least a month for their companies
to recover. It is also the case that planning by government and industry organizations for an ash-cloud
event had failed to consider a time-frame of more than about three days. One week seems to be the
maximum tolerance of the just-in-time global economy.
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Figure 123. A timeline of implications for society resulting from a shut-down in trucking
There is something that is implied in the outcome of the fuel blockades and in the McKinnon study: the
impact of the crisis becomes non-linear in time. That is, the damage caused by the disruption does not rise
in proportion to the length of time the disruption occurs: rather it starts to accelerate. Later, we shall argue
that this is firstly because inventories and buffer stocks cushion the early impact of the crisis, but as time
goes on, those inventories are exhausted. Secondly, the level and structure of interconnections mean that
the more people, businesses, goods and services (nodes) that are affected, the greater the chance of
infecting the remaining unaffected nodes. Further, the more nodes that are infected, the greater the chance
that 'hubs' such as critical infrastructure will be infected.
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Their failure has a disproportional effect on the general economy. Finally, as the crisis evolves, more
businesses terminally fail due to loss of cash-flow, for example.
One result of the fuel blockade was a 2006 report commissioned by the UK's Department for Environment,
Food, & Rural Affairs (DEFRA) exploring the risk and resilience of the food supply-chain undertaken by Helen
Peck of Cranfield University. This useful report looked at particular sources of large-scale supply-chain
disruption, in particular a loss of fuel, loss of power, or the loss of people arising from a pandemic. One
noteworthy lacuna in her report is that it does not consider a systemic failure of the banking or monetary
system. Peck notes that a failure in fuel supply could mean that bank machines were not restocked or that a
power failure could cripple the banking system, but in each case the financial system was fundamentally
sound.
One outcome of the financial crisis of 2008 was the (re-)introduction of the concept of a systemic banking
collapse, and even its link to supply-chains. For a moment, following the collapse of Lehman Brothers, there
was a brief freeze in the issuance of Letters of Credit, a pillar of international trade, as banks hoarded liquidity
and worried about counter-party risk. As a result the Baltic Dry Shipping Index, measuring bulk shipping
demand, dropped by more than 90 percent. Only action by monetary and government authorities ensured
that this was a passing moment.
And yet there is no pillar of the economy more all-encompassing than the financial and monetary system: it
links almost every good and service in the world. The fabric underpinning the exchange of real goods and
services is enabled by money, credit, and financial intermediation. Money and credit have no intrinsic value.
We swap a piece of paper or entries in a computer for the real labors and skills of billions of strangers across
the world. This works if they too believe that those digits can be exchanged elsewhere for real things or
services at a later time. What is implicit in such trust is faith in monetary access, stability and bank
intermediation.
In terms of impact, a large-scale financial collapse would far surpass the fuel blockades in impact and speed
of onset. The movement of goods, people, and critical functions would be rapidly affected. The catastrophic
impact arising from McKinnon's study would be merely a sub-set of the potential impact.
The grid and banking hubs are really hubs for any complex society. We can also expand the list of primary
keystone-hubs to the following list that together maintain the core functionality of the globalized economy.
Financial & Monetary System: At the heart of the financial and monetary system we have fiat
money, credit and bank intermediation. Our ability to trade and invest requires faith that the money
we receive for our real resources and labors is accessible and will be acceptable elsewhere in space
and time for the real resources and labor of others. Because fiat money has no intrinsic value, it exists
through collective confidence in relative monetary stability. The interrelationships between money,
credit and the banking system mean that the hubs stability is dependent upon the ability to service
credit expansion, or in general the debt/GDP ratio. Credit hyper-expansion can destabilize this and/
or GDP destruction.
Economies of Scale: People around the world share the costs of consuming what is produced in the
world, which is affordable because people around the world are also producing what is being
consumed. It is adaptive to levels of population, income and the evolving distribution between
discretionary and non-discretionary expenditure. It is also related to the scale and structure of global
aggregate demand.
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Production Flows: This includes factories and supply-chains. It's the chain of final and intermediate
goods and services transactions and the combinations that produce things in the economy and move
them through the economy. They comprise flows for final consumption, and flows to maintain and
repair factories and infrastructure against the inexorable effect of entropic decay. As production has
expanded (economic growth) and become more complex, more and more production tributaries are
required to be maintained.
Behavior: This is the collective behavioral responses and expectations adaptive to economic and
social conditionality. This includes the extent of those we cooperate with (social radius), social
discount rates, habituation, herd behavior, and our willingness to maintain institutions of trust (local
law, international law, IMF, EU), popular consensus and radical social change.
Critical Infrastructure: Generally the collectively shared infrastructure that provides critical services
that support wider economic and social processes. It includes grids and power stations, IT networks,
transport, the banking system, sewage & water systems, and emergency services.
Energy & Resource Infrastructure: This is all the things between an in situ resource and the user of
that input in the production system. This includes oil rigs, refineries, pipelines, farm machinery,
fertilizers and mining systems. It sends food and energy and other resources into the globalized
economy. Conversely, it channels the technical, productive and financial resources of the globalized
economy to access and processes its own expanding requirements for the energy and resources.
All of the core keystone-hubs co-evolved together, and each supports the functionality of the others.
Together they maintain the dynamic state of the globalized economy.
A very important feature of these primary global hubs is that they tend to have little or no redundancy. That
is, they have no substitutes at scale. For example, we are all dependent on fiat currency, fractional reserve
banking, and credit. We have almost no resilience to a systemic failure of the financial system, as we hold
little currency, no alternative delocalized trading systems, have little to barter (as our personal productivity
is dependent upon the globalized financial system), and have little capacity to maintain ourselves at even
subsistence level (low personal and community resilience). Likewise, while we might have a choice of
electricity providers, they share a common grid. If the grid were to fail there is no fallback system. Diesel
generators are limited. Further if grid failure initiated banking and IT system failure, diesel may be
unobtainable.
A reason for the concentration on hubs and a lack of redundancy arises from what is known as preferential
attachment. That is, the greater the number of connections to a node, the greater the likelihood that any
new connections will attach to the same node. For example, as the globalizing economy grows, increased
population, wealth and integration opens up the possibility of greater economies of scale and more diverse
productive niches.
When new technologies and business models emerge, they co-adapt and co-evolve with what is already
present. Their adoption and spread through wider networks depends on the efficiencies they provide in
terms of lower costs and new market opportunities. One of the principal ways of gaining overall efficiency is
by letting individual parts of the system share the costs of transactions by sharing common infrastructure
platforms (information and transport networks, electric grid, water/sewage systems, financial systems), and
integrating more. Thus there is a reinforcing trend of benefits for those who build the platform and the users
of the platform, which grows as the number of users grows. In time, the scale of the system becomes a
barrier to a diversity of alternative systems as the upfront cost and the embedded economies of scale
become a greater barrier to new entrants, especially where there is a complex high-cost hub infrastructure.
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Such economies of scale come to interweave whole socio-economic systems, such as road networks and
settlement patterns. Thus, there is vigorous competition between mobile phone service providers but they
share common information platforms and depend on electricity networks and the monetary system, both of
which have little or no system diversity.
10.4.2 Reverse economies of scale in critical infrastructure
As the globalized economy expanded in scale, larger and more complex critical infrastructure had to expand
to service that growth. As infrastructure such as water/ sewage systems, telecoms networks, and power and
grid infrastructure expanded, the fixed costs of maintenance and repair rose also. This reflects our eternal
battle against entropic decay. The income a utility earns must cover the fixed costs of the maintenance and
repair of its network plus normal running costs. Because infrastructure has amongst the largest scale and
most complex physical structures in the economy, its fixed costs are very high. In a constant or expanding
economy this can be afforded. The scale of our infrastructure is adapted to the economies of scale of the
economy we have now. However, in a contracting economy it sets off a positive feedback of reduced
demand, deteriorating networks, and growing economic damage to the wider economy.
As the economy contracts, then the customers of the utility have less to spend. A decline in revenue would
mean that the utility income relative to the fixed costs would fall. If they want to maintain the network, they
may have to raise the price of their service; this would drive away some customers, and cause others to use
less services. Thus the utility revenue would fall further, requiring further price rises, spending falls and so
on. If the utility cannot afford to maintain the network, the service deteriorates making it less attractive for
customers, who drop out, reducing income and so on.
The infrastructure does not decline linearly with economic contraction, rather there is a positive feedback
of accelerating infrastructure decline until it is no longer viable, and fails. Overall, it will have undergone a
phase transition from a scale adaptive state where it operated well into a new collapsed state.
Figure 124. Reverse economies of scale in critical infrastructure.
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The fixed costs of critical infrastructure are adaptive to scale and economic activity. As economy contracts
and demand falls, fixed maintenance costs remain. A positive feedback of declining utility income and
deteriorating infrastructure ensue. Eventually, the infrastructure fails.
Complex critical infrastructure is very interdependent. Thus failure of an integrated grid-power station-
water- sewage- telecoms - transport network under economic contraction would be set by failure of the
weakest link. Further, because critical infrastructure is a keystone-hub, its failure can have cause cascading
failure across other keystone-hubs, thereby driving the whole of the economy out of its stability domain.
Here again, we see the operation of Liebigs law, this time operating on two linked scales.
The ability of the contracting economy to maintain critical infrastructure by subsidizing it would be
increasingly difficult as contraction undermined other keystone-hubs.
In a contracting economy the situation might be expected to break down. If less and less is expected to be
available in the future, the benefit of grabbing something now increases (because you are getting poorer),
and the cost of breaking trust with a stranger across the world falls (because the benefits of future trade are
going to fall anyway). Because it is with a far off stranger rather than someone within your tribal group, your
reputation as a freeloader will be minimal to those within your group, where your reputation may remain of
great benefit. But breaking away from compliance, encourages further defection from compliance.
Importantly, trust takes a long time to build but can be lost rapidly. Global trade hangs upon a thread as fine
as trust.
A related issue is the contraction of trust radii, and a hardening of tribal feeling in times of stress and crisis.
A suspicion of outsiders and increasing nationalism are common features of an economic crisis.
Figure 125. Trust Radius The slow expansion of trust in an expanding economy, and its fast contraction in a
contracting economy.
It has been outlined how the risk of a major shock arising from decades of credit expansion and imbalances
is growing. We have also seen that we could expect a similar shock from the effects of peak oil on the
economy. What unifies both is a catastrophic collapse arising from a loss of confidence in debt, and the
solvency of banks and governments. What would be unique is the scale of the shock and its ability to strike
at the heart of the worlds financial system. But the implications are not just within the financial and
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monetary system. They would immediately affect the trade in real goods and services. As our economies
have become more complex, de-localized and high speed, the implications on supply-chains could be rapid
and devastating.
There are three general points that are worth noting. Together they point to the likelihood that the crisis
whenever it comes can be expected to be very large and society unprepared.
The first is temporal paralysis:

As financial and monetary systems become more unstable, the risks associated with doing anything
significant to change or alter the course increase (see also the discussion of lock-in in the final section). In
addition, the diversity of national actors, public opinion, institutional players and perceptions works against
a coherent consensus on action.
Therefore the temptation is to displace immediate risk by taking the minimal action to avert an imminent
crisis. This increases systemic risk. Some steps in the evolving crisis might be handled, for example, a Greek
default. However, each new iteration of the crisis is likely to be bigger and more complex than the one
before, while the system is becomes ever less resilient.
A second issue is what might be called the reflexivity trap:

The actions taken to prevent a crisis, or preparations for dealing with the aftermath of a crisis, may help
precipitate the crisis. Therefore to avoid precipitation, the preparation has to be low key and below the radar
of the public and markets. This limits the extent and scope of preparation, increasing the risk of a chaotic
and slow response.
The final point is about black swans & brittle systems:

The growing stress in our very complex globalised economy means it is much less resilient, see the discussion
in section 3.1 and figure 2. Thus a small shock or an unpredictable event could set in train a chain of events
that could push the globalised economy over a tipping point, and into a process of positive feedback and
collapse.
One cannot predict how such a financial and monetary collapse will occur, or when.
However, in this section we are considering a scenario, ideally one that in the light of what we know of the
economic conditions sketched earlier seems at least reasonable. This scenario should be considered a
warning, but also a more general guide to how supply chain cross contagion might operate in any financial/
monetary collapse.
The whole Section 10.4 is an excerpt of the excellent study done by David Korowicz (Korowicz 2012).
All of this is known and understood at the senior political administration level.
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10.5 Geopolitics Prognosis
The political leadership operating in the global geopolitical arena have the look of someone about to do
something flamboyantly stupid. Whatever is done here over the next decade or so will be memorable and
of historical note.
This report has shown that not only is the current industrial society heavily dependent on oil much of the
geopolitical problem solving has involved oil at some point. Over the last 70 years, it can be observed that
the oil price is a leading indicator for a severe economic downturn. It is also a lagging indicator in terms of
geopolitical events of a certain style (examine the peaks and events of Figure 21).
Geopolitical
actions/perceptions
Oil Price,
Supply & Demand
Financial & Economic
Downturns & Recoveries
Figure 126. The price of oil as a leading indicator and as a lagging indicator
The model shown in Figure 126 can be expanded in complexity to account for a wider scope of observed
events (Figure 127).
Real Economy
Geopolitical Actions
war, regime change, economic
Influence and strategic action
sanctions, trade blockades Influence

Oil Price,
Influence Supply & Demand
Marketed to be
Severe Economic and perceived to
Influence Downturns be the same thing
Establishment Administration
Central Banks
Political Influence
US Federal Reserve,
Leadership
ECB, BOJ, BOE, etc.
Large private sector corporations

Quantitative Fiat Economy
Google, Lockheed Martin, Disney,
Nestle, Quanta Computer Inc, Easing
Monsanto, Pfizer, Pearson, ICBC
Figure 127. Everything revolves around oil price
Political leadership from all the big nation states (United States, China, India, Russia and Europe) have been
caught out engaging in regime change (Blum 2013 and Boucekkine et al. 2016), economic sanctions and
trade wars to further their own interests (Johnstone 2017). Historically, most wars can be seen as a resource
war in some form. All of the military engagements over the last 30 years can be seen as resource wars.
Consider for a moment how many conflicts and military engagements have been in nation states with oil,
gas and fossilized water? Historically there is a strong precedent for this (in particular the British Empire)
(Paul 2002).
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An example of this is the current war in Syria. The Syrian conflict started as part of the Arab Spring in 2011.
Later the US and Europe got involved with diplomatic and economic sanctions applied against the Syrian
Regime. Both the US and Europe (and other countries) have been involved in air strikes, arms supplies and
troops on the ground, all in opposition to the democratically elected Syrian government (all of which is
violation of international law). The objectives were dual, to defeat the religious mercenary force ISIS and to
achieve regime change with the ousting of Bashar Hafez al-Assad (the 19th and current President of Syria,
holding the office since 17 July 2000). This all happened in conjunction with a ubiquitous Western media
campaign supporting the Western nations actions. The catch cry of this faction was Assad must go!
In 2014 Russia, Iran and China (through the formal invitation of the Syrian government) gave military and
economic support. This has proven to be the turning point of the war. The Russian and Chinese assistance
allowed the Syrian government to make large territory gains and is close to full victory.
There is something not openly discussed in main stream news that is highly relevant to this conflict. For
years there have been two proposed and competing gas pipelines to supply Europe with natural gas, both
of which pass through Syria (Figure 128). One pipeline would send natural gas from Qatar, through Saudi
Arabia, then Syria, to Europe. This pipeline was originally backed by the US, Saudi Arabia and Turkey. The
second pipeline would send natural gas from Iran, then Iraq, through Syria, to Europe. This pipeline was
backed by Iran, Russia and China. Both of these pipelines carry gas extracted from the same massive gas
field (Engdahl 2014).
Figure 128. The two competing gas pipelines passing through Syria to supply Europe
The difference of which pipeline will be built comes down to the decision and choice of the Syrian political
leadership, in particular President Bashar Assad). As Syria is traditionally a Russian ally, the Iranian pipeline
was favored. The choice between the pipelines after intense lobbying, was made a few months before the
Arab Spring started. Looking at the map in Figure 120, it becomes clear why the US, Turkey and EU wish to
oust Assad in regime change and why Russia and Iran would like to keep the current leadership in place. A
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more complete and referenced discussion of the kinds of lobbying that is done over these sorts of resource
infrastructure deals is in Confessions of an Economic Hitman (Perkins 2005).
Russia had control of Europe through inelastic supply of energy. The new gas pipeline had the capacity to
reduce that dependence and take control away from Russia and return it to the US sphere of influence
(Zuesse 2017). The US strategy seems to be to remove Russia as a supply of energy, and insert US business
interests in its place, where the US supplies Europe with gas (Sheppard & Foy 2017). For this to be successful,
regime change in Syria was necessary. Russia, wanting to maintain its strategic dominance over Europe,
acted and has outmaneuvered the US in Syria. Russian dominance over European energy supplies has been
maintained (unless US does something extraordinary in Syria, that war has been lost).
To put this in geopolitical context of why this is happening, it is necessary to examine where Europe currently
gets supply of natural gas. Approximately 30% of European gas consumption is sourced from Russia, with
40-50% of the Russian supply going through Ukraine (Source: http://www.gazprom.com/ ). Russia has held
a dominant hand over Europe in the past by cutting off gas supplies to Ukraine, therefore interrupting the
flow to Europe (this happened in 2009 and in late 2015). In the wake of current U.S. sanctions against Russia,
there has been widespread threats and concerns that Russia will cut off supply to Europe in retaliation as
recently as late last year.
In 2014 Ukraine ousted a pro-Russian president (now seen as US backed regime change, (Milne 2014)). The
current civil war in Ukraine has involved both Russia and the United States. Russia could have lost its only
warm water naval military port, which is situated on the Crimea peninsula in Ukraine. Actions were taken
covertly and overtly and the Crimean people held a referendum to rejoin the Russian federation. Western
media portrayed this as illegal (Harding and Walker 2014), yet the people of Crimea seem to be happier with
the outcome (Rapoza 2015). This highlights the question of what is legal when a political regime change
has happened. It also highlights what happens when the social contract of political leadership is revoked by
the people on the ground. The current Ukraine civil war is now being fought over possession and control of
the coal rich region of Donbass. Actions are being taken covertly and overtly which will probably result in
the Donbass rejoining the Russian federation. The outcome of the Ukraine civil war is that instead of trading
coal with Donbass in their own country, Ukraine is now buying coal from the US (Barker 2017).
Europe has been convinced to apply economic sanctions against Russia (who controls much of Europes
energy needs) and has taken part in a dangerous anti-Russian sentiment (Morgan 2017). This has enormous
capacity to damage the EU economically and threatens EU energy security (Johnstone 2017). NATO, under
US leadership (which has a pre-emptive strike doctrine (Gupta 2008)) has breached almost all of the
agreements made at the end of the cold war with the Soviet Union (Klussmann et al. 2009), and has
expanded its military presence up against Russian borders (Batchelor 2017). What would happen if Russian
political and military leadership actually believed US anti-Russian rhetoric, and remembered the US has a
pre-emptive strike doctrine, while assessing the NATO military buildup along its borders? Europe has also
assisted in the military, and economic actions against Syria. This was clearly a European bid to secure energy
security. Unfortunately it has not worked and Europe now finds itself of the defeated side of this strategic
geopolitical engagement.
Since WWII, United States foreign policy could be described as having the strategic objective to keep Russian
natural resources and Germany technology apart. Recently, Russia, China and Iran have joined in military
and political and economic partnership. The current net positon of the United States is one of very limited
potential (Riise 2016). Europe will be required to make the choice between continuing unconditional support
for the US Petro-dollar banking system and an economic partnership with the Russian/Chinese/Iranian
alliance.
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To have better understanding of how these large nation states interact in the geopolitical arena in the
competing of natural resources, The Grand Chessboard (Brzezinski 1998) and PNAC (Donnerly et al. 2000)
provide a more complete discussion.
10.5.1 Political and Big Business Knowledge of Peak Oil
Peak oil and peak natural resources is a known quantity that has been studied by the governments, military,
banking and private industry sectors of Britain, Germany and the United States. Consider then, how many
times have these nation states been in a military conflict, regime change support (official or unofficial) or
diplomatic sanction against or in a foreign country with large oil reserves in the last 20 years alone. Consider
then, once the implications of peak oil are understood by political leadership, would they allow the voting
public to have this knowledge? The answer is probably not as public confidence would be irreversibly
destroyed. The following are the outcomes of studies done by establishment authority parts of nation state
governments (not an exhaustive list).
1 United States Military

The United States Joint Forces Command regularly (about every two years) issues its perspective on future
trends, shocks, contexts and implications for the national security field. (Munroe 2010)
Amid the multitude of security threats, energy has moved rapidly to the forefront, and it is the oil supply issue
which is the focus of this review. The main oil supply vulnerabilities which were cited in 2008 are reiterated,
thus indicating that there has been no amelioration. It restates that oil and coal will continue to drive the
energy train until 2030, though it warns that in order to do so, the world would need to add roughly the
equivalent of Saudi Arabias current production every seven years.
By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output
could reach nearly 10 MBD (p. 29). This warning is consistent with others which have been issued during the
past 18 months (eg. the repeated verbal statements made by IEA chief economist Fatih Birol, the 2008 WEO,
Paul Stevens of Chatham House, ITPOES, etc.)
2 German Government, Military

A study by a military think tank (Future Analysis department of the Bundeswehr Transformation Center for
the German Military) has analyzed how "peak oil" might change the global economy (Schultz 2010). The
internal draft document shows for the first time how carefully the German government has considered a
potential energy crisis.
The team of authors, led by Lieutenant Colonel Thomas Will, uses sometimes-dramatic language to depict the
consequences of an irreversible depletion of raw materials. It warns of shifts in the global balance of power, of
the formation of new relationships based on interdependency, of a decline in importance of the western
industrial nations, of the "total collapse of the markets" and of serious political and economic crises.
The report has been confirmed as authentic, but, apparently, it isn't finished (in 2010) or approved for public
sharing yet, and it is doubtful that the German military or German government will release it without cutting
and editing some of the dramatic statements and predictions.
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3 British Government
British Department of Energy, in concert with the Bank of England and the British Department of Defense,
has ordered similar-and equally secret-studies on its impact (Rubin 2010). The Department of Energy and
Climate Change (DECC) is also refusing to hand over policy documents about "peak oil" under the Freedom
of Information (FOI) Act requests from journalists (Guardian 2010).
4 British Private Industry

On 10 February 2010 at the Royal Society, six UK companies Arup, Foster + Partners, Scottish and Southern
Energy, Solarcentury, Stagecoach Group and Virgin joined together to launch the second report of the UK
Industry Task-Force on Peak Oil and Energy Security (ITPOES) (Whitehorn 2010). The Task-Force warns that
the UK must not be caught out by the oil crunch in the same way it was with the credit crunch and states
that policies to address Peak Oil must be a priority for the new government. One opinion concludes that the
global peak production rate for oil is likely to occur within the next decade (maybe within 5 years). The net
flow rate data shows that increases in extraction will be slowing down in 2011-13 and dropping thereafter.
Given the long lead-times involved in developing the necessary infrastructure, this trend is unlikely to be
reversed within the next 5 years. There are now serious concerns that the free flow of relatively low cost
oil, which has underpinned OECD countries economic growth since 1945, may not be sustainable for very
much longer. It will be shown in this section that low-cost (under $25/b) oil supplies effectively ended in
early 2005 and are unlikely to return.
The industry is not discovering more giant fields at a sufficient rate.

There are concerns about the levels of reserves quoted by the OPEC countries (which are critical to the
confidence levels associated with future production capacity).
There are indications that underinvestment in the oil industry over the past decade has led to infrastructure
and under-skilling problems that will make it particularly difficult to increase production capacity rapidly
in the short-term.
5 International Energy Agency

Consistently optimistic in the past about future energy supplies, the IEA undertook its own field-by-field
survey of oil reserves in 2008 and has become increasingly concerned about oil supplies. This year the agency
explicitly discussed peak oil for the first time and proclaimed that conventional crude most likely peaked in
2006 (Staniford 2010). It continues to believe unconventional oil from the tar sands, the Arctic and deep-
water fields along with natural gas liquids can make up for declining conventional oil and lead to increases
in world oil production for two more decades. But it warns that this is no longer a foregone conclusion
without the necessary and rather large investment required. In 2008 the chief economist of the IEA, Fatih
Birol, wrote in a guest editorial in the British newspaper The Independent that we should leave oil before it
leaves us.
6 US Dept. of Energy
The report (written for the US Dept. of Energys National Energy Technology Laboratory (DOE, NETL)),
published in February 2005, is more commonly known as the "Hirsch Report." This extraordinary document
examines the time frame and implications of Peak Oil, and looks at what preparations need to be undertaken
at a national level to mitigate its impacts.
The Hirsch Report notes that over the past century the US economy has been shaped by the availability of
low-cost oil and that Peak Oil will present the US with economic losses that will be measured in the trillions
of dollars. According to the report, peaking oil production will be abrupt, providing little time to evolve.
Consequently, the repercussions will be revolutionary. And without massive mitigation, the report warns,
the problem will be pervasive and long-term. Such mitigation efforts will require abundant preparation and
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substantial time, the report warns. Waiting until production peaks would leave the world with a liquid fuel
deficit for 20 years. Initiating a crash program 10 years before peaking leaves a liquid fuels shortfall of a
decade. However, initiating a crash program 20 years before peaking could avoid a world liquid fuels
shortfall.
However, despite being commissioned by the DOE, the Hirsch Report was buried by the department because
it believed the American public could not deal with the idea that its way of life might be threatened. The
DOE simply determined that the public couldn't handle the report because it was just too painful.
What is abundantly clear, is that every nation state and large corporation around the world is studying this
set of problems. Many studies using game theory have been inferred, most of them confidential and kept
away from public scrutiny. Figure 129 is the outcome of one of the publically released studies.
Figure 129. Example of a game theory study done

(Source: Global Risks Report World Economic Forum)
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10.5.2 Geopolitical Probable Outcome
Prognosis - Change of dominant nation state immanent
United States (Dollar) 78 Years so far (1939- ???)

WWI, Great Depression & WWII
British Empire (Pound) 105 Years (1815-1920)
French Revolution & Napoleonic Wars
France (Franc) 95 Years (1720-1815)
Dutch East India Company Decline, Anglo-Dutch Wars
Netherlands (Guilder) 60 Years (1640-1720) Dutch Occupation, Catalan Revolt, Fall of the
Iberian Union, Thirty Years War
Spain (Real de a Ocho) 110 Years (1530-1640)
Portuguese succession crisis, Iberian Union
Portugal (Real) 80 Years (1450-1530)
The Black Plague & Misguided Geopolitics
Venetian Empire (Ducat) 190 Years (1260-1450)
1250
Year
Figure 130. The rise and fall of empires and their reign as the global reserve currency
USA
As can be seen in Figure 130, the transition between one empire and another is usually associated with a
temporal marker of a major military conflict/war, civil insurrection and a severe economic downturn. The
prognosis for the US economy and its geopolitical influence is grim. Currently at the time this report was
written, the fragility of the US financial monetary system had never been weaker and risk of war between
the nation states with nuclear weapons had never been higher (including the Cuban Missile Crisis). It is the
opinion of the author that in some form, the US geopolitical empire associated with the Petro dollar banking
system will crash and become irrelevant to the rest of the world.
The only strategy left to prevent this outcome (destruction of the petro dollar banking system) is for the US
military to go to war, on such a scale that it would provide the global society a distraction from what is
happening to their society system, and accept crushing austerity, food shortages and energy shortages. This
war would almost certainly have to be a global war. Consider US attempts to antagonize Russia in the
European region, or to antagonize China in the South China Sea. To date, this strategy (being aggressively
pushed since 2010) has been out maneuvered by other geopolitical players.
If all the US has left to problem solve with is a large military force, then at some point
they will go and shake someone down.
- Catherine Austin-Fitts (former Assistant Secretary of Housing and Federal Housing Commissioner at
the United States Department of Housing and Urban Development in the first Bush Administration)
China
China may well be the next empire as it already dominates the global industrial output, consumption of
resources, economic activity and it has a culture of strategic thinking. For this to happen though, the
challenges shown in this report need to be meet and resolved by the Chinese government.
Russia
The Russian net position is perhaps the strongest in the world at this time (opportunities vs. challenges).
Russian capability includes vast reserves of oil and gas, nuclear weapon deterrent capability, supplies
approximately 50% of its food needs through small scale domestic organic farming (Benson 2012), will soon
have paid off the Soviet era debt (Moscow Times 2017) and will halve regional debt by 2019 (Moscow Times
2016). Russia also has banned the use of GMOs in its food supply (Sharoykina 2016), and has as a direct
consequence of economic sanctions, become economically more self-reliant. Russian challenges involve
avoiding a large scale military engagement, maintaining existing economic interests, and not over extending
its reach in geopolitical ventures to increase its footprint.
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Europe
The internal and external pressures on Europe make it increasingly difficult for the EU to stay in its current
form. The multiple and simultaneous challenges for the EU parliament are:
Debt saturation
The need for more debt to service existing debt
Economic stagnation
Economic inequality between member states
Internal perceptions and stresses regarding what each nation state should do on behalf of the EU
Differences in political opinion between member states, regarding what economic and resource security
should be and could be
Differences in political opinion between member states, regarding geopolitical relationships outside the EU
The Euro currency has a high probability to default in some form, either due to internal stresses, or due to
exposure to external stresses, from the US, China or global market conditions. From this point there are four
possible outcomes.
1. The European Union disbands and all nation state members return to their independent sovereign
state profile. Their respective currencies may not be able to simply restart. The ECB, in an attempt
at survival, may hold and not release the assets and reserves that were used to back the currencies
of each nation state (gold bullion, foreign currencies, land titles to resource deposits, etc.). Greece
is in this situation as it had given all hard assets and reserves that backed the Drachma currency to
the ECB on joining the union. It is for this reason, the Greek government had no real choice but to
accept the terms of the ECB funded bailouts (where most of the money was given to international
banks, but the Greek people had to take on the debt). This would mean each nation states would
have a hard default and hard reset and would have to rebuild from the foundation up.
2. The European Union splits into three sub-groups that would preferentially trade with each other.
Each group would have a similar economic profile and a similar economic potential. Like would be
placed with like. Three separate but linked EU currencies would be created from the ashes of the
Euro. Reset could be done differently in each bloc.
Northern Europe Bloc Germany, Netherlands, Belgium, France, Austria, Luxembourg,

Denmark, Finland, Sweden
Southern Europe Bloc - Italy, Greece, Portugal, Spain, Ireland
Former Soviet Bloc - Latvia, Bulgaria, Lithuania, Croatia, Cyprus, Malta, Czech Republic,
Poland, Estonia, Romania, Slovakia, Slovenia, Hungary
3. The business model behind Europe transitions from a union focusing on a financial currency to a
union(s) focusing on the sourcing of physical raw materials. The challenges of this report are
understood and a new political alliance is developed around the restructuring the industrial grid
according to a new set of restraints and a new social contract. The raw materials that are required
to do this (steel, copper, aluminum, plastics, ceramics, glass, etc.) become the value sought after.
The member nation states understand that working together it is possible to operate in a fashion that
is more difficult separately. Repurposing existing structures and recycling integrated with
manufacture is the key to this. This would provide a physical reason to come together as opposed a
debt structure being enforced.
4. A combination of the 1, 2 and 3
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10.6 The Big Picture
As can be observed, not only is the original Limits to Growth model form correct, but the data is confirming
the based case scenario. The implications are threefold:
1 The current working paradigm of industrialization, manufacture, food production, waste management to
support human population is unsustainable.
2 Due to current dependency on non-renewable finite natural resource consumption, and projected peak
production of those resources, the current system is approaching limits to operation.
3 There have been a number of temporal marker data signatures that indicate current society is about to
reach those limits, and as a result, transform from a growth based economic to a contraction based
economic.
In macro-scale terms, humanity has been growing exponentially in population, technology capability and
social complexity. As our biology has been instruction us to do at an instinct level, we have been competing
for resources as fast as possible against each other and in the face of environmental adversity. As a
civilization we have gone from one situation where we had no limits or constraints from our environment,
yet seemingly endless natural resources (Figure 131). The scope and scale of human population, our
industrial footprint and the waste plume coming off our civilization was dwarfed by the natural planetary
environment. The planetary environment was robust and stable.
Biosphere, Aerosphere, Hydrosphere & Geosphere all interacting dynamically
Keeping the planet stable as a macro system.
Finance
Natural Population
Resources Industrial
Footprint
Waste plume
Pollution
Figure 131. Interaction between human civilization and its environment 500 years ago
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From that relatively stable circumstance, we have progressed to a new situation where we are starting to
meet resistance and limitations from planetary environment, in conjunction with resource scarcity. While
the quantity and quality of the finite non-renewable natural resources is much smaller in scope and grade
compared to the afore mentioned circumstance, human population, industrial footprint, associated waste
plume, and monetary management system are now all so much larger in scope to what it was beforehand
(Figure 132). What is also different is there is a vastly higher quantity of pollution in the planetary
environment. All living environmental biosystems are in such a state of stress that we are currently following
the profile of the 6th mass extinction of life on earth (Kolbert 2014). What is completely misunderstood by
current human civilization is its true relationship with the planetary environment.
hydrosphere, deforestation, mass die off of flora and fauna, ocean acidity
Biosphere system stress, widespread pollution in aerosphere and
dramatically increased, oxygen levels in aerosphere reduced
Finance
Natural
Resources
Population
Industrial
Footprint
Pollution
Waste Plume
Figure 132. Interaction between human civilization and its environment now
Human civilization has been in this situation before, but on a much smaller scale. Collapses of even advanced
civilizations have occurred many times in the past five thousand years (Diamond 2005, Tainter 1988 and
Hancock 1996), and they were frequently followed by centuries of population and cultural decline and
economic regression. A NASA-funded study studied 32 advanced civilizations that have collapsed before the
current modern industrial civilization, and has drawn some confronting conclusions regarding our current
society (Motesharrei et al. 2014).
Many excellent and useful studies have been done to examine the fundamental building blocks of human
society and how we interact with our environment have been done. Questions examined are of the abstract
and difficult building blocks that define how we got here and where we might go from this point, achieving
the integration, of the simplistic big picture, with the complexity precision of fine detail (Hagens 2012 &
2014, Zeitgeist documentary series). The Zeitgeist is a series of three documentary films released between
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2007 and 2011 and two further filmed presentations (totaling 5 works) that present a number of issues in
human society, as well as proposals for broad social and economic changes (Joseph 2008 & 2011).
One of the major components of the coming transformation is the evolution of human society form in the
social context. All human societies to date have developed in context of unlimited natural resources and the
perception of unlimited growth an expansion. All social forms of management (capitalism, socialism,
communism, oligarchies, monarchies, tribal, etc.) have been based on this fundamental premise of growth
and the isolation of responsibility form our environment. This will change, the question becomes will we
proactively meet the challenge or reactively make the best of things (Taylor 2008).
What is clear is that the current desire to consume based on whim and its underlying requirement of growth
is no longer possible or desired (Hamilton 2003, Hamilton & Denniss 2005). The social construct of
materialism and its support philosophy of capitalism are both required to transform into something else or
be phased out entirely. The difficult question is what should they be replaced with that will allow so many
people live in close proximity to each other and maintain our existing knowledge base.
All of these studies support the basic idea that human civilization, it methods of operation and its strategic
priorities have been defined by its energy source. Our current society is now fully dependent on oil, which
is on the cusp of peak production, then depletion. As it stands, there is no credible replacement for oil or
fossil fuels in general. Conventional political leadership strategy as it shared with the voting public is when
doubt, run about, wave your arms and scream and shout and give war a chance. Clearly, behind closed
doors, conventional political leadership is well aware of the challenges shown in this report and are
developing a response (which is probably unpalatable for the voting public to accept at this time).
As we are now, we are not remotely aware as a society, let alone prepared for this eventually. This
combination of issues coming together in such a short time frame imply that our industrial society is facing
a discontinuity of capability. A period of time where fundamental reset is applied to all sectors of our society
and every aspect is rebuilt. The society and its industrial capability on the other side of the discontinuity will
look fundamentally different to what current society does now.
In this report, the coming change and transition as a discontinuity. The phrase crash has been used by
some analysts to describe this perceived time period. The word does not do what is coming justice. It also
implies a relatively fast process. Instead, prognosis is this transformation of society is so fundamental and
so counter intuitive to our biological instincts, it will last at the very least, multiple decades. There are several
definitions of discontinuity which are of relevance:
A business model discontinuity is a particular development in external environment, where a

corporation loses completely one of its supports for existence in terms of resource, or opportunity,
or a constraint, or a threat is eliminated completely.
An economic market discontinuity is a shift in any of the market forces or their interrelationships
that cannot be predicted by a continuation of historical trends and that, if it occurs, can dramatically
affect the performance of a firm or an industry.
A mechanical discontinuity is a plane of physical weakness where the tensile strength perpendicular
to the discontinuity or the shear strength along the discontinuity is lower than that of the surrounding
soil or rock material.
A discontinuity in geotechnical engineering is a plane or surface that marks a change in physical or

chemical characteristics in a soil or rock mass. A discontinuity can be, for example, a bedding,
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schistosity, foliation, joint, cleavage, fracture, fissure, crack, or fault plane. A boundary event of
fundamental change that is measurably different to preceding units over time.
For Michel Foucault (192684), discontinuity and continuity reflect the flow of history and the fact
that some "things are no longer perceived, described, expressed, characterized, classified, and known
in the same way" from one era to the next. In developing the theory of archaeology of knowledge,
Foucault was trying to analyze the fundamental codes which a culture uses to construct the episteme
or configuration of knowledge that determines the empirical orders and social practices of each
particular historical era. He adopted discontinuity as a positive working tool. Some of the discourse
would be regular and continuous over time as knowledge steadily accumulates and society gradually
establishes what will constitute truth or reason for the time being. But, in a transition from one era
to the next (a discontinuity), there will be overlaps, breaks and discontinuities as society reconfigures
the discourse to match the new environment.
All of these definitions are useful in describing the coming era of human civilization.
Figure 133. The choice before us, both practical and abstract
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Growth of human civilisation, population and complexity of technology
Contraction of scope and

Growth of human civilisation, population and complexity of technology complexity of capability
Agriculture & Animal Machine Transistor, internal Petrochemical, 1880s base level, 1930s
Leather tooling,
Technology Husbandry, Wood craft, Basic manufacture, combustion power, microchip, digital, technology complexity, Rare
Pottery
complexity iron & steel casting Gunpowder electricity, metal alloy communication examples of digital technology
Energy Unknown, Probably very

Resource Manual Labour Wood & Biomass Coal Oil & Gas low energy profile
Strategic Energy Intensive Industrial Financial fiat Economy, Oil Growing food, Basic Industrial
Survival Growing food, Basic Manufacture
priority Manufacture, Real Economy Production Manufacture
Discontinuity
Dominant Nation State Corporate Footprint

Feudalism and Age of Empires
form of Tribal Governance & Corporatism Unknown, New Social
Royal Kingdoms 1200-1914
administration 1914-1945 1945 - now contract
Scarcity of natural
Limitless natural resources & stable global natural environment resources & unstable global
natural environment
Figure 134. Transformation of our industrial society through a discontinuity
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Attempts at what the future could and should look like is studied and examined. In many respects we will
not know what is useful until we get there. The Fan is a European based project that is looking at all aspects
of the coming transformation and is developing mitigation strategies to make the transition as smooth as
possible to the best outcome for human society (Figure 135).
Figure 135. The Fan systems crisis and transformation project

(Source: The Fan http://serwer1488996.home.pl/new-fan/ )
The Venus Project proposes an alternative vision of what the future can be if we apply what we already know
in order to achieve a sustainable new world civilization. It calls for a straight forward redesign of our culture
in which the age-old inadequacies of war, poverty, hunger, debt and unnecessary human suffering are
viewed not only as avoidable, but as totally unacceptable. Anything less will result in a continuation of the
same catalog of problems inherent in today's world.
Figure 136. The Venus Project

(Source: https://www.thevenusproject.com/ )
(Designers and Analysts: Jacque Fresco & Roxanne Meadows)
The Venus project is a long range development. It may take 100-200 years to transition from here to there.
More practical here and now discussions include how we might live in a world with no fossil fuel energy and
be more genuinely sustainable (Mobbs 2005, Hopkins 2008 and Holmgren 2011).
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The many and varied opinions and approaches in developing plans for the future as we pass through the
discontinuity are all relevant, even if they do not agree in form or practice. This diversity gives humanity
strength and resilience, as it is not completely understood the form and nature of the discontinuity.
In geological historical context, the biosystem flora and fauna (plants and animals) food chains had two kinds
of evolution. There was the steady and gradual change over long periods of stability (transitioning from one
geological epoch and another). Then there was the short sharp periods of dramatic change that often
correlates the transition between one geological period and another (the planets response to a global event
like asteroid impact). The life systems look very different on either side of the geological transition (for
example the fossil records of the Jurassic Period vs Cretaceous Period). What allowed the planet climatic
and Biosystems to adjust to the crisis and maintain relative stability was the biodiversity of flora and fauna.
The value of biodiversity is a lesson for current human civilization in understanding our true relationship with
the planetary environment.
Human society also follows similar patterns but at much smaller time scales. Consider the social differences
before and after the Bubonic Black Plague ravaged Europe in the 13th century.
Uncertainty is to be embraced, not seen as a problem. There is no single answer that is universally useful. So
all models and paradigms should be at least considered, and several should be developed and monitored
simultaneously in a way that they can dynamically interact. Understanding of and response to the
discontinuity will become a social stand-alone-complex. At which point, what we want, what we need and
what we do becomes the same thing. We are living through a decisively important era of human evolution.
As such, our actions and our beliefs are most relevant to what kind world our children inherit. Now more so
than ever before.
10.7 Temporal Markers that Diagnose at What Stage of the Transformation is Happening
Now
These are genuinely extraordinary and unusual times. This report has proposed that society is about to
transform. The need to expand and grow in size is approaching the soft limits to growth, where logistics of
operation merely get more difficult. The hard limits are approached when the soft limitations are ignored
and growth if forced. This would result in a hard stop, crash and then contraction. Fortunately human
society is a dynamic interactive self-adjusting system, just the like the natural environment it inhabits.
Our industrial systems also are an interdependent dynamic self-adjusting network. The raw materials we
extract, manufacture, distribution, and the monetary system we use to manage the flow of materials all can
be seen as one system. The data patterns shown in this report could be seen as the dynamic interaction
between these sectors, similar to Figure 137.
Finance Markets & Money
(Fiat Economy must grow at approx. 2% p.a.)
ERoEI Exergy
based limits to
growth in a stable
finite system
Depleting Raw Material Supply

(Non-Renewable Natural Real Economy Work Done
Resources) (Goods & Service)
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The list below is a summary of the major data signatures of structural change looked at in this report. As
can be seen there are five macro groupings of temporal markers (that happen at close to the same time).
2000 Massive peak movement globally of foreign investment FDI (Figure 16)
2000 World Bank Base Metals & Energy Indices merge for the first time (Figure 27)
Group A
2000/2001 Mining Productivity Index in Australia peaks and declines (Figure 28)
2000-02 Dotcom Bubble bursting
2000 Financial derivatives markets deregulated
2002 World Bank Base Metals Index and Energy Index increase sharply (Figure 27)
2005 The supply of conventional crude oil became inelastic (Figure 17)
2005 The production of conventional crude oil plateaued (Figure 18)
2005 Peak driving in the US (Figure 66)
Group B
2005 Peak of U.S. Net Imports of Crude Oil and Petroleum Products (Figure 67)
2005-08 Supply and demand for oil separate (Figure 19)
2005 Peak and decline of US crude oil imports of petroleum products (Figure 67)
2005 Massive blowout in the cost of metals (Figure 23)
2005-06 Energy consumption per captia in EU-28 peaks and contracts (Figure 10)
2005 Peak and then decline of third industrial revolution (IR3) (Figure 74)
2007 Natural resource consumption in EU-28 peaks and contracts (Figure 12)
2008 Baltic Dry Index peaked to an all-time high then crashed (Figure 21)
2008 Price of oil peaks then crashes $147USD/bbl - $48USD/bbl (Figure 20)
Group C
2008 Global Financial Crisis (Figure 15)

2008 US & EU industrial output crashes and never fully recovers (Figure 11)
2008 EU GDP crashes and never fully recovers (Figure 13)
2008 Caterpillar retail sales crash hard in 2008 (Figure 24)
2008 QE1 by US Federal Reserve starts (Figure 20)
2009 Raw material mining boom of Southern Hemisphere starts (Figure 25)
2009 Caterpillar retail sales recover sharply in 2009 (Figure 24)
Group D
2009 Peak Chinese industrial output (Figure 36)
2011 Current mining crash for Southern Hemisphere starts (Figure 25)
2011 Caterpillar retail sales crash hard 2011 (Figure 24)
2011 QE2 by US Federal Reserve starts (Figure 20)
2013 Peak in global per capita energy consumption (Figure 47)

2014 Price of oil crashes (Figure 20)
Group E
2014 96% reserve downgrade of Monterey Oil Shale deposit

2014 QE3 finishes (Figure 20)
2014 Peak Global GDP (Figure 52)
2015 Possible total peak oil production (Figure 76)
2016 Feb 2016 Baltic Dry Index crashes to 290 (lowest value to date) (Figure 22)
Group A - first of the conventional mining of metals blowout signature cluster

Group B - first of the peak oil blowout signature cluster
Group C - first divergence blowout between the real and fiat economies signature cluster
Group D - outcomes success and then failure of the first QE strategy signature cluster
Group E peak and then contraction of the industrial output of the real economy signature cluster
118
As the system hits a point where internal stress overrides local capacity to adapt, it blows out into one of
these signatures. As everything is dynamically connected, the impact of the blowout ripples to other parts
of the system that also blowout. Much like a natural weather storm, the ripples continue until the internal
stress is relieved temporarily. As the cause of the stress is fundamental and unresolved, stress builds again
to another cluster of blowouts.
Group B and Group D have a severe economic downturn, preceded by a massive movement of foreign
investment capital (those investors on the inside track know what is coming). Group C contains the GFC and
could be seen as a blowout from the signals in Group B. Group B is energy based and has the metal price
embedded in it. Until Group B, energy and easy finance could solve all problems and remove all bottlenecks.
Between Group B and Group C, was an era of reckless exuberance with no situational awareness of what is
happening. Between Group C and Group D was the historically unprecedented Quantitative Easing
programs. The success and then failure of which resulted in Group D. Group A could be a fore shock warning
of Group C, and/or a structural movement of the whole system that defines the timing and form of its final
blowout. Group E is the stalling of the real economy as QE3 ends.
These data signatures, while large in their own right, are part of a larger pattern that suggests this current
system of industrial operation is indeed hitting the soft limits to growth. This implies that the short and
medium term future may be challenging. Transformation is not just coming, it is nearly here.
If peak industrial output has indeed be reached, what is next?
According to the limits to growth model (Figure 49), the Peak in Industrial Output per Capita precedes by a
few years a Peak in Services per Capita, which in turn precedes a Peak in Food Production per Capita. One
again highlighting the need to model human population against all other things.
Peak in Industrial Output

per Capita
a few years Peak in services given to

between society per capita
a few years Peak in food production

between per Capita
Figure 138. Progression of peaks in limits to growth scenario
In this working environment, the follow signatures could be seen that will influence what can be done:
Financial capital flight from conventional markets into perceived safe havens. There will be no safe
havens.
Drawing upon some of the conclusions of this report, another financial crisis will trigger, this time
initiating a chain reaction that will lead to a systemic sovereign debt default.
Financial stock markets would crash. Record single day fall in index values, record volumes of
monetary value wiped out. This would start in either US or EU or Japan or China, then ripple out to
all other markets in the time frame of a few days.
119
The banking credit system will paralyze. Credit will no longer be available. Electronic funds transfer
will no longer be available.
Bank runs. Banks will cease releasing cash. A banking holiday would be declared.
Stock markets would cease trading.
Cyprus style bail in strategies would be applied by banks with the full backing of government.
QE4 would be started with a legally creative mandate to work towards an unobtainable goal.
Energy shortages, in particular of oil and petroleum based products.
Just-in-time supply system will be traumatized and normal delivery of goods and services will be
fragmented.
Essential goods and services will be rationed
Political leadership starts behaving in context of Continuity of Governance (COG) and in the case of
the United States, Continuity of Operations (COOP).
While it is probable that all of this will start with a financial crisis in some form, this is an environment where
the unexpected and desperately creative strategies will be attempted. In 2008, the GFC looked like the
massive blowout is being described above. So much so, that the predictive models and graphics that were
used to understand the fallout of the GFC are being used here now, with almost no corrections needed
(Figures 120, 121 and 122). The response of Federal Reserve Bank in the unprecedented volume of printing
of money, and corresponding reduction of interest rates was unforeseen by most analysts at the time. The
same could happen again. Something unexpected and from left field could be applied by monetary
establishment.
Or a Black Swan Event could change the rules completely, making all predictions not useful.
What is required by all concerned is to be self-aware of capability, risk and responsibility, situationally aware,
and above all tactically flexible.
120
11.0 Recommendations for ACME Corporation
Recommendations to ACME Corporation in context of the challenges presented in this report are as follows:
Study the basic thesis and challenges presented in this report. Get ACME staff in multiple
departments, to test the ideas presented to determine their validity. Then further develop the ideas
into a directly ACME relevance (risk mitigation of business model). Establish multiple independent
hypothesis testing in separate parts of the company. Once done appropriately, communicate the
results to key executive and operational management. Understanding of the issues and a situational
awareness, linked to flexibility of response is the key for ACME to navigate these difficult challenges,
and in some cases strategically prosper after evolution.
Re-assess the ACME business model in context of peak industrial output, contracting real economy,
energy supply shocks and fragmented monetary system. There are vulnerabilities and great strategic
opportunities here. In the short term, the service of waste remove is a vital service to society that
will always be valued by all stake holders. In the medium and long term, supply of metals and plastics
from primary sources would become more difficult and logistically unreliable. Recycling of waste
could be seen as a local source of metals that is more reliable and not subject to geopolitical
disruption of long logistical supply lines. Some metals and alloys will become very valuable and can
only be sourced through recycling. Take steps to start to evolve the ACME corporate culture into
something that is self-aware and situational aware in context to these challenges.
Now During Discontinuity
Metal price is the only metric Metals and minerals residues local to EU will now
Quantity is more important that quality be at a much higher premium value
Recycling not seen as that relevant. Waste Time restraints removed
removal is really how industry sees these Logistical restraints applied
activities Goods supply grid routinely disrupted
Market environment profiled and dominated by Energy restraints applied
reliable Just-in-Time goods supply grid Power grid electrical supply routinely disrupted
Reliable electronic funds transfer Electricity from power grid dirty with spikes and
dropouts. Black outs and brown outs routine
Potable water restrictions
Who the metal purchaser is now more strategically
relevant
New business model for a contracting real economy

More sophisticated technology in Fluid and volatile market
characterising, sorting and processing
Alliances with sister corporations

Suez Executive who directly support and facilitate
Analytics based information complex
Leadership Suez business model
Personnel who know how to use tech Established boundaries with

and information systems competitors
Figure 139. The new ACME internal technical capability interacting with a fluid and volatile market
121
Consolidate ACME business footprint around critical company services. Do not expand company size
at this time, or if this is done, do so in context of the risks presented in this report. Consider
balkanization of the company to mitigate risk through containment of threats (For example form a
sub-division entity within ACME that owns all bad debt and troubled assets. If the market crashes,
that entity could be jettisoned to maintain the integrity of the rest of the company).
Develop sophisticated situation awareness intelligence data collection and analysis methods for
market(s) and stakeholders, associated with the challenges presented in this report. Use the
analytics data management approach to develop ACME information technology capability. Analytics
is the discovery, interpretation, and communication of meaningful patterns in data (Davenport &
Harris 2007). Especially valuable in areas rich with recorded information, analytics relies on the
simultaneous application of statistics, computer programming and operations research to quantify
performance. Use these methods to manage internal capability and to navigate external logistical
problems. Maneuver around problems before they are rate determining step bottlenecks. Educate
and train ACME staff in how to use this new system to full effect. This system would require top shelf
cyber security resilience.
Figure 140. Analytics data analysis strategy
Develop and evolve a management culture that is flexible in response to changing conditions. Use
the proposed information system linked to key management staff to reduce the effective response
(tactical and strategic) time to a change of business environment.
Develop more sophisticated characterization and sorting technology. Waste streams will become
more valuable. It becomes more worthwhile to separate out the different kinds of waste into like
with like. The right residue is then put into the right process stream. This has to be done before
pyrometallurgy or hydrometallurgy. So characterization methods of all kinds (quantitative and
qualitative, real time and offline) used in a streamlined and effective fashion to identify waste
streams and sort them needs to be developed. Effective sorting will require effective
characterization, but this needs to be managed by an effective data management system (and
operational staff have to be capable of using it).
122
Develop a more complex stockpile system where more stockpiles of smaller volumes are
characterized and monitored. Each stockpile would have a different product, with a logistical block-
chain of characterization data, linked to and administered by ACME information systems.
Develop more sophisticated and strong lines of communication between the operationally important
parts of the company. A higher level of quality of information transfer of operational data,
characterization data and market conditions. A live and dynamic conduit of communication between
staff (who understand the challenges presented in this report), from the executive board to
operational management (at the plant level).
Evolve the ACME footprint to become an industrial self-sufficient entity. Have influence and control
more aspects of what is necessary for ACME to operate, as opposed to employing contractors. For
example own and operate a wind turbine array that has been designed and commissioned to power
ACME industrial plant operations.
Establish links and alliances with other industrial groups who would support ACME business model.
ACME needs a mandate to collect waste and it needs customers to sell products to. Establish alliances
and partnerships with corporations that could fill these roles. A corporation that operates smelting
facilities to produce metal ingots/products could be one such example. A plastics manufacturer is
another example. To be useful, those corporations would have to go through a similar process as
ACME is, to meet the challenges presented in this report.
Do not decommission the incinerator plants in Germany. There may be an energy surplus for a very
short time but in 2-5 years, there will be an energy shortage. The heating oil the can be made could
become strategically valuable. Prepare accordingly.
Consider a change in how these incinerators are to be used. At this time, energy is cheap and
abundant. In an energy shortage scenario, all waste streams become revalued. Some plastics and in
particular rubber could be treated with pyrolysis catalytic cracking, to produce a fuel oil that can be
sold as heating oil, or further treated to create diesel fuel. Currently rubber is disposed of by
crumbing it and selling it to the construction industry as a filler for concrete. Each tyre on a civilian
automobile car has 7 liters of oil in it. Some of this could be recovered. To do so in a market of
energy shortage, produces a highly valuable product.
Prepare ACME to operate in times of logistical crisis. Loss of the internet, or the banking credit system
shutting down for periods of time are highly probable. Have all information and necessary resources
contained on ACME property. Develop communication lines to be resilient in times of disruption.
For example, have land line telephones that plug directly into the telephone network (what was
standard in the 1990s) as opposed to cordless hand sets and mobile phones. The landline network
can run on the power supplied directly through the tele-cable if the electrical power shuts down. The
cordless units and mobile network would cease to operate without electricity.
Reduce debt levels. Assess who ACME is in debt to and what assets have been used as collateral for
those debts. Based on new situational awareness of a changing business market, rank those debts
in terms of importance. Resolve the important debts first.
Based on the refitted business model, assess what company services are vital for operation. Ensure
that what is required for the resilient operation of these services is internally resources and
supported to a much longer time period of self-sufficiency (recommended 6-12 months as opposed
123
to what it is now). For example, spare parts for maintenance reserves, in large enough quantities to
service operation for 12 months are held at each operating plant (instead of purchasing them as they
are needed).
Maintain enough cash reserves to pay staff wages for an extended period of time (6-12 months). If
there is a cash flow disruption, ACME staff can and will still get paid. Once this is achieved, inform
the staff of this. Thus when logistical difficulties arise, those staff will still come to work.
Diversify and expand currency holdings. In times of disruption cash is highly desirable. As both the
conventional monetary system and the banking electronic transfer credit system is fragile and
vulnerable, make arrangements for monetary resilience. Keep in a number of secure vaults (dont
put all eggs in a single basket) on ACME owned (outright, legally, on a property not associated with
debt of any kind) property cash of all kinds of currencies, gold bullion and silver bullion. Invest a
portion of capital in a range of cryptocurrencies, with the understanding of the volatility of these
exchanges. Have Bitcoin feature amongst reserves. Link authority to use these reserves to the ACME
executive board only.
Consider developing the capability to cast metal ingots of precious metals at a small scale internally.
ACME recycles waste streams with precious metals in them. Instead of selling them off to an external
buyer, ACME could develop their own currency mint.
124
12.0 Further Work
This report is just one report of four. To complete this work, there are three sister reports to accompany it.
This report describes the fragmentation of the existing system of exponential growth. This is work in
progress.
Environmental fallout of
Fragmentation of the existing industrialisation.
existing system of Biosystem stress
exponential growth. response to widespread
Peak industrial output as industrial pollution.
a consequence of Consequence of human
depletion of finite mom- industrial systems
renewable natural interacting with planetary
resources. environmental Earth
systems.
Transformation and
evolution of human
civilisation. The start of
the discussion for steps
and stages for the way
forward
The need for evolution of

social constructs. The
phasing out of
materialism and
capitalism. The need to
be more self aware as a
society. Requirement for
better stewardship of and
authentic relationship
with the planetary
environment.
Figure 141. Work in progress
125
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Yellen, J., (2017 June) 103rd Annual Report 2016 Federal Reserve. Board of Governors of the Federal
Reserve System.
https://www.federalreserve.gov/publications/files/2016-annual-report.pdf
Zittel, W, and Schindler, J., (2007) C R U D E O I L The Supply Outlook Energy Watch Group, Ludwig-
Bolkow Systemtechnik
Zittel, W. et al, (March 2013) Fossil and Nuclear Fuels the supply outlook Energy Watch Group,
Ludwig-Bolkow Systemtechnik
Zuesse, E., (2017, July 1st) The Economic Motive for Americas Current Wars,
Strategic Culture Foundation online journal
https://www.strategic-culture.org/news/2017/07/01/economic-motive-for-america-current-wars.html
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4.0 Glossary of Terms
Analytics - is the discovery, interpretation, and communication of meaningful patterns in data. Especially valuable in areas rich
with recorded information, analytics relies on the simultaneous application of statistics, computer programming and operations
research to quantify performance. Organizations may apply analytics to business data to describe, predict, and improve business
performance. Specifically, areas within analytics include predictive analytics, prescriptive analytics, enterprise decision
management, descriptive analytics, cognitive analytics, retail analytics, store assortment and stock-keeping unit optimization,
marketing optimization and marketing mix modelling, web analytics, call analytics, speech analytics, sales force sizing and
optimization, price and promotion modelling, predictive science, credit risk analysis, and fraud analytics. Since analytics can
require extensive computation (see big data), the algorithms and software used for analytics harness the most current methods
in computer science, statistics, and mathematics.
Anglosphere (The) is the remnants of the British Empire. The Anglosphere is a set of English-speaking nations with similar
cultural roots, based upon populations originating from the nations of the British Isles (England, Wales, Scotland, Northern Ireland,
and Ireland), which today maintain close political and military cooperation. While the nations included in different sources vary,
the Anglosphere is usually not considered to include all countries where English is an official language, although the nations that
are commonly included were all once part of the British Empire. In its most restricted sense, the term covers Australia, Canada,
Ireland, New Zealand, the United Kingdom, and the United States, which in the post-British Empire era maintain a close affinity of
cultural, familial, and political links with one another.
Anthracite coal - The highest rank of coal; used primarily for residential and commercial space heating. It is a hard, brittle, and
black lustrous coal, often referred to as hard coal, containing a high percentage of fixed carbon and a low percentage of volatile
matter. The moisture content of fresh-mined anthracite generally is less than 15 percent. The heat content of anthracite ranges
from 22 to 28 million Btu per ton on a moist, mineral-matter-free basis. The heat content of anthracite coal consumed in the
United States averages 25 million Btu per ton, on the as-received basis (i.e., containing both inherent moisture and mineral
matter). Note: Since the 1980's, anthracite refuse or mine waste has been used for steam electric power generation. This fuel
typically has a heat content of 15 million Btu per ton or less.
Arab Spring (The) - also referred to as Arab revolutions, was a revolutionary wave of both violent and non-violent demonstrations,
protests, riots, coups and civil wars in North Africa and the Middle East that began on 17 December 2010 in Tunisia with the
Tunisian Revolution. This was the evolution and rebranding of the Colour Revolutions.
Arctic drilling - or drilling in arctic environments are characterized by extreme cold winters where surface temperature can drop
below 50 C (58 F). The five Arctic regions of Russia, Alaska, Norway, Greenland, and Canada hold a tremendous potential for
both discovered and undiscovered reserves of Oil and Gas. The north area of the Arctic Circle contains an estimated 90 billion
barrels of undiscovered, technically recoverable oil, 1,670 trillion cubic feet of technically recoverable natural gas, and 44 billion
barrels of technically recoverable natural gas liquids.
Asphalt - A dark brown-to-black cement-like material obtained by petroleum processing and containing bitumens as the
predominant component; used primarily for road construction. It includes crude asphalt as well as the following finished products:
cements, fluxes, the asphalt content of emulsions (exclusive of water), and petroleum distillates blended with asphalt to make
cutback asphalts. Note: The conversion factor for asphalt is 5.5 barrels per short ton.
Aviation gasoline (finished) - A complex mixture of relatively volatile hydrocarbons with or without small quantities of additives,
blended to form a fuel suitable for use in aviation reciprocating engines. Fuel specifications are provided in ASTM Specification D
910 and Military Specification MIL-G-5572. Note: Data on blending components are not counted in data on finished aviation
gasoline.
Baltic Dry Index (The) The Baltic Dry Index (BDI) is an economic indicator issued daily by the London-based Baltic Exchange. Not
restricted to Baltic Sea countries, the index provides "an assessment" of the price of moving the major raw materials by sea.
Taking in 23 shipping routes measured on a timecharter basis, the index covers Handysize, Supramax, Panamax, and Capesize dry
bulk carriers carrying a range of commodities including coal, iron ore and grain.
Bank Run - A bank run (also known as a run on the bank) occurs when in a fractional-reserve banking system (where banks normally
only keep a small proportion of their assets as cash), a large number of customers withdraw cash from deposit accounts with a
financial institution at the same time because they believe that the financial institution is, or might become, insolvent; and keep
the cash or transfer it into other assets, such as government bonds, precious metals or gemstones. When they transfer funds to
another institution it may be characterised as a capital flight. As a bank run progresses, it generates its own momentum: as more
people withdraw cash, the likelihood of default increases, triggering further withdrawals. This can destabilize the bank to the point
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where it runs out of cash and thus faces sudden bankruptcy. To combat a bank run, a bank may limit how much cash each customer
may withdraw, suspend withdrawals altogether, or promptly acquire more cash from other banks or from the central bank, besides
other measures.
Banking panic (or bank panic) - is a financial crisis that occurs when many banks suffer runs at the same time, as people suddenly
try to convert their threatened deposits into cash or try to get out of their domestic banking system altogether.
Barrel - A unit of volume equal to 42 U.S. gallons. The unit of measure to describe volumes of oil.
bbl - The abbreviation for barrel(s).
bbl/d - The abbreviation for barrel(s) per day.
bbl/sd - The abbreviation for barrel(s) per stream day.
bcf - The abbreviation for billion cubic feet.
Base gas - The quantity of natural gas needed to maintain adequate reservoir pressures and deliverability rates throughout the
withdrawal season. Base gas usually is not withdrawn and remains in the reservoir. All natural gas native to a depleted reservoir
is included in the base gas volume.
Biodiesel - A fuel typically made from soybean, canola, or other vegetable oils; animal fats; and recycled grease. It can serve as a
substitute for petroleum-derived diesel or distillate fuel. For EIA reporting, it is a fuel composed of mono-alkyl esters of long chain
fatty acids derived from vegetable oils or animal fats, designated B100, and meeting the requirements of ASTM (American Society
for Testing materials) D 6751.
Biofuels - Liquid fuels and blending components produced from biomass feedstocks, used primarily for transportation. Essentially
ethanol and biodiesel.
Biomass - Organic non-fossil material of biological origin constituting a renewable energy source.
Biomass-based liquid supplies - (BtL or BMtL) is a multi-step process of producing synthetic hydrocarbon fuels made from biomass
via a thermochemical route. Such a fuel has been called grassoline.
Biomass gas (Biogas) - A medium Btu gas containing methane and carbon dioxide, resulting from the action of microorganisms on
organic materials such as a landfill.
Biomass power generation (Bioenergy) - Bioenergy is renewable energy made available from materials derived from biological
sources. Biomass is any organic material which has stored sunlight in the form of chemical energy. As a fuel it may include wood,
wood waste, straw, manure, sugarcane, and many other by-products from a variety of agricultural processes. By 2010, there was
35 GW (47,000,000 hp) of globally installed bioenergy capacity for electricity generation, of which 7 GW (9,400,000 hp) was in the
United States. In its most narrow sense it is a synonym to biofuel, which is fuel derived from biological sources. In its broader sense
it includes biomass, the biological material used as a biofuel, as well as the social, economic, scientific and technical fields
associated with using biological sources for energy. This is a common misconception, as bioenergy is the energy extracted from
the biomass, as the biomass is the fuel and the bioenergy is the energy contained in the fuel. There is a slight tendency for the
word bioenergy to be favoured in Europe compared with biofuel in America.
Bitumen - A naturally occurring viscous mixture, mainly of hydrocarbons heavier than pentane, that may contain sulphur
compounds and that, in its natural occurring viscous state, is not recoverable at a commercial rate through a well.
Bituminous coal - A dense coal, usually black, sometimes dark brown, often with well-defined bands of bright and dull material,
used primarily as fuel in steam-electric power generation, with substantial quantities also used for heat and power applications in
manufacturing and to make coke. Bituminous coal is the most abundant coal in active U.S. mining regions. Its moisture content
usually is less than 20 percent. The heat content of bituminous coal ranges from 21 to 30 million Btu per ton on a moist, mineral-
matter-free basis. The heat content of bituminous coal consumed in the United States averages 24 million Btu per ton, on the as-
received basis (i.e., containing both inherent moisture and mineral matter).
BOE - Barrels of Oil Equivalent (used internationally)
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Boiler - A device for generating steam for power, processing, or heating purposes; or hot water for heating purposes or hot water
supply. Heat from an external combustion source is transmitted to a fluid contained within the tubes found in the boiler shell. This
fluid is delivered to an end-use at a desired pressure, temperature, and quality.
Boiler fuel - An energy source to produce heat that is transferred to the boiler vessel in order to generate steam or hot water.
Fossil fuel is the primary energy source used to produce heat for boilers.
Black Swan Event - The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a
surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. The term is based
on an ancient saying which presumed black swans did not exist, but the saying was rewritten after black swans were discovered
in the wild. The theory was developed by Nassim Nicholas Taleb to explain:
The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal
expectations in history, science, finance, and technology.
The non-computability of the probability of the consequential rare events using scientific methods (owing to the very
nature of small probabilities).
The psychological biases which blind people, both individually and collectively, to uncertainty and to a rare event's
massive role in historical affairs.
Blast-furnace gas - The waste combustible gas generated in a blast furnace when iron ore is being reduced with coke to metallic
iron. It is commonly used as a fuel within steel works.
Blowout (Oil gusher) - A blowout is the uncontrolled release of crude oil and/or natural gas from an oil well or gas well after
pressure control systems have failed. Modern wells have blowout preventers intended to prevent such an occurrence. Prior to
the advent of pressure control equipment in the 1920s, the uncontrolled release of oil and gas from a well while drilling was
common and was known as an oil gusher, gusher or wild well. An accidental spark during a blowout can lead to a catastrophic oil
or gas fire.
Breeder Reactor (Fast) - is a nuclear reactor that generates more fissile material than it consumes. These devices achieve this
because their neutron economy is high enough to breed more fissile fuel than they use from fertile material, such as uranium-238
or thorium-232. Breeders were at first found attractive because their fuel economy was better than light water reactors, but
interest declined after the 1960s as more uranium reserves were found, and new methods of uranium enrichment reduced fuel
costs.
Brent Crude - is a major trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil
worldwide. This grade is described as light because of its relatively low density, and sweet because of its low sulphur content.
Brent Crude is extracted from the North Sea and comprises Brent Blend, Forties Blend, Oseberg and Ekofisk crudes (also known
as the BFOE Quotation).
Bretton Woods system - of monetary management established the rules for commercial and financial relations among the United
States, Canada, Western Europe, Australia and Japan after the 1944 Bretton-Woods Agreement. The Bretton Woods system was
the first example of a fully negotiated monetary order intended to govern monetary relations among independent states. The
chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the
exchange rate ( 1 percent) by tying its currency to gold and the ability of the IMF to bridge temporary imbalances of payments.
Also, there was a need to address the lack of cooperation among other countries and to prevent competitive devaluation of the
currencies as well. Preparing to rebuild the international economic system while World War II was still raging, 730 delegates from
all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United
Nations Monetary and Financial Conference, also known as the Bretton Woods Conference. Setting up a system of rules,
institutions, and procedures to regulate the international monetary system, these accords established the International Monetary
Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group.
The United States, which controlled two thirds of the world's gold, insisted that the Bretton Woods system rest on both gold and
the US dollar. Soviet representatives attended the conference but later declined to ratify the final agreements, charging that the
institutions they had created were "branches of Wall Street." These organizations became operational in 1945 after a sufficient
number of countries had ratified the agreement.
British thermal unit (BTU) - The quantity of heat required to raise the temperature of 1 pound of liquid water by 1 degree
Fahrenheit at the temperature at which water has its greatest density (approximately 39 degrees Fahrenheit).
Btu conversion factor - A factor for converting energy data between one unit of measurement and British thermal units (Btu). Btu
conversion factors are generally used to convert energy data from physical units of measure (such as barrels, cubic feet, or short
tons) into the energy-equivalent measure of Btu.
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Btu per cubic foot - The total heating value, expressed in Btu, produced by the combustion, at constant pressure, of the amount
of the gas that would occupy a volume of 1 cubic foot at a temperature of 60 degrees F if saturated with water vapor and under a
pressure equivalent to that of 30 inches of mercury at 32 degrees F and under standard gravitational force (980.665 cm. per sec.
squared) with air of the same temperature and pressure as the gas, when the products of combustion are cooled to the initial
temperature of gas and air when the water formed by combustion is condensed to the liquid state.(Sometimes called gross heating
value or total heating value.)
BTX - The acronym for the commercial petroleum aromatics-- benzene, toluene, and xylene.
Bubble (economic or asset) - An economic bubble or asset bubble (sometimes also referred to as a speculative bubble, a market
bubble, a price bubble, a financial bubble, a speculative mania, or a balloon) is trade in an asset at a price or price range that
strongly exceeds the asset's intrinsic value.
Byproduct - A secondary or additional product resulting from the feedstock use of energy or the processing of non-energy
materials. For example, the more common byproducts of coke ovens are coal gas, tar, and a mixture of benzene, toluene, and
xylenes (BTX).
Calorific value (or content) - The heating value (or energy value or calorific value) of a substance, usually a fuel or food (see food
energy), is the amount of heat released during the combustion of a specified amount of it. ... It is measured in units of energy per
unit of the substance, usually mass, such as: kJ/kg, kJ/mol, kcal/kg, Btu/lb.
Canadian syncrude - Syncrude Canada Ltd. is one of the world's largest producers of synthetic crude oil from oil sands and the
largest single source producer in Canada.
Canadian tar sands Often referred to as the massive deposits of oil sands or tar sands in Alberta Canada. See oil sands
Capital investment - The term Capital Investment has two usages in business. First, capital investment refers to money used by a
business to purchase fixed assets, such as land, machinery, or buildings. Secondly, capital investment refers to money invested in
a business with the understanding that the money will be used to purchase fixed assets, rather than used to cover the business's
day-to-day operating expenses.
Capital expenditure or capital expense (CAPEX) - is the money a company spends to buy, maintain, or improve its fixed assets,
such as buildings, vehicles, equipment, or land. It is considered a capital expenditure when the asset is newly purchased or when
money is used towards extending the useful life of an existing asset, such as repairs to a buildings roof.
Carbon black - An amorphous form of carbon, produced commercially by thermal or oxidative decomposition of hydrocarbons
and used principally in rubber goods, pigments, and printer's ink.
Carbon dioxide emissions - There are both natural and human sources of carbon dioxide emissions. Natural sources include
decomposition, ocean release and respiration. Human sources come from activities like cement production, deforestation as well
as the burning of fossil fuels like coal, oil and natural gas.
Catalytic cracking - The refining process of breaking down the larger, heavier, and more complex hydrocarbon molecules into
simpler and lighter molecules. Catalytic cracking is accomplished by the use of a catalytic agent and is an effective process for
increasing the yield of gasoline from crude oil. Catalytic cracking processes fresh feeds and recycled feeds.
Catch-22 - is a paradoxical situation from which an individual cannot escape because of contradictory rules. The term was coined
by Joseph Heller, who used it in his 1961 novel Catch-22. Catch-22s often result from rules, regulations, or procedures that an
individual is subject to but has no control over because to fight the rule is to accept it. Another example is a situation in which
someone is in need of something that can only be had by not being in need of it. (A bank will never issue someone a loan if they
need the money.) One connotation of the term is that the creators of the "catch-22" situation have created arbitrary rules in order
to justify and conceal their own abuse of power.
Central Bank - A central bank, reserve bank, or monetary authority is an institution that manages a state's currency, money supply,
and interest rates. Central banks also usually oversee the commercial banking system of their respective countries. In contrast to
a commercial bank, a central bank possesses a monopoly on increasing the monetary base in the state, and usually also prints the
national currency, which usually serves as the state's legal tender. The main function of a central bank is to control the nation's
money supply (monetary policy), through active duties such as managing interest rates, setting the reserve requirement, and
acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis. Central banks usually also
have supervisory powers, intended to prevent bank runs and to reduce the risk that commercial banks and other financial
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institutions engage in reckless or fraudulent behaviour. Central banks in most developed nations are institutionally designed to be
independent from political interference. Still, limited control by the executive and legislative bodies usually exists.
Chain reaction (A) - is a sequence of reactions where a reactive product or by-product causes additional reactions to take place.
In a chain reaction, positive feedback leads to a self-amplifying chain of events. Chain reactions are one way in which systems
which are in thermodynamic non-equilibrium can release energy or increase entropy in order to reach a state of higher entropy.
For example, a system may not be able to reach a lower energy state by releasing energy into the environment, because it is
hindered or prevented in some way from taking the path that will result in the energy release. If a reaction results in a small energy
release making way for more energy releases in an expanding chain, then the system will typically collapse explosively until much
or all of the stored energy has been released. A macroscopic metaphor for chain reactions is thus a snowball causing a larger
snowball until finally an avalanche results ("snowball effect"). This is a result of stored gravitational potential energy seeking a
path of release over friction.
Chernobyl disaster (The) - also referred to as the Chernobyl accident, was a catastrophic nuclear accident. It occurred on 26 April
1986 in the No.4 light water graphite moderated reactor at the Chernobyl Nuclear Power Plant near Pripyat, in what was then
part of the Ukrainian Soviet Socialist Republic of the Soviet Union (USSR). The event occurred during a late-night safety test which
simulated a station blackout power-failure and in which safety systems were deliberately turned off. A combination of inherent
reactor design flaws and the reactor operators arranging the core in a manner contrary to the checklist for the test, eventually
resulted in uncontrolled reaction conditions. Water flashed into steam generating a destructive steam explosion and a subsequent
open-air graphite fire. This fire produced considerable updrafts for about nine days. These lofted plumes of fission products into
the atmosphere. The estimated radioactive inventory that was released during this very hot fire phase approximately equalled in
magnitude the airborne fission products released in the initial destructive explosion. Practically all of this radioactive material
would then go on to fall-out/precipitate onto much of the surface of the western USSR and Europe. The Chernobyl accident
dominates the energy accidents sub-category, of most disastrous nuclear power plant accident in history, both in terms of cost
and casualties. It is one of only two nuclear energy accidents classified as a level 7 event (the maximum classification) on the
International Nuclear Event Scale.
Club of Rome (The) - is a global think tank that deals with a variety of international issues, including the world economic system,
climate change, and environmental degradation. Founded in 1968 at Accademia dei Lincei in Rome, Italy, the Club of Rome
describes itself as "a group of world citizens, sharing a common concern for the future of humanity." It consists of current and
former heads of state, UN bureaucrats, high-level politicians and government officials, diplomats, scientists, economists and
business leaders from around the globe.
Coal - A readily combustible black or brownish-black rock whose composition, including inherent moisture, consists of more than
50 percent by weight and more than 70 percent by volume of carbonaceous material. It is formed from plant remains that have
been compacted, hardened, chemically altered, and metamorphosed by heat and pressure over geologic time.
Coalbed methane - Coalbed methane (CBM or coal-bed methane), coalbed gas, coal seam gas (CSG), or coal-mine methane (CMM)
is a form of natural gas extracted from coal beds. In recent decades it has become an important source of energy in United States,
Canada, Australia, and other countries. The term refers to methane adsorbed into the solid matrix of the coal. It is called 'sweet
gas' because of its lack of hydrogen sulfide. The presence of this gas is well known from its occurrence in underground coal mining,
where it presents a serious safety risk. Coalbed methane is distinct from a typical sandstone or other conventional gas reservoir,
as the methane is stored within the coal by a process called adsorption. The methane is in a near-liquid state, lining the inside of
pores within the coal (called the matrix). The open fractures in the coal (called the cleats) can also contain free gas or can be
saturated with water.
Coal chemicals - Coal chemicals are obtained from the gases and vapor recovered from the manufacturing of coke. Generally,
crude tar, ammonia, crude light oil, and gas are the basic products recovered. They are refined or processed to yield a variety of
chemical materials.
Coal consumption - The quantity of coal burned for the generation of electric power (in short tons), including fuel used for
maintenance of standby service.
Coal conversion see coal liquefaction.
Coal fired power plants - are a type of power plant that make use of the combustion of coal in order to generate electricity. Their
use provides around 40% of the world's electricity and they are primarily used in developing countries.
Coal gas - Substitute natural gas produced synthetically by the chemical reduction of coal at a coal gasification facility.
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Coal gasification - The process of converting coal into gas. The basic process involves crushing coal to a powder, which is then
heated in the presence of steam and oxygen to produce a gas. The gas is then refined to reduce sulfur and other impurities. The
gas can be used as a fuel or processed further and concentrated into chemical or liquid fuel.
Coal grade - This classification refers to coal quality and application use.
Coal (lignite) - Lignite, often referred to as brown coal, is a soft brown combustible sedimentary rock formed from naturally
compressed peat. It is considered the lowest rank of coal due to its relatively low heat content. It has a carbon content around
6070 percent. It is mined all around the world and is used almost exclusively as a fuel for steam-electric power generation
Coal liquefaction - is a process of converting coal into liquid hydrocarbons: liquid fuels and petrochemicals. The conversion
industry is commonly referred to as "coal conversion" or "Coal To X". "Coal to Liquid Fuels" is commonly called "CTL" or "coal
liquefaction", although "liquefaction" is generally used for a non-chemical process of becoming liquid.
Coal rank - The classification of coals according to their degree of progressive alteration from lignite to anthracite. In the United
States, the standard ranks of coal include lignite, sub-bituminous coal, bituminous coal, and anthracite and are based on fixed
carbon, volatile matter, heating value, and agglomerating (or caking) properties.
Coal Seam Gas (CSG) see Coalbed methane (CBM), and Hydraulic fracturing or fracking
Coke (coal) - A solid carbonaceous residue derived from low-ash, low-sulfur bituminous coal from which the volatile constituents
are driven off by baking in an oven at temperatures as high as 2,000 degrees Fahrenheit so that the fixed carbon and residual ash
are fused together. Coke is used as a fuel and as a reducing agent in smelting iron ore in a blast furnace. Coke from coal is grey,
hard, and porous and has a heating value of 24.8 million Btu per ton.
Coke (petroleum) - A residue high in carbon content and low in hydrogen that is the final product of thermal decomposition in
the condensation process in cracking. This product is reported as marketable coke or catalyst coke. The conversion is 5 barrels (of
42 U.S. gallons each) per short ton.
Coking - Thermal refining processes used to produce fuel gas, gasoline blendstocks, distillates, and petroleum coke from the
heavier products of atmospheric and vacuum distillation.
Cold War (The) - was a state of geopolitical tension after World War II between powers in the Eastern Bloc (the Soviet Union and
its satellite states) and powers in the Western Bloc (the United States, its NATO allies and others). Historians do not fully agree on
the dates, but a common timeframe is the period between 1947, the year the Truman Doctrine (a U.S. foreign policy pledging to
aid nations threatened by Soviet expansionism) was announced, and 1991, the year the Soviet Union collapsed.
Colour revolution - (sometimes called the coloured revolution) or color revolution is a term that was widely used by worldwide
media. To describe various related movements that developed in several societies in the former Soviet Union and the Balkans
during the early 2000s. The term has also been applied to a number of revolutions elsewhere, including in the Middle East. Some
observers (such as Justin Raimondo and Michael Lind) have called the events a revolutionary wave, the origins of which can be
traced back to the 1986 People Power Revolution (also known as the "Yellow Revolution") in the Philippines. Participants in the
colour revolutions have mostly used nonviolent resistance, also called civil resistance. Such methods as demonstrations, strikes
and interventions have been intended protest against governments seen as corrupt and/or authoritarian, and to advocate
democracy; and they have also created strong pressure for change. These movements generally adopted a specific colour or flower
as their symbol. The colour revolutions are notable for the important role of non-governmental organisations (NGOs) and
particularly student activists in organising creative non-violent resistance. When three colour revolutions in a row failed (Green
Revolution in Iran, Black Revolution in Pakistan, Jasmin Revolution in Tunisa), they were rebranded as the Arab Spring.
Combustion - Chemical oxidation accompanied by the generation of light and heat.
Commodity price index - A commodity price index is a fixed-weight index or (weighted) average of selected commodity prices,
which may be based on spot or futures prices. It is designed to be representative of the broad commodity asset class or a specific
subset of commodities, such as energy or metals. It is an index that tracks a basket of commodities to measure their performance.
These indexes are often traded on exchanges, allowing investors to gain easier access to commodities without having to enter the
futures market. The value of these indexes fluctuates based on their underlying commodities, and this value can be traded on an
exchange in much the same way as stock index futures.
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Compound annual growth rate (CAGR) - is a business and investing specific term for the geometric progression ratio that provides
a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of
the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns
that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common
domain such as revenue growth of companies in the same industry. CAGR is equivalent to the more generic exponential growth
rate when the exponential growth interval is one year.
Condensate - See Lease Condensate
Confidence (Public) - is the trust bestowed by citizens based on demonstrations and expectations of: (1) Their governments ability
to provide for their common defence and economic security and behave consistent with the interests of society; and (2) Their
critical infrastructures ability to provide products and services at expected levels and to behave consistent with their customers
best interests.
Continuity of government (COG) - is the principle of establishing defined procedures that allow a government to continue its
essential operations in case of a catastrophic event such as nuclear war. COG was developed by the British government before
and during World War II to counter threats, such as that of the Luftwaffe bombing during the Battle of Britain. The need for
continuity-of-government plans gained new urgency with nuclear proliferation. During and after the Cold War countries
developed such plans to avoid (or minimize) confusion and disorder due to a power vacuum in the aftermath of a nuclear attack.
In the US at least, COG is no longer limited to nuclear emergencies; the Continuity of Operations Plan was activated following the
September 11 attacks in 2001.
Continuity of Operations (COOP) - is a United States federal government initiative, required by U.S. Presidential Policy Directive
40 (PPD-40), to ensure that agencies are able to continue performance of essential functions under a broad range of
circumstances. PPD-40 specifies certain requirements for continuity plan development, including the requirement that all federal
executive branch departments and agencies develop an integrated, overlapping continuity capability, that supports the 8 National
Essential Functions (NEFs) described in PPD-40. The Federal Continuity Directive 1 (FCD 1) is a 2017 directive, released by the
Department of Homeland Security (DHS) that provides doctrine and guidance to all federal organizations for developing continuity
program plans and capabilities. FCD 1 also serves as guidance to state, local, and tribal governments. The Federal Continuity
Directive 2 (FCD 2) of July 2013 is a directive to assist federal Executive Branch organizations in identifying their Mission Essential
Functions (MEFs) and candidate Primary Mission Essential Functions (PMEFs).
The DHS together with the Federal Emergency Management Agency (FEMA), and in coordination with other non-federal partners
in July 2013, developed the Continuity Guidance Circular 1 (CGC 1) and CGC 2. The preamble of the CGC 1 states that its function
is to provide "direction to the non-Federal Governments (NFGs) for developing continuity plans and programs. Continuity planning
facilitates the performance of essential functions during all-hazards emergencies or other situations that may disrupt normal
operations. By continuing the performance of essential functions through a catastrophic emergency, the State, territorial, tribal,
and local governments, and the private sector support the ability of the Federal Government to perform National Essential
Functions (NEFs)." CGC 1 parallels the information in FCD 1 closely, but is geared to states, territories, tribal and local governments,
and private-sector organizations.
The purpose of Continuity Guidance Circular 2 (CGC 2) is to provide "non-Federal Governments (NFGs) with guidance on how to
implement CGC 1, Annex D: ESSENTIAL FUNCTIONS. It provides them with guidance, a methodology, and checklists to identify,
assess, and validate their essential functions. This CGC includes guidance for conducting a continuity Business Process Analysis
(BPA), Business Impact Analysis (BIA), and a risk assessment that will identify essential function relationships, interdependencies,
time sensitivities, threats and vulnerabilities, and mitigation strategies." FEMA provides guidance to the private sector for business
continuity planning purposes.[4] FEMA realizes that when business is disrupted, it can cost money, so a continuity plan is essential
to help identify critical functions and develop preventative measures to continue functions should disruption occur.
Conventional oil is a term used to describe oil that can be produced (extracted from the ground) using traditional drilling
methods. It is liquid at atmospheric temperature and pressure conditions, and therefore flows without additional stimulation.
Conventional gas refers to natural gas that can be produced from reservoirs using traditional drilling, pumping and compression
techniques.
Consumer Price Index (CPI) -The CPI is a statistical estimate constructed using the prices of a sample of representative items
whose prices are collected periodically. Sub-indices and sub-sub-indices are computed for different categories and sub-categories
of goods and services, being combined to produce the overall index with weights reflecting their shares in the total of the
consumer expenditures covered by the index. It is one of several price indices calculated by most national statistical agencies. The
annual percentage change in a CPI is used as a measure of inflation.
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Cost neutral Where the priceperformance ratio (costperformance or costbenefit) is at unity. That is, the costs invested equal
the costs returned.
Cost of capital - The rate of return a utility must offer to obtain additional funds. The cost of capital varies with the leverage ratio,
the effective income tax rate, conditions in the bond and stock markets, growth rate of the utility, its dividend strategy, stability
of net income, the amount of new capital required, and other factors dealing with business and financial risks. It is a composite of
the cost for debt interest, preferred stock dividends, and common stockholders' earnings that provide the facilities used in
supplying utility service.
Cost of debt - The interest rate paid on new increments of debt capital multiplied by 1 minus the tax rate.
CPI - see Consumer Price Index
Credit default swap (CDS) - is a financial swap agreement that the seller of the CDS will compensate the buyer (usually the creditor
of the reference loan) in the event of a loan default (by the debtor) or other credit event. That is, the seller of the CDS insures the
buyer against some reference loan defaulting. The buyer of the CDS makes a series of payments (the CDS "fee" or "spread") to the
seller and, in exchange, receives a payoff if the loan defaults. It was invented by Blythe Masters from JP Morgan in 1994.
In the event of default the buyer of the CDS receives compensation (usually the face value of the loan), and the seller of the CDS
takes possession of the defaulted loan. However, anyone can purchase a CDS, even buyers who do not hold the loan instrument
and who have no direct insurable interest in the loan (these are called "naked" CDSs). If there are more CDS contracts outstanding
than bonds in existence, a protocol exists to hold a credit event auction; the payment received is usually substantially less than
the face value of the loan.
Crude oil - A mixture of hydrocarbons that exists in liquid phase in natural underground reservoirs and remains liquid at
atmospheric pressure after passing through surface separating facilities. Depending upon the characteristics of the crude stream,
it may also include 1. Small amounts of hydrocarbons that exist in gaseous phase in natural underground reservoirs but
are liquid at atmospheric pressure after being recovered from oil well (casing head) gas in lease separators and are subsequently
comingled with the crude stream without being separately measured. Lease condensate recovered as a liquid from natural gas
wells in lease or field separation facilities and later mixed into the crude stream is also included; 2. Small amounts of
nonhydrocarbons produced with the oil, such as sulfur and various metals; 3. Drip gases, and liquid hydrocarbons produced from
tar sands, oil sands, gilsonite, and oil shale. Liquids produced at natural gas processing plants are excluded. Crude oil is refined to
produce a wide array of petroleum products, including heating oils; gasoline, diesel and jet fuels; lubricants; asphalt; ethane,
propane, and butane; and many other products used for their energy or chemical content.
Crypto currency (or cyptocurrency) - is a digital asset designed to work as a medium of exchange using cryptography to secure
the transactions and to control the creation of additional units of the currency.[1] Cryptocurrencies are classified as a subset of
digital currencies and are also classified as a subset of alternative currencies and virtual currencies. Bitcoin became the first
decentralized cryptocurrency in 2009. Since then, numerous cryptocurrencies have been created. These are frequently called
altcoins, as a blend of bitcoin alternative. Bitcoin and its derivatives use decentralized control as opposed to centralized electronic
money/centralized banking systems. The decentralized control is related to the use of bitcoin's blockchain transaction database
in the role of a distributed ledger.
Cuban Missile Crisis (The)- , also known as the October Crisis, the Caribbean Crisis, or the Missile Scare, was a 13-day (October
1628, 1962) confrontation between the United States and the Soviet Union concerning American ballistic missile deployment in
Italy and Turkey with consequent Soviet ballistic missile deployment in Cuba. The confrontation is often considered the closest
the Cold War came to escalating into a full-scale nuclear war. In response to the failed Bay of Pigs Invasion of 1961 and the
presence of American Jupiter ballistic missiles in Italy and Turkey, Soviet leader Nikita Khrushchev decided to agree to Cuba's
request to place nuclear missiles on the island to deter a future invasion. An agreement was reached during a secret meeting
between Khrushchev and Fidel Castro in July 1962 and construction of a number of missile launch facilities started later that
summer. The 1962 United States elections were under way, and the White House had denied charges that it was ignoring
dangerous Soviet missiles 90 miles from Florida. The missile preparations were confirmed when an Air Force U-2 spy plane
produced clear photographic evidence of medium-range (SS-4) and intermediate-range (R-14) ballistic missile facilities. The US
established a military blockade to prevent further missiles from reaching Cuba. It announced that they would not permit offensive
weapons to be delivered to Cuba and demanded that the weapons already in Cuba be dismantled and returned to the Soviet
Union. After a long period of tense negotiations, an agreement was reached between US President John F. Kennedy and
Khrushchev. Publicly, the Soviets would dismantle their offensive weapons in Cuba and return them to the Soviet Union, subject
to United Nations verification, in exchange for a US public declaration and agreement to avoid invading Cuba again. Secretly, the
United States also agreed that it would dismantle all U.S.-built Jupiter MRBMs, which had been deployed in Turkey and Italy against
the Soviet Union. When all offensive missiles and Ilyushin Il-28 light bombers had been withdrawn from Cuba, the blockade was
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formally ended on November 21, 1962. The negotiations between the United States and the Soviet Union pointed out the necessity
of a quick, clear, and direct communication line between Washington and Moscow.
Cut-off grade (uranium) - The lowest grade, in percent U3O8, of uranium ore at a minimum specified thickness that can be mined
at a specified cost.
Debt (financial) - Debt is an amount of money borrowed by one party from another. In this context, debt is the amount of money
owed by a nation state or a corporation to a bank (being itself usually a private corporation).
Debt Default - In finance, default is failure to meet the legal obligations (or conditions) of a loan, for example when a home buyer
fails to make a mortgage payment, or when a corporation or government fails to pay a bond which has reached maturity. A national
or sovereign default is the failure or refusal of a government to repay its national debt. The biggest private default in history is
Lehman Brothers with over $600,000,000,000 when it filed for bankruptcy in 2008 and the biggest sovereign default is Greece
with $138,000,000,000 in March 2012.
Decommissioning - is a general term for a formal process to remove something from an active status. Shut down and asset
stripping is part of decommissioning.
Deep offshore drilling - is typically defined as drilling in a water depth that is greater than 500 feet (150 meters). In general, rigs
drilling in this environment are drillships and semisubmersibles. Wells being drilled in deep offshore environments are typically
extended reach and use cutting edge industry technology.
Deepwater Horizon oil spill - (also referred to as the BP oil spill, the BP oil disaster, the Gulf of Mexico oil spill, and the Macondo
blowout) began on April 20, 2010, in the Gulf of Mexico on the BP-operated Macondo Prospect. Killing eleven people, it is
considered the largest marine oil spill in the history of the petroleum industry and estimated to be 8% to 31% larger in volume
than the previous largest, the Ixtoc I oil spill. The US Government estimated the total discharge at 4.9 million barrels (210 million
US gal; 780,000 m3). After several failed efforts to contain the flow, the well was declared sealed on September 19, 2010. Reports
in early 2012 indicated the well site was still leaking.
Deflation - In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the
inflation rate falls below 0% (a negative inflation rate). Inflation reduces the real value of money over time; conversely, deflation
increases the real value of money the currency of a national or regional economy. This allows one to buy more goods and services
than before with the same amount of money. Economists generally believe that deflation is a problem in a modern economy
because it may increase the real value of debt, especially if the deflation was unexpected. Deflation may also aggravate recessions
and lead to a deflationary spiral. Deflation is distinct from disinflation, a slow-down in the inflation rate, i.e. when inflation declines
to a lower rate but is still positive.
Demand destruction (Economic destruction) Demand destruction is a permanent downward shift on the demand curve in the
direction of lower demand of a commodity, such as energy products, induced by a prolonged period of high prices or constrained
supply.
Derivatives - In finance, a derivative is a contract that derives its value from the performance of an underlying entity. This
underlying entity can be an asset, index, or interest rate, and is often simply called the "underlying".[1][2] Derivatives can be used
for a number of purposes, including insuring against price movements (hedging), increasing exposure to price movements for
speculation or getting access to otherwise hard-to-trade assets or markets.[3] Some of the more common derivatives include
forwards, futures, options, swaps, and variations of these such as synthetic collateralized debt obligations and credit default
swaps. Most derivatives are traded over-the-counter (off-exchange) or on an exchange such as the Bombay Stock Exchange, while
most insurance contracts have developed into a separate industry. Derivatives are one of the three main categories of financial
instruments, the other two being stocks (i.e., equities or shares) and debt (i.e., bonds and mortgages).
Disinflation - is a decrease in the rate of inflation a slowdown in the rate of increase of the general price level of goods and
services in a nation's gross domestic product over time. It is the opposite of reflation. Disinflation occurs when the increase in the
consumer price level slows down from the previous period when the prices were rising.
Dotcom Bubble - The dot-com bubble (also known as the dot-com boom, the tech bubble, the Internet bubble, the dot-com
collapse, and the information technology bubble) was a historic economic bubble and period of excessive speculation that
occurred roughly from 1997 to 2001, a period of extreme growth in the usage and adaptation of the Internet by businesses and
consumers. During this period, many Internet-based companies, commonly referred to as dot-coms, were founded, many of which
failed. During 20002002, the bubble collapsed.
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Dry natural gas - Natural gas which remains after: 1) the liquefiable hydrocarbon portion has been removed from the gas stream
(i.e., gas after lease, field, and/or plant separation); and 2) any volumes of nonhydrocarbon gases have been removed where they
occur in sufficient quantity to render the gas unmarketable. Note: Dry natural gas is also known as consumer-grade natural gas.
The parameters for measurement are cubic feet at 60 degrees Fahrenheit and 14.73 pounds per square inch absolute. Also see
Natural gas.
Dry natural gas production - The process of producing consumer-grade natural gas. Natural gas withdrawn from reservoirs is
reduced by volumes used at the production (lease) site and by processing losses. Volumes used at the production site include (1)
the volume returned to reservoirs in cycling, repressuring of oil reservoirs, and conservation operations; and (2) gas vented and
flared. Processing losses include (1) nonhydrocarbon gases (e.g., water vapor, carbon dioxide, helium, hydrogen sulfide, and
nitrogen) removed from the gas stream; and (2) gas converted to liquid form, such as lease condensate and plant liquids. Volumes
of dry gas withdrawn from gas storage reservoirs are not considered part of production. Dry natural gas production equals
marketed production less extraction loss.
Economic bubble (or Asset bubble) - Sometimes also referred to as a speculative bubble, a market bubble, a price bubble, a
financial bubble, a speculative mania, or a balloon. This is a trade in an asset at a price or price range that strongly exceeds the
asset's intrinsic value. It could also be described as a situation in which asset prices appear to be based on implausible or
inconsistent views about the future. Asset bubbles date back as far as the 1600s and are now widely regarded as a recurrent
feature of modern economic history. Historically, the Dutch Golden Age's Tulipmania (in the mid-1630s) is often considered the
first recorded economic bubble. Because it is often difficult to observe intrinsic values in real-life markets, bubbles are often
conclusively identified only in retrospect, once a sudden drop in prices has occurred. Such a drop is known as a crash or a bubble
burst. Both the boom and the burst phases of the bubble are examples of a positive feedback mechanism, in contrast to the
negative feedback mechanism that determines the equilibrium price under normal market circumstances. Prices in an economic
bubble can fluctuate erratically, and become impossible to predict from supply and demand alone.
Economic stagnation - is a prolonged period of slow economic growth (traditionally measured in terms of the GDP growth), usually
accompanied by high unemployment.
EIA - The U.S. Energy Information Administration (EIA) is a principal agency of the U.S. Federal Statistical System responsible for
collecting, analyzing, and disseminating energy information to promote sound policymaking, efficient markets, and public
understanding of energy and its interaction with the economy and the environment. EIA programs cover data on coal, petroleum,
natural gas, electric, renewable and nuclear energy. EIA is part of the U.S. Department of Energy.
Electric power quality - or simply power quality, involves voltage, frequency, and waveform. Good power quality can be defined
as a steady supply voltage that stays within the prescribed range, steady a.c. frequency close to the rated value, and smooth
voltage curve waveform (resembles a sine wave). In general, it is useful to consider power quality as the compatibility between
what comes out of an electric outlet and the load that is plugged into it. The term is used to describe electric power that drives
an electrical load and the load's ability to function properly. Without the proper power, an electrical device (or load) may
malfunction, fail prematurely or not operate at all. There are many ways in which electric power can be of poor quality and many
more causes of such poor quality power.
Electrical power grid - An electrical grid is an interconnected network for delivering electricity from producers to consumers. It
consists of generating stations that produce electrical power, high voltage transmission lines that carry power from distant sources
to demand centres, and distribution lines that connect individual customers. Power stations may be located near a fuel source,
at a dam site, or to take advantage of renewable energy sources, and are often located away from heavily populated areas. They
are usually quite large to take advantage of economies of scale. The electric power which is generated is stepped up to a higher
voltage at which it connects to the electric power transmission network.
Endosomatic energy - Ecological economists distinguish between 'endosomatic' and 'exosomatic' use of energy by humans.
Energy from inside the body is considered endosomatic. Inside the body, as food energy, adult humans spend per day between
1,500 and 2,500 kcal on average. A convenient number easy to remember is 2,400 kcal, equivalent to 10 MJ (megajoules).
Energy - In physics, energy is the property that must be transferred to an object in order to perform work on or to heat the
object, and can be converted in form, but not created or destroyed. The standard SI unit of energy is the joule, which is the energy
transferred to an object by the mechanical work of moving it a distance of 1 metre against a force of 1 newton. Common energy
forms include the kinetic energy of a moving object, the potential energy stored by an object's position in a force field
(gravitational, electric or magnetic), the elastic energy stored by stretching solid objects, the chemical energy released when a fuel
burns, the radiant energy carried by light, and the thermal energy due to an object's temperature. Mass and energy are closely
related. Due to massenergy equivalence, any object that has mass when stationary in a frame of reference (called rest mass) also
has an equivalent amount of energy whose form is called rest energy in that frame, and any additional energy acquired by the
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object above that rest energy will increase an object's mass. For example, with a sensitive enough scale, one could measure an
increase in mass after heating an object. Living organisms require available energy to stay alive, such as the energy humans get
from food. Civilisation gets the energy it needs from energy resources such as fossil fuels, nuclear fuel, or renewable energy. The
processes of Earth's climate and ecosystem are driven by the radiant energy Earth receives from the sun and the geothermal
energy contained within the Earth.
Energy consumed per capita - all energy needed as input to produce fuel and electricity for end-users, per person for a nation
state or region. It is known as Total Primary Energy Supply (TPES), a term used to indicate the sum of production and imports
subtracting exports and storage changes.
Energy density - is the amount of energy stored in a given system or region of space per unit volume. Colloquially it may also be
used for energy per unit mass, though the accurate term for this is specific energy. Often only the useful or extractable energy is
measured, which is to say that inaccessible energy (such as rest mass energy) is ignored. Energy per unit volume has the same
physical units as pressure, and in many circumstances is a synonym: for example, the energy density of a magnetic field may be
expressed as (and behaves as) a physical pressure, and the energy required to compress a compressed gas a little more may be
determined by multiplying the difference between the gas pressure and the external pressure by the change in volume. In short,
pressure is a measure of the enthalpy per unit volume of a system. A pressure gradient has the potential to perform work on the
surroundings by converting enthalpy to work until equilibrium is reached.
Energy returned on energy invested (ERoEI) - is the ratio of the amount of usable energy (the exergy) delivered from a particular
energy resource to the amount of exergy used to obtain that energy resource.
Environmental rehabilitation see Land rehabilitation
EU-28 - The European Union (EU) is a political and economic union of 28 member states that are located primarily in Europe. It
has an area of 4,475,757 km2, and an estimated population of over 510 million. The European Union (EU) was established on 1
November 1993 with 12 Member States. Their number has grown to the present 28 through a series of enlargements.
European Central Bank (ECB) - The European Central Bank (ECB; German: Europische Zentralbank (EZB), French: Banque centrale
europenne (BCE)) is the central bank for the euro and administers monetary policy of the eurozone, which consists of 19 EU
member states and is one of the largest currency areas in the world. It is one of the world's most important central banks and is
one of the seven institutions of the European Union (EU) listed in the Treaty on European Union (TEU). The capital stock of the
bank is owned by the central banks of all 28 EU member states. The primary objective of the ECB, mandated in Article 2 of the
Statute of the ECB, is to maintain price stability within the Eurozone. Its basic tasks, set out in Article 3 of the Statute, are to set
and implement the monetary policy for the Eurozone, to conduct foreign exchange operations, to take care of the foreign reserves
of the European System of Central Banks and operation of the financial market infrastructure under the TARGET2 payments
system. The ECB has, under Article 16 of its Statute, the exclusive right to authorise the issuance of euro banknotes. The ECB is
governed by European law directly, but its set-up resembles that of a corporation in the sense that the ECB has shareholders and
stock capital.
Euro () - The euro (sign: ; code: EUR) is the official currency of the eurozone, which consists of 19 of the 28 member states of
the European Union: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. The currency is also officially used by the institutions
of the European Union and four other European countries, as well as unilaterally by two others, and is consequently used daily by
some 337 million Europeans as of 2015.
Excess reserves - In banking, excess reserves are bank reserves in excess of a reserve requirement set by a central bank. In the
United States, bank reserves for a commercial bank are held in part as a credit balance in an account for the commercial bank at
the applicable Federal Reserve Bank (FRB). This credit balance is not separated into separate "minimum reserves" and "excess
reserves" accounts. The total amount of FRB credits held in all FRB accounts for all commercial banks, together with all currency
and vault cash, form the M0 monetary base. Holding excess reserves has an opportunity cost if higher risk-adjusted interest can
be earned by putting the funds elsewhere. For banks in the U.S. Federal Reserve System, this earning process is accomplished by
a given bank by making short-term (usually overnight) loans on the federal funds market to another bank that may be short of its
reserve requirements. Other banks may instead choose, however, to hold their excess reserves to facilitate upcoming transactions
or to meet contractual clearing balance requirements.
Exergy - In thermodynamics, the exergy (in older usage, available work and/or availability) of a system is the maximum useful
work possible during a process that brings the system into equilibrium with a heat reservoir. ... After the system and surroundings
reach equilibrium, the exergy is zero.
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Exosomatic energy - Ecological economists distinguish between 'endosomatic' and 'exosomatic' use of energy by humans. Energy
from outside of the body is exosomatic.
FAO Food Price Index (The) - is a measure of the monthly change in international prices of a basket of food commodities. It consists
of the average of five commodity group price indices, weighted with the average export shares of each of the groups for 2002-
2004.
Federal Reserve Bank (The) - A Federal Reserve Bank is a regional bank of the Federal Reserve System, the central banking system
of the United States. There are twelve in total, one for each of the twelve Federal Reserve Districts that were created by the
Federal Reserve Act of 1913. The banks are jointly responsible for implementing the monetary policy set forth by the Federal
Open Market Committee, and are divided as follows:
Federal Reserve Bank of Boston Federal Reserve Bank of Chicago

Federal Reserve Bank of New York Federal Reserve Bank of St. Louis
Federal Reserve Bank of Philadelphia Federal Reserve Bank of Minneapolis
Federal Reserve Bank of Cleveland Federal Reserve Bank of Kansas City
Federal Reserve Bank of Richmond Federal Reserve Bank of Dallas
Federal Reserve Bank of Atlanta Federal Reserve Bank of San Francisco
Some banks also possess branches, with the whole system being headquartered at the Eccles Building in Washington, D.C.
Fiat Currency - Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical
commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the
material that the money is made of.
Fiat Economy (The) - The part of the economy that is concerned with buying and selling on the financial markets. This includes
trading of fiat currencies, derivate and trading of paper asset certificates as opposed to physical assets (for example, physical gold
bullion vs. a paper certificate of ownership of gold stored in a bank vault).
Financial or fiscal year - a year as reckoned for taxing or accounting purposes, for example the British tax year, reckoned from 6
April.
Financial contagion - refers to "the spread of market disturbances mostly on the downside from one country to the other, a
process observed through co-movements in exchange rates, stock prices, sovereign spreads, and capital flows". Financial
contagion can be a potential risk for countries who are trying to integrate their financial system with international financial
markets and institutions. It helps explain an economic crisis extending across neighbouring countries, or even regions. Financial
contagion happens at both the international level and the domestic level. At the domestic level, usually the failure of a domestic
bank or financial intermediary triggers transmission when it defaults on interbank liabilities and sells assets in a fire sale, thereby
undermining confidence in similar banks. An example of this phenomenon is the subsequent turmoil in the United States financial
markets. International financial contagion, which happens in both advanced economies and developing economies, is the
transmission of financial crisis across financial markets for direct or indirect economies. However, under today's financial system,
with the large volume of cash flow, such as hedge fund and cross-regional operation of large banks, financial contagion usually
happens simultaneously both among domestic institutions and across countries.
First Oil Shock/Crisis (1973) The 1973 oil crisis began in October 1973 when the members of the Organization of Arab Petroleum
Exporting Countries proclaimed an oil embargo. The embargo occurred in response to United States' support for Israel during the
Yom Kippur War. By the end of the embargo in March 1974, the price of oil had risen from US$3 per barrel to nearly $12 globally;
US prices were significantly higher. The embargo caused an oil crisis, or "shock", with many short- and long-term effects on global
politics and the global economy. It was later called the "first oil shock", followed by the 1979 oil crisis, termed the "second oil
shock."
Foreign Direct Investment (FDI) - A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a
business in one country by an entity based in another country. It is thus distinguished from foreign portfolio investment by a
notion of direct control.
Fossil fuel power station - is a power station which burns fossil fuel such as coal, natural gas, or petroleum to produce electricity.
Central station fossil fuel power plants are designed on a large scale for continuous operation. In many countries, such plants
provide most of the electrical energy used. Fossil fuel power stations have machinery to convert the heat energy of combustion
into mechanical energy, which then operates an electrical generator. The prime mover may be a steam turbine, a gas turbine or,
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in small plants, a reciprocating internal combustion engine. All plants use the energy extracted from expanding gas, either steam
or combustion gases.
Fossil water - or paleowater is an ancient body of water that has been contained in some undisturbed space, typically groundwater
in an aquifer, for millennia. Other types of fossil water can include subglacial lakes, such as Antarctica's Lake Vostok, and even
ancient water on other planets. UNESCO defines fossil groundwater as water that infiltrated usually millennia ago and often under
climatic conditions different from the present, and that has been stored underground since that time. Many communities across
the planet depend on fossilized water reserves for their livelihood.
Fracking See Hydraulic fracturing
Fractional-reserve banking - is the practice whereby a bank accepts deposits, makes loans or investments, and holds reserves
equal to a fraction of its deposit liabilities. Reserves are held as currency in the bank, or as balances in the bank's accounts at the
central bank. Fractional-reserve banking is the current form of banking practiced in most countries worldwide. Fractional-reserve
banking allows banks to act as financial intermediaries between borrowers and savers, and to provide longer-term loans to
borrowers while providing immediate liquidity to depositors (providing the function of maturity transformation). However, a bank
can experience a bank run if depositors wish to withdraw more funds than the reserves held by the bank. To mitigate the risks of
bank runs and systemic crises (when problems are extreme and widespread), governments of most countries regulate and oversee
commercial banks, provide deposit insurance and act as lender of last resort to commercial banks.
French Revolution (The) - was a period of far-reaching social and political upheaval in France that lasted from 1789 until 1799,
and was partially carried forward by Napoleon during the later expansion of the French Empire. The Revolution overthrew the
monarchy, established a republic, experienced violent periods of political turmoil, and finally culminated in a dictatorship under
Napoleon that rapidly brought many of its principles to Western Europe and beyond. Inspired by liberal and radical ideas, the
Revolution profoundly altered the course of modern history, triggering the global decline of absolute monarchies while replacing
them with republics and liberal democracies. Through the Revolutionary Wars, it unleashed a wave of global conflicts that
extended from the Caribbean to the Middle East. Historians widely regard the Revolution as one of the most important events in
human history.
Fuel oil - A liquid petroleum product less volatile than gasoline, used as an energy source. Fuel oil includes distillate fuel oil, and
residual fuel oil.
Fukushima Daiichi nuclear disaster (The) - was an energy accident at the Fukushima Daiichi Nuclear Power Plant in Fukushima,
initiated primarily by the tsunami following the Thoku earthquake on 11 March 2011. Immediately after the earthquake, the
active reactors automatically shut down their sustained fission reactions. However, the tsunami disabled the emergency
generators that would have provided power to control and operate the pumps necessary to cool the reactors. The insufficient
cooling led to three nuclear meltdowns, hydrogen-air explosions, and the release of radioactive material in Units 1, 2, and 3 from
12 March to 15 March. Loss of cooling also caused the pool for storing spent fuel from Reactor 4 to overheat on 15 March due to
the decay heat from the fuel rods. The Fukushima disaster was the most significant nuclear incident since April 26, 1986 the
Chernobyl disaster and the second disaster to be given the Level 7 event classification of the International Nuclear Event Scale.
Though there have been no fatalities linked to radiation due to the accident, the eventual number of cancer deaths, according to
the linear no-threshold theory of radiation safety, that will be caused by the accident is expected to be around 130640 people in
the years and decades ahead.
Gas - A non-solid, non-liquid combustible energy source that includes natural gas, coke-oven gas, blast-furnace gas, and refinery
gas.
Gas Condensate Well Gas - Natural gas remaining after the removal of the lease condensate.
Gas processing unit - A facility designed to recover natural gas liquids from a stream of natural gas that may or may not have
passed through lease separators and/or field separation facilities. Another function of natural gas processing plants is to control
the quality of the processed natural gas stream. Cycling plants are considered natural gas processing plants.
Gas flare - A gas flare, alternatively known as a flare stack, is a gas combustion device used in industrial plants such as petroleum
refineries, chemical plants, and natural gas processing plants as well as at oil or gas production sites having oil wells, gas wells,
offshore oil and gas rigs and landfills. In industrial plants, flare stacks are primarily used for burning off flammable gas released by
pressure relief valves during unplanned over-pressuring of plant equipment. During plant or partial plant startups and shutdowns,
flare stacks are also often used for the planned combustion of gases over relatively short periods. Gas flaring at many oil and gas
production sites protects against the dangers of over-pressuring industrial plant equipment. When petroleum crude oil is extracted
and produced from onshore or offshore oil wells, raw natural gas associated with the oil is brought to the surface as well. Especially
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in areas of the world lacking pipelines and other gas transportation infrastructure, vast amounts of such associated gas are
commonly flared as waste or unusable gas.
Gas to liquids (GTL) - is a refinery process to convert natural gas or other gaseous hydrocarbons into longer-chain hydrocarbons,
such as gasoline or diesel fuel. Methane-rich gases are converted into liquid synthetic fuels either via direct conversionusing
non-catalytic processes that convert methane to methanol in one stepor via syngas as an intermediate, such as in the Fischer
Tropsch, Mobil and syngas to gasoline plus processes.
Gas turbine plant - A plant in which the prime mover is a gas turbine. A gas turbine consists typically of an axial-flow air compressor
and one or more combustion chambers where liquid or gaseous fuel is burned and the hot gases are passed to the turbine and
where the hot gases expand drive the generator and are then used to run the compressor.
Gas well - A well completed for production of natural gas from one or more gas zones or reservoirs. Such wells contain no
completions for the production of crude oil.
Gas well productivity - Derived annually by dividing gross natural gas withdrawals from gas wells by the number of producing gas
wells on December 31 and then dividing the quotient by the number of days in the year.
Gasification - A method for converting coal, petroleum, biomass, wastes, or other carbon-containing materials into a gas that can
be burned to generate power or processed into chemicals and fuels.
Gasohol - A blend of finished motor gasoline containing alcohol (generally ethanol but sometimes methanol) at a concentration
between 5.7 percent and 10 percent by volume. Also see Oxygenates.
Gasoil - European and Asian designation for No. 2 heating oil and No. 2 diesel fuel.
Gasoline blending components - Naphthas which will be used for blending or compounding into finished aviation or motor
gasoline (e.g., straight-run gasoline, alkylate, reformate, benzene, toluene, andxylene). Excludes oxygenates (alcohols, ethers),
butane, and pentanes plus.
Gasoline grades - The classification of gasoline by octane ratings. Each type of gasoline (conventional, oxygenated, and
reformulated) is classified by three grades - Regular, Midgrade, and Premium. Note: gasoline sales are reported by grade in
accordance with their classification at the time of sale.
Regular gasoline - Gasoline having an antiknock index, i.e., octane rating, greater than or equal to 85 and less than 88.
Note Octane requirements may vary by altitude.
Midgrade gasoline - Gasoline having an antiknock index, i.e., octane rating, greater than or equal to 88 and less than or
equal to 90. Note: Octane requirements may vary by altitude.
Premium gasoline - Gasoline having an antiknock index, i.e., octane rating, greater than 90. Note: Octane requirements
may vary by altitude.
Gasoline motor, (leaded) - Contains more than 0.05 grams of lead per gallon or more than 0.005 grams of phosphorus per gallon.
The actual lead content of any given gallon may vary. Premium and regular grades are included, depending on the octane rating.
Includes leaded gasohol. Blendstock is excluded until blending has been completed. Alcohol that is to be used in the blending of
gasohol is also excluded.
Gasoline treated as blendstock (GTAB) - Non-certified Foreign Refinery gasoline classified by an importer as blendstock to be
either blended or reclassified with respect to reformulated or conventional gasoline. GTAB is classified as either reformulated or
conventional quality based on emissions performance, formulation, and intended end use.
Geographical marker - A geographical marker is any statement that helps answer the question, Where did this happen? Often
used as an analytical tool to correlate causality or help define the existence of a relationship between events associated with a
geographic location.
Geothermal power generation - is power generated by geothermal energy. Technologies in use include dry steam power stations,
flash steam power stations and binary cycle power stations. Geothermal electricity generation is currently used in 24 countries,
while geothermal heating is in use in 70 countries. As of 2015, worldwide geothermal power capacity amounts to 12.8 gigawatts
(GW), of which 28 percent or 3,548 megawatts are installed in the United States. International markets grew at an average annual
rate of 5 percent over the last three years and global geothermal power capacity is expected to reach 14.517.6 GW by 2020.
Based on current geologic knowledge and technology, the Geothermal Energy Association (GEA) estimates that only 6.5 percent
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of total global potential has been tapped so far, while the IPCC reported geothermal power potential to be in the range of 35 GW
to 2 TW. Countries generating more than 15 percent of their electricity from geothermal sources include El Salvador, Kenya, the
Philippines, Iceland and Costa Rica. Geothermal power is considered to be a sustainable, renewable source of energy because the
heat extraction is small compared with the Earth's heat content.
GFC of 2008 (The) - The 2008 Global Financial Crisis was the worst economic disaster since the Great Depression of 1929. The root
cause has been traced to no one single event or reason. Financial turbulence started in the United States but quickly became
global in scope. Rather, it was the result of a sequence of events, each with its own triggering mechanism that led to near collapse
of the banking system. Often referred to as The Great Recession.
Global Financial Crisis (GFC) A worldwide period of economic difficulty experienced by markets and consumers. A global financial
crisis is a difficult business environment to succeed in since potential consumers tend to reduce their purchases of goods and
services until the economic situation improves.
Global Reserve Currency - In the foreign exchange market and international finance, a world currency, supranational currency, or
global currency refers to a currency that is transacted internationally, with no set borders. In the period following the Bretton
Woods Conference of 1944, exchange rates around the world were pegged to the United States dollar, which could be exchanged
for a fixed amount of gold. This reinforced the dominance of the US dollar as a global currency. Since the collapse of the fixed
exchange rate regime and the gold standard and the institution of floating exchange rates following the Smithsonian Agreement
in 1971, most currencies around the world have no longer been pegged to the United States dollar. However, as the United States
has the worlds largest economy, most international transactions continue to be conducted with the United States dollar, and it
has remained the de facto world currency. This state of affairs has been facilitated by Saudi Arabia pricing all its oil contracts in
$USD, forming the petrodollar.
Gold standard (The) - is a monetary system in which the standard economic unit of account is based on a fixed quantity of gold.
Three types can be distinguished: specie, bullion, and exchange.
In the gold specie standard the monetary unit is associated with the value of circulating gold coins, or the monetary unit
has the value of a certain circulating gold coin, but other coins may be made of less valuable metal.
The gold bullion standard is a system in which gold coins do not circulate, but the authorities agree to sell gold bullion on
demand at a fixed price in exchange for the circulating currency.
The gold exchange standard usually does not involve the circulation of gold coins. The main feature of the gold exchange
standard is that the government guarantees a fixed exchange rate to the currency of another country that uses a gold
standard (specie or bullion), regardless of what type of notes or coins are used as a means of exchange. This creates a de
facto gold standard, where the value of the means of exchange has a fixed external value in terms of gold that is
independent of the inherent value of the means of exchange itself.
Most nations abandoned the gold standard as the basis of their monetary systems at some point in the 20th century, although
many hold substantial gold reserves.
Great Depression (The) - The Great Depression was a severe worldwide economic depression that took place during the 1930s.
The timing of the Great Depression varied across nations; in most countries it started in 1929 and lasted until 1941. It was the
longest, deepest, and most widespread depression of the 20th century. In the 21st century, the Great Depression is commonly
used as an example of how far the world's economy can decline. The depression originated in the United States, after a major fall
in stock prices that began around September 4, 1929, and became worldwide news with the stock market crash of October 29,
1929 (known as Black Tuesday). Between 1929 and 1932, worldwide gross domestic product (GDP) fell by an estimated 15%. By
comparison, worldwide GDP fell by less than 1% from 2008 to 2009 during the Great Recession (GFC).
Greenhouse gases - Those gases, such as water vapor, carbon dioxide, nitrous oxide, methane, hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs) and sulfur hexafluoride, that are transparent to solar (short-wave) radiation but opaque to long-wave
(infrared) radiation, thus preventing long-wave radiant energy from leaving Earth's atmosphere. The net effect is a trapping of
absorbed radiation and a tendency to warm the planet's surface.
Gross Domestic Product (GDP) - GDP is the total value of everything produced by all the people and companies in the nation state.
Gulf of Mexico oil spill - See Deepwater Horizon oil spill
Heating value (natural gas) - The average number of British thermal units per cubic foot of natural gas as determined from tests
of fuel samples.
Heavy gas oil - Petroleum distillates with an approximate boiling range from 651 degrees Fahrenheit to 1000 degrees Fahrenheit.
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Heavy crude oil (or extra heavy crude oil) - is highly-viscous oil that cannot easily flow to production wells under normal reservoir
conditions. It is referred to as "heavy" because its density or specific gravity is higher than that of light crude oil. Heavy crude oil
has been defined as any liquid petroleum with an API gravity less than 20. Physical properties that differ between heavy crude
oils and lighter grades include higher viscosity and specific gravity, as well as heavier molecular composition. In 2010, the World
Energy Council defined extra heavy oil as crude oil having a gravity of less than 10 and a reservoir viscosity of no more than 10,000
centipoises. When reservoir viscosity measurements are not available, extra-heavy oil is considered by the WEC to have a lower
limit of 4 API. In other words, oil with a density greater than 1000 kg/m 3 or, equivalently, and a specific gravity greater than 1
and a reservoir viscosity of no more than 10,000 centipoises. Heavy oils and asphalt are dense nonaqueous phase liquids (DNAPLs).
They have a "low solubility and are with viscosity lower and density higher than water." "Large spills of DNAPL will quickly
penetrate the full depth of the aquifer and accumulate on its bottom."
Heavy industry - is industry that involves one or more characteristics such as large and heavy products; large and heavy equipment
and facilities (such as heavy equipment, large machine tools, and huge buildings); or complex or numerous processes.
House of Saud - The House of Saud is the ruling royal family of Saudi Arabia. The family has thousands of members. It is composed
of the descendants of Muhammad bin Saud, founder of the Emirate of Diriyah, known as the First Saudi state (1744 - 1818), and
his brothers, though the ruling faction of the family is primarily led by the descendants of Ibn Saud, the modern founder of Saudi
Arabia. The family is estimated to comprise 15,000 members, but the majority of the power and wealth is possessed by a group
of only about 2,000 people.
Hubbert peak (The) - theory says that for any given geographical area, from an individual oil-producing region to the planet as a
whole, the rate of petroleum production tends to follow a bell-shaped curve. It is one of the primary theories on peak oil. Choosing
a particular curve determines a point of maximum production based on discovery rates, production rates and cumulative
production. Early in the curve (pre-peak), the production rate increases due to the discovery rate and the addition of
infrastructure. Late in the curve (post-peak), production declines because of resource depletion.
Hubbert curve - In 1956, Hubbert proposed that fossil fuel production in a given region over time would follow a roughly bell-
shaped curve without giving a precise formula; he later used the Hubbert curve, the derivative of the logistic curve, for estimating
future production using past observed discoveries. Hubbert assumed that after fossil fuel reserves (oil reserves, coal reserves,
and natural gas reserves) are discovered, production at first increases approximately exponentially, as more extraction
commences and more efficient facilities are installed. At some point, a peak output is reached, and production begins declining
until it approximates an exponential decline. The Hubbert curve satisfies these constraints. Furthermore, it is roughly symmetrical,
with the peak of production reached when about half of the fossil fuel that will ultimately be produced has been produced. It also
has a single peak.
Hydrocarbon Gas Liquids - Natural gas and crude oil are mixtures of different hydrocarbons. Hydrocarbons are molecules of
carbon and hydrogen in various combinations. Hydrocarbon gas liquids (HGL) are hydrocarbons that occur as gases at atmospheric
pressure and as liquids under higher pressures. HGL can also be liquefied by cooling. The specific pressures and temperatures at
which the gases liquefy vary by the type of HGL. HGL may be described as being light or heavy according to the number of carbon
atoms and hydrogen atoms in an HGL molecule.
Hydraulic fracturing (also fracking, fraccing, frac'ing, hydrofracturing or hydrofracking) - is a well stimulation technique in which
rock is fractured by a pressurized liquid. The process involves the high-pressure injection of 'fracking fluid' (primarily water,
containing sand or other proppants suspended with the aid of thickening agents) into a wellbore to create cracks in the deep-rock
formations through which natural gas, petroleum, and brine will flow more freely. When the hydraulic pressure is removed from
the well, small grains of hydraulic fracturing proppants (either sand or aluminium oxide) hold the fractures open. Used in tight oil
formations.
Hyperinflation - In economics, hyperinflation occurs when a country experiences very high and usually accelerating rates of
inflation, rapidly eroding the real value of the local currency, and causing the population to minimize their holdings of local money.
The population normally switches to holding relatively stable foreign currencies. Under such conditions, the general price level
within an economy increases rapidly as the official currency quickly loses real value. The value of economic items remains relatively
stable in terms of foreign currencies. Unlike low inflation, where the process of rising prices is protracted and not generally
noticeable except by studying past market prices, hyperinflation sees a rapid and continuing increase in nominal prices, the
nominal cost of goods, and in the supply of money. Typically, however, the general price level rises even more rapidly than the
money supply as people try ridding themselves of the devaluing currency as quickly as possible. As this scenario happens, the real
stock of money (i.e., the amount of circulating money divided by the price level) decreases.
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International Energy Agency (IEA) - (French: Agence internationale de l'nergie) is a Paris-based autonomous intergovernmental
organization established in the framework of the Organisation for Economic Co-operation and Development (OECD) in 1974 in the
wake of the 1973 oil crisis. The IEA was initially dedicated to responding to physical disruptions in the supply of oil, as well as
serving as an information source on statistics about the international oil market and other energy sectors. The IEA acts as a policy
adviser to its member states, but also works with non-member countries, especially China, India, and Russia. The Agency's
mandate has broadened to focus on the "3Es" of effectual energy policy: energy security, economic development, and
environmental protection.
Industrial grid (The) an informal term that describes the interconnecting and interdependent network of industrial facilities.
Ranging from power generation to manufacture to raw material processing, all connected by networks like the electrical power
grid, Just in Time Supply of goods, potable water and waste removal.
Industrial Production Index (IPI) The industrial production index (abbreviated IPI and sometimes also called industrial output
index or industrial volume index) is a business cycle indicator which measures monthly changes in the price-adjusted output of
industry. This report uses the industrial production index as it is calculated in the European Union (EU-28). The Industrial
Production Index (IPI) is also an economic indicator published by the Federal Reserve Board of the United States that measures
the real production output of manufacturing, mining, and utilities. It is not clear if both the EU and the US use exactly the same
method of calculation.
Industrial Revolution (The) - was the transition to new manufacturing processes in the period from about 1760 to sometime
between 1820 and 1840. This transition included going from hand production methods to machines, new chemical manufacturing
and iron production processes, improved efficiency of water power, the increasing use of steam power, the development of
machine tools and the rise of the factory system. Textiles were the dominant industry of the Industrial Revolution in terms of
employment, value of output and capital invested; the textile industry was also the first to use modern production methods.
Inflation - In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a
period of time. When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a
reduction in the purchasing power per unit of money a loss of real value in the medium of exchange and unit of account within
the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index,
usually the consumer price index, over time. The opposite of inflation is deflation.
Insolvency - is the state of being unable to pay the money owed, by a person or company, on time; those in a state of insolvency
are said to be insolvent. There are two forms: cash-flow insolvency and balance-sheet insolvency.
Cash-flow insolvency is when a person or company has enough assets to pay what is owed, but does not have the
appropriate form of payment. For example, a person may own a large house and a valuable car, but not have enough
liquid assets to pay a debt when it falls due. Cash-flow insolvency can usually be resolved by negotiation. For example,
the bill collector may wait until the car is sold and the debtor agrees to pay a penalty.
Balance-sheet insolvency is when a person or company does not have enough assets to pay all of their debts. The person
or company might enter bankruptcy, but not necessarily. Once a loss is accepted by all parties, negotiation is often able
to resolve the situation without bankruptcy.
A company that is balance-sheet insolvent may still have enough cash to pay its next bill on time. However, most laws will not let
the company pay that bill unless it will directly help all their creditors. For example, an insolvent farmer may be allowed to hire
people to help harvest the crop, because not harvesting and selling the crop would be worse for his creditors.
Installed power See Name plate capacity.
Internal combustion engine (ICE) - is a heat engine where the combustion of a fuel occurs with an oxidizer (usually air) in a
combustion chamber that is an integral part of the working fluid flow circuit. In an internal combustion engine the expansion of
the high-temperature and high-pressure gases produced by combustion applies direct force to some component of the engine.
The force is applied typically to pistons, turbine blades, rotor or a nozzle. This force moves the component over a distance,
transforming chemical energy into useful mechanical energy. Automobiles and trucks use internal combustion engines powered
by mostly petroleum products or sometimes gas.
International Atomic Energy Agency (IAEA) - is an international organization that seeks to promote the peaceful use of nuclear
energy, and to inhibit its use for any military purpose, including nuclear weapons. The IAEA was established as an autonomous
organisation on 29 July 1957. Though established independently of the United Nations through its own international treaty, the
IAEA Statute, the IAEA reports to both the United Nations General Assembly and Security Council. The IAEA serves as an
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intergovernmental forum for scientific and technical co-operation in the peaceful use of nuclear technology and nuclear power
worldwide. The programs of the IAEA encourage the development of the peaceful applications of nuclear technology, provide
international safeguards against misuse of nuclear technology and nuclear materials, and promote nuclear safety (including
radiation protection) and nuclear security standards and their implementation.
International Monetary Fund (IMF) - is an international organization headquartered in Washington, D.C., of "189 countries
working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment
and sustainable economic growth, and reduce poverty around the world." Formed in 1944 at the Bretton Woods Conference
primarily by the ideas of Harry Dexter White and John Maynard Keynes, it came into formal existence in 1945 with 29 member
countries and the goal of reconstructing the international payment system. It now plays a central role in the management of
balance of payments difficulties and international financial crises. Countries contribute funds to a pool through a quota system
from which countries experiencing balance of payments problems can borrow money. As of 2016, the fund had SDR477 billion
(about $668 billion).
IOC International oil companies. The 20 largest oil & gas companies ranked in order of size: Saudi Aramco, Sinopec, China
National Petroleum Corporation, PetroChina, Exxon Mobil, Royal Dutch Shell, Kuwait Petroleum Corporation, BP, Total SA, Lukoil,
Eni, Valero Energy, Petrobras, Chevron Corporation, PDVSA, Pemex, National Iranian Oil, Gazprom, Petronas, China National
Offshore Oil.
Islamic State of Iraq and the Levant (ISIL) - also known as the Islamic State of Iraq and Syria (ISIS ), Islamic State (IS), and by its
Arabic language acronym Daesh, is an Arabic Salafi jihadist militant group and unrecognised proto-state that follows a
fundamentalist, Wahhabi doctrine of Sunni Islam. ISIL gained global prominence in early 2014 when it drove Iraqi government
forces out of key cities in its Western Iraq offensive, followed by its capture of Mosul and the Sinjar massacre.
Just-in-time supply The supply chain and supply networks of retail demand is delivered with as little lag time as possible. Thus
orders for goods can be submitted just as those goods arrive to the point of sale from the supply network. This makes for an
efficient business practice when the supply network is operating without bottlenecks and quoted delivery times match reality.
This system has poor resilience when something unforeseen happens like a natural disaster or the market experiences a Black
Swan event.
Just-in-time (JIT) manufacturing - also known as just-in-time production or the Toyota Production System (TPS), is a methodology
aimed primarily at reducing flow times within production system as well as response times from suppliers and to customers.
Kerogen (oil) - is a mixture of organic chemical compounds that make up a portion of the organic matter in sedimentary rocks. It
is insoluble in normal organic solvents because of the high molecular weight (upwards of 1,000 daltons or 1000 Da; 1Da= 1 atomic
mass unit) of its component compounds. The soluble portion is known as bitumen. When heated to the right temperatures in the
Earth's crust, (oil window c. 50150 C, gas window c. 150200 C, both depending on how quickly the source rock is heated) some
types of kerogen release crude oil or natural gas, collectively known as hydrocarbons (fossil fuels). When such kerogens are present
in high concentration in rocks such as shale, they form possible source rocks. Shales rich in kerogens that have not been heated
to a warmer temperature to release their hydrocarbons may form oil shale deposits.
Koyoto Protocol - is an international treaty which extends the 1992 United Nations Framework Convention on Climate Change
(UNFCCC) that commits State Parties to reduce greenhouse gas emissions, based on the scientific consensus that (a) global
warming is occurring and (b) it is extremely likely that human-made CO2 emissions have predominantly caused it. The Kyoto
Protocol was adopted in Kyoto, Japan, on December 11, 1997 and entered into force on February 16, 2005.
Land rehabilitation (or Environmental rehabilitation) - is the process of returning the land in a given area to some degree of its
former state, after some process (industry, natural disasters, etc.) has resulted in its damage. Many projects and developments
will result in the land becoming degraded, for example mining, farming and forestry.
Landfill gas - Gas that is generated by decomposition of organic material at landfill disposal sites. The average composition of
landfill gas is approximately 50 percent methane and 50 percent carbon dioxide and water vapor by volume. The methane
percentage, however, can vary from 40 to 60 percent, depending on several factors including waste composition (e.g.
carbohydrate and cellulose content). The methane in landfill gas may be vented, flared, combusted to generate electricity or useful
thermal energy on-site, or injected into a pipeline for combustion off-site.
Lb - Unit of mass the Pound
Lease Condensate - Light liquid hydrocarbons recovered from lease separators or field facilities at associated and non-associated
natural gas wells. Mostly pentanes and heavier hydrocarbons. Normally enters the crude oil stream after production.
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Liquid fuels - All petroleum including crude oil and products of petroleum refining, natural gas liquids, biofuels, and liquids derived
from other hydrocarbon sources (including coal to liquids and gas to liquids). Not included are liquefied natural gas (LNG) and
liquid hydrogen.
Liquefied natural gas (LNG) - Natural gas (primarily methane) that has been liquefied by reducing its temperature to -260 degrees
Fahrenheit at atmospheric pressure.
Liquefied petroleum gases (LPG) - A group of hydrocarbon gases, primarily propane, normal butane, and isobutane, derived from
crude oil refining or natural gas processing. These gases may be marketed individually or mixed. They can be liquefied through
pressurization (without requiring cryogenic refrigeration) for convenience of transportation or storage. Excludes ethane and
olefins. Note: In some EIA publications, LPG includes ethane and marketed refinery olefin streams, in accordance with definitions
used prior to January 2014.
Low Btu gas - A fuel gas with a heating value between 90 and 200 Btu per cubic foot.
LTO - light tight oil, abbreviated LTO, known also as tight oil or shale oil.
Manufactured gas - A gas obtained by destructive distillation of coal or by the thermal decomposition of oil, or by the reaction of
steam passing through a bed of heated coal or coke. Examples are coal gases, coke oven gases, producer gas, blast furnace gas,
blue (water) gas, carburetted water gas. Btu content varies widely.
Mine rehabilitation - Modern mine rehabilitation aims to minimize and mitigate the environmental effects of modern mining,
which may in the case of open pit mining involve movement of significant volumes of rock. Rehabilitation management is an
ongoing process, often resulting in open pit mines being backfilled. After mining finishes, the mine area must undergo
rehabilitation. Most natural energy resources can be examined in this fashion at the end of their extraction life.
Monterey shale oil reserves - The Monterey Formation is an extensive Miocene oil-rich geological sedimentary formation in
California, with outcrops of the formation in parts of the California Coast Ranges, Peninsular Ranges, and on some of California's
off-shore islands. The formation is the major source-rock for 37 to 38 billion barrels of oil in conventional traps such as sandstones.
This is most of California's known oil resources. The Monterey has been extensively investigated and mapped for petroleum
potential, and is of major importance for understanding the complex geological history of California. Its rocks are mostly highly
siliceous strata that vary greatly in composition, stratigraphy, and tectono-stratigraphic history. The US Energy Information
Administration (EIA) estimated in 2014 that the 1,750 square mile Monterey Formation could yield about 600 million barrels of
oil, from tight oil contained in the formation, down sharply from their 2011 estimate of a potential 15.4 billion barrels. An
independent review by the California Council on Science and Technology found both of these estimates to be "highly uncertain."
Despite intense industry efforts, there has been little success to date (2013) in producing Monterey-hosted tight oil/shale oil,
except in places where it is already naturally fractured, and it may be many years, if ever, before the Monterey becomes a
significant producer of shale oil.
Motor gasoline (finished) - A complex mixture of relatively volatile hydrocarbons with or without small quantities of additives,
blended to form a fuel suitable for use in spark-ignition engines. Motor gasoline, as defined in ASTM Specification D 4814 or
Federal Specification VV-G-1690C, is characterized as having a boiling range of 122 to 158 degrees Fahrenheit at the 10 percent
recovery point to 365 to 374 degrees Fahrenheit at the 90 percent recovery point. Motor gasoline includes conventional gasoline;
all types of oxygenated gasoline, including gasohol; and reformulated gasoline, but excludes aviation gasoline. Note: Volumetric
data on blending components, such as oxygenates, are not counted in data on finished motor gasoline until the blending
components are blended into the gasoline.
MOX (Nuclear fuel) - Mixed oxide fuel, commonly referred to as MOX fuel, is nuclear fuel that contains more than one oxide of
fissile material, usually consisting of plutonium blended with natural uranium, reprocessed uranium, or depleted uranium. MOX
fuel is an alternative to the low-enriched uranium (LEU) fuel used in the light water reactors that predominate nuclear power
generation. For example, a mixture of 7% plutonium and 93% natural uranium reacts similarly, although not identically, to LEU
fuel. MOX usually consists of two phases, UO2 and PuO2, and/or a single phase solid solution (U,Pu)O2. The content of PuO2 may
vary from 1.5 wt.% to 2530 wt.% depending on the type of nuclear reactor. Although MOX fuel can be used in thermal reactors
to provide energy, efficient fission of plutonium in MOX can only be achieved in fast reactors. One attraction of MOX fuel is that
it is a way of utilizing surplus weapons-grade plutonium, an alternative to storage of surplus plutonium, which would need to be
secured against the risk of theft for use in nuclear weapons.
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Mtoe - The tonne of oil equivalent (toe) is a unit of energy defined as the amount of energy released by burning one tonne of
crude oil. It is approximately 42 gigajoules or 11,630 kilowatt hours, although as different crude oils have different calorific values,
the exact value is defined by convention; several slightly different definitions exist. The toe is sometimes used for large amounts
of energy. Multiples of the toe are used, in particular the megatoe (Mtoe, one million toe) and the gigatoe (Gtoe, one billion toe).
A smaller unit of kilogram of oil equivalent (kgoe) is also sometimes used denoting 1/1000 toe.
Multifactor Productivity Index (MFP) - Reflects the overall efficiency with which labour and capital inputs are used together in
the production process. Changes in MFP reflect the effects of changes in management practices, brand names, organizational
change, general knowledge, network effects, spillovers from production factors, adjustment costs, economies of scale, the effects
of imperfect competition and measurement errors. Growth in MFP is measured as a residual, i.e. that part of GDP growth that
cannot be explained by changes in labour and capital inputs. In simple terms therefore, if labour and capital inputs remained
unchanged between two periods, any changes in output would reflect changes in MFP. This indicator is measured as an index and
in annual growth rates.
Nameplate capacity - also known as the rated capacity, nominal capacity, installed capacity, or maximum effect, is the intended
full-load sustained output of a facility such as a power plant, a chemical plant, fuel plant, metal refinery, mine, and many others.
Nameplate capacity is the number registered with authorities for classifying the power output of a power station usually expressed
in megawatts (MW). Power plants with an output consistently near their nameplate capacity have a high capacity factor.
Native gas - Gas in place at the time that a reservoir was converted to use as an underground storage reservoir in contrast to
injected gas volumes.
North Atlantic Treaty Organization (NATO) - also called the North Atlantic Alliance, is an intergovernmental military alliance
between several North American and European states based on the North Atlantic Treaty that was signed on 4 April 1949. NATO
constitutes a system of collective defence whereby its member states agree to mutual defence in response to an attack by any
external party. Three NATO members (the United States, France and the United Kingdom) are permanent members of the United
Nations Security Council with the power to veto and are officially nuclear-weapon states. NATO Headquarters are located in Haren,
Brussels, Belgium, while the headquarters of Allied Command Operations is near Mons, Belgium.
Natural gas - A gaseous mixture of hydrocarbon compounds, the primary one being methane.
Natural gas field facility - A field facility designed to process natural gas produced from more than one lease for the purpose of
recovering condensate from a stream of natural gas; however, some field facilities are designed to recover propane, normal
butane, pentanes plus, etc., and to control the quality of natural gas to be marketed.
Natural gas gross withdrawals - Full well-stream volume of produced natural gas, excluding condensate separated at the lease.
Natural gas hydrates - Solid, crystalline, wax-like substances composed of water, methane, methane clathrate, and usually a small
amount of other gases, with the gases being trapped in the interstices of a water-ice lattice. They form beneath permafrost and
on the ocean floor under conditions of moderately high pressure and at temperatures near the freezing point of water.
Natural gas lease production - Gross withdrawals of natural gas minus gas production injected on the lease into producing
reservoirs, vented, flared, used as fuel on the lease, and nonhydrocarbon gases removed in treating or processing operations on
the lease.
Natural Gas Liquids (NGL) - A group of hydrocarbons including ethane, propane, normal butane, isobutane, and natural gasoline.
Generally include natural gas plant liquids and all liquefied refinery gases except olefins.
Natural gas liquids production - The volume of natural gas liquids removed from natural gas in lease separators, field facilities,
gas processing plants, or cycling plants during the report year.
Natural gas plant liquids (NGPL) - Butane, ethane, pentanes, propane and other non-methane components of raw natural gas.
Those hydrocarbons in natural gas that are separated as liquids at natural gas processing, fractionating, and cycling plants.
Products obtained include ethane, liquefied petroleum gases (propane, normal butane, and isobutane), and natural gasoline.
Component products may be fractionated or mixed. Lease condensate and plant condensate are excluded. Note: Some EIA
publications categorize NGPL production as field production, in accordance with definitions used prior to January 2014.
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Natural resources - are resources that exist without actions of humankind. They are part of and are found in the natural
environment. For example a coal or copper deposit found in the earths crust.
Net Energy Cliff (The) On a chart plot of "Energy available for consumption" (y axis) vs "ERoEI" (x axis). The net available energy
to society follows a negative exponential curve. As society approaches the bend in the curve, available energy gradient becomes
quite steep very quickly. Much like falling off a cliff.
Net energy yield - The net energy yield of the resource, which is the difference between the energy inputs required to produce
the resource and the energy contained in the final product. The net energy, or energy returned on energy invested (ERoEI), of
unconventional resources is generally much lower than for conventional resources. Lower EROEI translates to higher production
costs, lower production rates, and usually more collateral environmental damage in extraction.
Net Hubbert Curve (The) The traditional Hubbert curve is corrected for ERoEI of each of the oil resources, where the easy to
extract and process resources are used first. The outcome is a skewed distribution for net available energy to do useful physical
work. Calculated with the formula: Net Energy = Gross Energy * ((ERoEI 1)/ ERoEI)
Non-renewable resource (also called a finite resource) - is a resource that does not renew itself at a sufficient rate for sustainable
economic extraction in meaningful human time-frames. An example is carbon-based, organically-derived fuel. The original organic
material, with the aid of heat and pressure, becomes a fuel such as oil or gas. Earth minerals and metal ores, fossil fuels (coal,
petroleum, natural gas) and groundwater in certain aquifers are all considered non-renewable resources, though individual
elements are almost always conserved.
Nuclear Energy Agency (NEA) - is an intergovernmental agency that is organized under the Organisation for Economic Co-
operation and Development (OECD). Originally formed on 1 February 1958 with the name European Nuclear Energy Agency (ENEA)
(the United States participated as an Associate Member), the name was changed on 20 April 1972 to its current name after Japan
became a member. The mission of the NEA is to "assist its member countries in maintaining and further developing, through
international co-operation, the scientific, technological and legal bases required for the safe, environmentally friendly and
economical use of nuclear energy for peaceful purposes."
Nuclear Power Generation - is the use of nuclear reactions that release nuclear energy to generate heat, which most frequently
is then used in steam turbines to produce electricity in a nuclear power plant. The term includes nuclear fission, nuclear decay and
nuclear fusion. Presently, the nuclear fission of elements in the actinide series of the periodic table produce the vast majority of
nuclear energy in the direct service electricity generation, with nuclear decay processes, primarily in the form of geothermal
energy, and radioisotope thermoelectric generators, in niche uses making up the rest.
Nuclear fission - In nuclear physics and nuclear chemistry, nuclear fission is either a nuclear reaction or a radioactive decay process
in which the nucleus of an atom splits into smaller parts (lighter nuclei). The fission process often produces free neutrons and
gamma photons, and releases a very large amount of energy even by the energetic standards of radioactive decay.
Nuclear fuel - is a substance that is used in nuclear power stations to produce heat to power turbines. Heat is created when
nuclear fuel undergoes nuclear fission. Most nuclear fuels contain heavy fissile elements that are capable of nuclear fission, such
as uranium-235 or plutonium-239. When the unstable nuclei of these atoms are hit by a slow-moving neutron, they split, creating
two daughter nuclei and two or three more neutrons. These neutrons then go on to split more nuclei. This creates a self-sustaining
chain reaction that is controlled in a nuclear reactor, or uncontrolled in a nuclear weapon. The processes involved in mining,
refining, purifying, using, and disposing of nuclear fuel are collectively known as the nuclear fuel cycle. Not all types of nuclear
fuels create power from nuclear fission; plutonium-238 and some other elements are used to produce small amounts of nuclear
power by radioactive decay in radioisotope thermoelectric generators and other types of atomic batteries. Nuclear fuel has the
highest energy density of all practical fuel sources.
Nuclear fusion - In nuclear physics, nuclear fusion is a reaction in which two or more atomic nuclei come close enough to form
one or more different atomic nuclei and subatomic particles (neutrons or protons). The difference in mass between the products
and reactants is manifested as the release of large amounts of energy. This difference in mass arises due to the difference in
atomic "binding energy" between the atomic nuclei before and after the reaction. Fusion is the process that powers active or
"main sequence" stars, or other high magnitude stars. The fusion process that produces a nucleus lighter than iron-56 or nickel-
62 will generally yield a net energy release. These elements have the smallest mass per nucleon and the largest binding energy
per nucleon, respectively. Fusion of light elements toward these releases energy (an exothermic process), while a fusion producing
nuclei heavier than these elements, will result in energy retained by the resulting nucleons, and the resulting reaction is
endothermic. The opposite is true for the reverse process, nuclear fission. This means that the lighter elements, such as hydrogen
and helium, are in general more fusible; while the heavier elements, such as uranium and plutonium, are more fissionable. The
extreme astrophysical event of a supernova can produce enough energy to fuse nuclei into elements heavier than iron.
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Nuclear reactors generations of evolution - The nuclear power industry has been developing and improving reactor technology
for more than five decades. Several generations of reactors are commonly distinguished.
1 - Generation I: Reactors were developed in 1950-60s and very few are still running today. They have been referred to
as early prototypic reactors.
2 - Generation II: Developed in mid 1960s, active safety system was often being used in this generations reactors. The
safety system involves electrical or mechanical operation on command, which means they are activated by human
controllers and cannot operate if electrical power systems are shut down. About 90% of nuclear power plants operating
today employ Generation II technology. Many of them have incorporated some passive or inherent safety features
requiring no active controls or operational intervention for accidents avoidance in the event of malfunction, and may rely
on gravity, natural convection or resistance to high temperatures.
3 - Generation III: Advanced Reactors developed in Mid-1990s, their designs incorporate further passive safety systems
which is to increase reactor safety by operating without human intervention or electrical power. European Pressurised
Water Reactor (EPR) and the Westinghouse Advanced Plant 1000 (AP1000) pressurised water reactor belong to this
group.
4 - Generation IV: Designs of this type of reactors are still on the drawing board and will not be operational before 2020
at the earliest, and probably later. They will tend to have closed fuel cycles and burn the long-lived actinides now forming
part of spent fuel, so that fission products are the only high-level waste and the time taken for its radioactivity to fall to
a safe level will be far shorter. Many designs will be fast neutron reactors.
Oil refinery (or petroleum refinery) - is an industrial process plant where crude oil is processed and refined into more useful
products such as petroleum naphtha, gasoline, diesel fuel, asphalt base, heating oil, kerosene, and liquefied petroleum gas.
Oil reservoir - An underground pool of liquid consisting of hydrocarbons, sulfur, oxygen, and nitrogen trapped within a geological
formation and protected from evaporation by the overlying mineral strata.
Oil sands - based synthetic crudes and derivative products, also known as tar sands, or more technically bituminous sands, are a
type of unconventional petroleum deposit. Oil sands are either loose sands or partially consolidated sandstone containing a
naturally occurring mixture of sand, clay, and water, saturated with a dense and extremely viscous form of petroleum technically
referred to as bitumen (or colloquially as tar due to its superficially similar appearance).
Oil stocks - oil stocks include crude oil (including strategic reserves), unfinished oils, natural gas plant liquids, and refined
petroleum products.
Oil bearing shale - is an organic-rich fine-grained sedimentary rock containing kerogen (a solid mixture of organic chemical
compounds) from which liquid hydrocarbons called shale oil (not to be confused with tight oilcrude oil occurring naturally in
shales) can be produced. Shale oil is a substitute for conventional crude oil; however, extracting shale oil from oil shale is more
costly than the production of conventional crude oil both financially and in terms of its environmental impact.
Oil well - A well completed for the production of crude oil from at least one oil zone or reservoir.
Onshore or land base drilling - is defined as drilling with rigs that are moved in by ground transportation and the drilling site is
not over water. Many of these wells are now being drilled using a technique called pad drilling where multiple wells are drilled
from the same site in very close proximity of each other by shifting the rig slightly. Typically, these are mature fields, pushing the
drilling envelope farther to more challenging well formations like new shale fields or very deep wells.
OPEC - Organization of the Petroleum Exporting Countries is an intergovernmental organization of 14 nations as of May 2017,
founded in 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, Venezuela), and headquartered since 1965
in Vienna. As of 2016, the 14 countries accounted for an estimated 44 percent of global oil production and 73 percent of the
world's "proven" oil reserves, giving OPEC a major influence on global oil prices that were previously determined by American-
dominated multinational oil companies. OPEC's stated mission is "to coordinate and unify the petroleum policies of its member
countries and ensure the stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to
consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry."
OPEX - An operating expense, operating expenditure, operational expense, operational expenditure or OPEX is an ongoing cost
for running a product, business, or system.
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Panic of 1907 (also known as the 1907 Bankers' Panic or Knickerbocker Crisis) was a United States financial crisis that took
place over a three-week period starting in mid-October, when the New York Stock Exchange fell almost 50% from its peak the
previous year. Panic occurred, as this was during a time of economic recession, and there were numerous runs on banks and trust
companies. The 1907 panic eventually spread throughout the nation when many state and local banks and businesses entered
bankruptcy. Primary causes of the run included a retraction of market liquidity by a number of New York City banks and a loss of
confidence among depositors, exacerbated by unregulated side bets at bucket shops. The panic was triggered by the failed
attempt in October 1907 to corner the market on stock of the United Copper Company. When this bid failed, banks that had lent
money to the cornering scheme suffered runs that later spread to affiliated banks and trusts, leading a week later to the downfall
of the Knickerbocker Trust CompanyNew York City's third-largest trust. The collapse of the Knickerbocker spread fear
throughout the city's trusts as regional banks withdrew reserves from New York City banks. Panic extended across the nation as
vast numbers of people withdrew deposits from their regional banks.
Peak Gas - According to M. King Hubbert's Hubbert peak theory, Peak gas is the point in time at which the maximum global natural
gas (fossil gas) production rate will be reached, after which the rate of production will enter its terminal decline. Natural gas is a
fossil fuel formed from plant matter over the course of millions of years. It is a finite resource and thus considered to be a non-
renewable energy source.
Peak Oil - an event based on M. King Hubbert's theory, is the point in time when the maximum rate of extraction of petroleum is
reached, after which it is expected to enter terminal decline.[1] Peak oil theory is based on the observed rise, peak, fall, and
depletion of aggregate production rate in oil fields over time. It is often confused with oil depletion; however, peak oil is the point
of maximum production, while depletion refers to a period of falling reserves and supply.
Peak Coal The term Peak coal is used to refer to the point in time at which coal production and consumption reaches its
maximum, after which, it is assumed, production and consumption will decline steadily. The term was originally used in connection
with M. King Hubbert's Hubbert peak theory, in which the finite nature of the resource determines a constraint on production.
Peak Uranium - is the point in time that the maximum global uranium production rate is reached. After that peak, according to
Hubbert peak theory, the rate of production enters a terminal decline. While uranium is used in nuclear weapons, its primary use
is for energy generation via nuclear fission of the uranium-235 isotope in a nuclear power reactor. Each kilogram of uranium-235
fissioned releases the energy equivalent of millions of times its mass in chemical reactants, as much energy as 2700 tons of coal,
but uranium-235 is only 0.7% of the mass of natural uranium. Uranium-235 is a finite non-renewable resource.
Per capita - The phrase in Latin means "by heads" or "for each head", i.e., per individual/person. The term is used in a wide variety
of social sciences and statistical research contexts, including government statistics, economic indicators, and built environment
studies. It is commonly and usually used in the field of statistics in place of saying "per person"
Pennsylvania oil rush (The) - was a boom in petroleum production which occurred in north western Pennsylvania from 1859 to
the early 1870s. It was the first oil boom in the United States. The oil rush began in Titusville, Pennsylvania, in the Oil Creek Valley
when Colonel Edwin L. Drake struck "rock oil" there. Titusville and other towns on the shores of Oil Creek expanded rapidly as oil
wells and refineries shot up across the region. Oil quickly became one of the most valuable commodities in the United States and
railroads expanded into Western Pennsylvania to ship petroleum to the rest of the country. By the mid-1870s, the oil industry was
well established, and the "rush" to drill wells and control production was over. Pennsylvania oil production peaked in 1891, and
was later surpassed by western states such as Texas and California, but some oil industry remains in Pennsylvania.
Petrodollar (The) Petrodollar recycling is the international spending or investment of a country's revenues from petroleum
exports ("petrodollars"). It generally refers to the phenomenon of major petroleum-exporting nations, mainly the OPEC members
plus Russia and Norway, earning more money from the export of crude oil than they could efficiently invest in their own
economies. The resulting global interdependencies and financial flows, from oil producers back to oil consumers, can reach a scale
of hundreds of billions of US dollars per year including a wide range of transactions in a variety of currencies, some pegged to
the US dollar and some not. These flows are heavily influenced by government-level decisions regarding international investment
and aid, with important consequences for both global finance and petroleum politics. The phenomenon is most pronounced during
periods when the price of oil is historically high. The first major petrodollar surge (19741981) resulted in more financial
complications than the second (20052014). These OPEC countries were advised on how to invest their surpluses by Western
investment bankers and subsequently signed contracts with the U.S. on military bases, large arms deals, military training and
cooperation on governmental and economic levels. Their governments' dependency on U.S. specialists remains unchanged to the
present day. An agreement was made between the House of Saud in Saudi Arabia to price all oil they control in $US dollars,
making the $USD the petrodollar and over time, the world reserve currency. In exchange for this, the United States government
agreed to protect the House of Saud with its military against all aggressors domestic and foreign.
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Petroleum and other liquids - All petroleum including crude oil and products of petroleum refining, natural gas liquids, biofuels,
and liquids derived from other hydrocarbon sources (including coal to liquids and gas to liquids). Not included are liquefied natural
gas (LNG) and liquid hydrogen.
Petroleum products - Petroleum products are obtained from the processing of crude oil (including lease condensate), natural gas,
and other hydrocarbon compounds. Petroleum products include unfinished oils, liquefied petroleum gases, pentanes plus,
aviation gasoline, motor gasoline, naphtha-type jet fuel, kerosene-type jet fuel, kerosene, distillate fuel oil, residual fuel oil,
petrochemical feedstocks, special naphthas, lubricants, waxes, petroleum coke, asphalt, road oil, still gas, and miscellaneous
products.
Plunge Protection Team (The) - The Working Group on Financial Markets (also, President's Working Group on Financial Markets,
the Working Group, and colloquially the Plunge Protection Team) was created by Executive Order 12631, signed on March 18,
1988, by United States President Ronald Reagan. As established by the executive order, the Working Group has three purposes
and functions:
1 Recognizing the goals of enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation's financial
markets and maintaining investor confidence, the Working Group shall identify and consider:
a) the major issues raised by the numerous studies on the events in the financial markets surrounding October 19, 1987,
and any of those recommendations that have the potential to achieve the goals noted above; and
b) the actions, including governmental actions under existing laws and regulations (such as policy coordination and
contingency planning), that are appropriate to carry out these recommendations.
2 The Working Group shall consult, as appropriate, with representatives of the various exchanges, clearinghouses, self-
regulatory bodies, and with major market participants to determine private sector solutions wherever possible.
3 The Working Group shall report to the President initially within 60 days (and periodically thereafter) on its progress and,
if appropriate, its views on any recommended legislative changes. The Working Group consists of:
The Secretary of the Treasury, or his or her designee (as Chairperson of the Working Group);
The Chairperson of the Board of Governors of the Federal Reserve System, or his or her designee;
The Chairperson of the Securities and Exchange Commission, or his or her designee; and
The Chairperson of the Commodity Futures Trading Commission, or his or her designee.
Plutonium - is a transuranic radioactive chemical element with symbol Pu and atomic number 94. The element normally exhibits
six allotropes and four oxidation states. It reacts with carbon, halogens, nitrogen, silicon and hydrogen. When exposed to moist
air, it forms oxides and hydrides that can expand the sample up to 70% in volume, which in turn flake off as a powder that is
pyrophoric. It is radioactive and can accumulate in bones, which makes the handling of plutonium dangerous. Plutonium was first
produced and isolated on December 14, 1940 by Dr. Glenn T. Seaborg, Joseph W. Kennedy, Edwin M. McMillan, and Arthur C.
Wahl by deuteron bombardment of uranium-238 in the 60-inch cyclotron at the University of California, Berkeley. Used to make
nuclear weapons and can be used for nuclear fuel.
Population growth - In biology or human geography, population growth is the increase in the number of individuals in a
population. Global human population growth amounts to around 75 million annually, or 1.1% per year. The global population has
grown from 1 billion in 1800 to 7 billion in 2012. It is expected to keep growing, and estimates have put the total population at 8.4
billion by mid-2030, and 9.6 billion by mid-2050. Many nations with rapid population growth have low standards of living, whereas
many nations with low rates of population growth have high standards of living. Current World Population is 7,519,873,847
people. On 1 January 2017, the population of the European Union (EU-28) was estimated at 511.8 million.
Power - In physics, power is the rate of doing work. It is the amount of energy consumed per unit time. Having no direction, it is a
scalar quantity. In the SI system, the unit of power is the joule per second (J/s), known as the watt in honour of James Watt, the
eighteenth-century developer of the steam engine. Another common and traditional measure is horsepower (comparing to the
power of a horse). The rate of producing, transferring, or using energy, most commonly associated with electricity. Power is
measured in watts and often expressed in kilowatts (kW) or megawatts (MW).
Power Station - A power station, also referred to as a power plant or powerhouse and sometimes generating station or generating
plant, is an industrial facility for the generation of electric power. Most power stations contain one or more generators, a rotating
machine that converts mechanical power into electrical power. The relative motion between a magnetic field and a conductor
creates an electrical current. The energy source harnessed to turn the generator varies widely. Most power stations in the world
burn fossil fuels such as coal, oil, and natural gas to generate electricity. Others use nuclear power, but there is an increasing use
of cleaner renewable sources such as solar, wind, wave and hydroelectric.
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Power station output Power delivered to the electrical power grid by that power station.
Power (electrical) - An electric measurement unit of power called a voltampere is equal to the product of 1 volt and 1 ampere.
This is equivalent to 1 watt for a direct current system, and a unit of apparent power is separated into real and reactive power.
Real power is the work-producing part of apparent power that measures the rate of supply of energy and is denoted as kilowatts
(kW). Reactive power is the portion of apparent power that does no work and is referred to as kilovars; this type of power must
be supplied to most types of magnetic equipment, such as motors, and is supplied by generator or by electrostatic equipment.
Voltamperes are usually divided by 1,000 and called kilovoltamperes (kVA). Energy is denoted by the product of real power and
the length of time utilized; this product is expressed as kilowatthours.
Price-performance - In economics and engineering, the priceperformance ratio refers to a product's ability to deliver
performance, of any sort, for its price. Generally speaking, products with a lower price/performance ratio are more desirable,
excluding other factors. Priceperformance is often written as costperformance or costbenefit. Even though this term would
seem to be a straightforward ratio, when price performance is improved, better, or increased, it actually refers to the performance
divided by the price, in other words exactly the opposite ratio to rank a product as having an increased price/performance.
Primary energy consumption - Consumption of primary energy. (Energy sources that are produced from other energy sources,
e.g., coal coke from coal, are included in primary energy consumption only if their energy content has not already been included
as part of the original energy source. This includes the following in energy consumption: coal consumption; coal coke net imports;
petroleum consumption (petroleum products supplied, including natural gas plant liquids and crude oil burned as fuel); dry natural
gas excluding supplemental gaseous fuels consumption; nuclear electricity net generation (converted to Btu using the nuclear
plants heat rates); conventional hydroelectricity net generation (converted to Btu using the fossil-fuels plant heat rates);
geothermal electricity net generation (converted to Btu using the fossil-fuels plant heat rates), and geothermal heat pump energy
and geothermal direct use energy; solar thermal and photovoltaic electricity net generation (converted to Btu using the fossil-
fuels plant heat rates), and solar thermal direct use energy; wind electricity net generation (converted to Btu using the fossil-fuels
plant heat rates); wood and wood-derived fuels consumption; biomass waste consumption; fuel ethanol and biodiesel
consumption; losses and co-products from the production of fuel ethanol and biodiesel; and electricity net imports (converted to
Btu using the electricity heat content of 3,412 Btu per kilowatthour).
Primary energy consumption expenditures - Expenditures for energy consumed in each of the four major end-use sectors,
excluding energy in the form of electricity, plus expenditures by the electric utilities sector for energy used to generate electricity.
There are no fuel-associated expenditures for associated expenditures for hydroelectric power, geothermal energy, photovoltaic
and solar energy, or wind energy. Also excluded are the quantifiable consumption expenditures that are an integral part of process
fuel consumption.
Primary energy production - Production of primary energy. This includes the following in energy production: coal production,
waste coal supplied, and coal refuse recovery; crude oil and lease condensate production; natural gas plant liquids production;
dry natural gas excluding supplemental gaseous fuels production; nuclear electricity net generation (converted to Btu using the
nuclear plant heat rates); conventional hydroelectricity net generation (converted to Btu using the fossil-fuels plant heat rates);
geothermal electricity net generation (converted to Btu using the fossil-fuels plant heat rates), and geothermal heat pump energy
and geothermal direct use energy; solar thermal and photovoltaic electricity net generation (converted to Btu using the fossil-
fuels plant heat rates), and solar thermal direct use energy; wind electricity net generation (converted to Btu using the fossil-fuels
plant heat rates); wood and wood-derived fuels consumption; biomass waste consumption; and biofuels feedstock.
Primary fuels - Fuels that can be used continuously. They can sustain the boiler sufficiently for the production of electricity.
Primary raw materials - Are the product of the primary production sectors, which encompass the extraction of natural resources
from the environment and their transformation through processing or refining. The obtained raw materials are primary
commodities, the base materials for further manufacturing and consumption processes.
Printing of Money or Money Creation - Money creation (also known as credit creation) is the process by which the money supply
of a country or a monetary region (such as the Eurozone) is increased. A central bank may introduce new money into the economy
(termed "expansionary monetary policy", or by detractors "printing money") by purchasing financial assets or lending money to
financial institutions. However, in most countries today, most of the money supply is in the form of bank deposits, which is created
by private banks in a fractional reserve banking system. Bank lending increases the amount of broad money beyond the amount
of base money originally created by the central bank. Reserve requirements, capital adequacy ratios, and other policies of the
central bank influence this process.
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Probable (indicated) reserves, coal - Reserves or resources for which tonnage and grade are computed partly from specific
measurements, samples, or production data and partly from projection for a reasonable distance on the basis of geological
evidence. The sites available are too widely or otherwise in appropriately spaced to permit the mineral bodies to be outlined
completely or the grade established throughout.
Probable energy reserves - Estimated quantities of energy sources that, on the basis of geologic evidence that supports
projections from proved reserves, can reasonably be expected to exist and be recoverable under existing economic and operating
conditions. Site information is insufficient to establish with confidence the location, quality, and grades of the energy source. Note:
This term is equivalent to "Indicated Reserves" as defined in the resource/reserve classification contained in the U.S. Geological
Survey Circular 831, 1980. Measured and indicated reserves, when combined, constitute demonstrated reserves.
Process fuel - All energy consumed in the acquisition, processing, and transportation of energy. Quantifiable process fuel includes
three categories natural gas lease and plant operations, natural gas pipeline operations, and oil refinery operations.
Processed gas - Natural gas that has gone through a processing plant.
Project commissioning - is the process of assuring that all systems and components of a building or industrial plant are designed,
installed, tested, operated, and maintained according to the operational requirements of the owner or final client. A
commissioning process may be applied not only to new projects but also to existing units and systems subject to expansion,
renovation or revamping. In practice, the commissioning process comprises the integrated application of a set of engineering
techniques and procedures to check, inspect and test every operational component of the project, from individual functions, such
as instruments and equipment, up to complex amalgamations such as modules, subsystems and systems.
Project for the New American Century (PNAC) - was a neoconservative think tank based in Washington, D.C. that focused on
United States foreign policy. It was established as a non-profit educational organization in 1997, and founded by William Kristol
and Robert Kagan. PNAC's stated goal was "to promote American global leadership." The organization stated that "American
leadership is good both for America and for the world," and sought to build support for "a Reaganite policy of military strength
and moral clarity." Of the twenty-five people who signed PNAC's founding statement of principles, ten went on to serve in the
administration of U.S. President George W. Bush, including Dick Cheney, Donald Rumsfeld, and Paul Wolfowitz. Observers such
as Irwin Stelzer and Dave Grondin have suggested that the PNAC played a key role in shaping the foreign policy of the Bush
Administration, particularly in building support for the Iraq War.
Production, oil and gas - The lifting of oil and gas to the surface and gathering, treating, field processing (as in the case of
processing gas to extract liquid hydrocarbons), and field storage. The production function shall normally be regarded as
terminating at the outlet valve on the lease or field production storage tank. If unusual physical or operational circumstances exist,
it may be more appropriate to regard the production function as terminating at the first point at which oil, gas, or gas liquids are
delivered to a main pipeline, a common carrier, a refinery, or a marine terminal.
Proved (measured) reserves, coal - Reserves or resources for which tonnage is computed from dimensions revealed in outcrops,
trenches, workings, and drill holes and for which the grade is computed from the results of detailed sampling. The sites for
inspection, sampling, and measurement are spaced so closely and the geologic character is so well defined that size, shape, and
mineral content are well established. The computed tonnage and grade are judged to be accurate within limits that are stated,
and no such limit is judged to be different from the computed tonnage or grade by more than 20 percent.
Proved energy reserves - Estimated quantities of energy sources that analysis of geologic and engineering data demonstrates with
reasonable certainty are recoverable under existing economic and operating conditions. The location, quantity, and grade of the
energy source are usually considered to be well established in such reserves. Note: This term is equivalent to "Measured Reserves"
as defined in the resource/reserve classification contained in the U.S. Geological Survey Circular 831, 1980. Measured and
indicated reserves, when combined, constitute demonstrated reserves.
Proxy (technical) - A figure that can be used to represent the value of something in a calculation.
Purchasing power - (sometimes retroactively called adjusted for inflation) is the number and quality or value of goods and services
that can be purchased with a unit of currency. For example, if one had taken one unit of currency to a store in the 1950s, it is
probable that it would have been possible to buy a greater number of items than would today, indicating that one would have
had a greater purchasing power in the 1950s. Currency can be either a commodity money, like gold or silver, or fiat money emitted
by government sanctioned agencies.
PV - Photovoltaic
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PVCs that convert sunlight directly into energy - A method for producing energy by converting sunlight using photovoltaic cells
(PVCs) that are solid-state single converter devices. Although currently not in wide usage, commercial customers have a growing
interest in usage and, therefore, DOE has a growing interest in the impact of PVCs on energy consumption. Economically, PVCs
are competitive with other sources of electricity.
Pyrolysis - The thermal decomposition of biomass at high temperatures (greater than 400 F, or 200 C) in the absence of air. The
end product of pyrolysis is a mixture of solids (char), liquids (oxygenated oils), and gases (methane, carbon monoxide, and carbon
dioxide) with proportions determined by operating temperature, pressure, oxygen content, and other conditions.
Quantitative easing (QE) - is a monetary policy in which a central bank creates new electronic money in order to buy government
bonds or other financial assets to stimulate the economy (i.e., to increase private-sector spending and return inflation to its target).
An unconventional form of monetary policy, it is usually used when standard monetary policy has become ineffective at combating
a falling money supply. A central bank implements quantitative easing by buying specified amounts of financial assets from
commercial banks and other financial institutions, thus raising the prices of those financial assets and lowering their yield, while
simultaneously increasing the money supply. This differs from the more usual policy of buying or selling short-term government
bonds to keep interbank interest rates at a specified target value. Also called printing of money. QE1-3 added $4.5 Trillion to US
Federal Reserve balance Sheet.
QE1 Round 1 of quantitative easing by the United States Federal Reserve. December 2008 to March 2010.
QE2 Round 2 of quantitative easing by the United States Federal Reserve. November 2010 to June 2011.
QE3 Round 3 of quantitative easing by the United States Federal Reserve. September 2012 to December 2013.
Radioactive decay - (also known as nuclear decay or radioactivity) is the process by which an unstable atomic nucleus loses energy
(in terms of mass in its rest frame) by emitting radiation, such as an alpha particle, beta particle with neutrino or only a neutrino
in the case of electron capture, gamma ray, or electron in the case of Internal conversion. A material containing such unstable
nuclei is considered radioactive.
Radioactive half-life - Half-life (symbol t12) is the time required for a quantity to reduce to half its initial value. The term is
commonly used in nuclear physics to describe how quickly unstable atoms undergo, or how long stable atoms survive, radioactive
decay. The term is also used more generally to characterize any type of exponential or non-exponential decay. For example, the
medical sciences refer to the biological half-life of drugs and other chemicals in the human body. The converse of half-life is
doubling time. Half-life is constant over the lifetime of an exponentially decaying quantity, and it is a characteristic unit for the
exponential decay equation. Radioactive isotopes eventually decay, or disintegrate, to harmless materials. Some isotopes decay
in hours or even minutes, but others decay very slowly. Strontium-90 and cesium-137 have half-lives of about 30 years (half the
radioactivity will decay in 30 years). Plutonium-239 has a half-life of 24,000 years.
Radioactive waste - is waste that contains radioactive material. Radioactive waste is usually a by-product of nuclear power
generation and other applications of nuclear fission or nuclear technology, such as research and medicine. Radioactive waste is
hazardous to all forms of life and the environment, and is regulated by government agencies in order to protect human health
and the environment. Radioactivity naturally decays over time, so radioactive waste has to be isolated and confined in appropriate
disposal facilities for a sufficient period until it no longer poses a threat. The time radioactive waste must be stored for depends
on the type of waste and radioactive isotopes. Current approaches to managing radioactive waste have been segregation and
storage for short-lived waste, near-surface disposal for low and some intermediate level waste, and deep burial or partitioning /
transmutation for the high-level waste.
Rate of energy supply (The) - that is, the rate at which the resource can be produced. A large insitu resource does society little
good if it cannot be produced consistently and in large enough quantitiescharacteristics that are constrained by geological,
geochemical, and geographical factors (and subsequently manifested in economic costs). For example, although resources such
as oil shale, gas hydrates, and in situ coal gasification have a very large in situ potential, they have been produced at only miniscule
rates, if at all, despite major expenditures over many years on pilot projects. Tar sands similarly have immense in situ resources,
but more than four decades of very large capital inputs and collateral environmental impacts have yielded production of less than
two percent of world oil requirements.
Raw material - Crude or processed material that can be converted by manufacture, processing, or combination into a new and
useful product. The basic substances or mixtures of substances in an untreated state except for extraction and primary processing.
They can be subdivided into primary and secondary raw materials.
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Real economy (The) - The part of the economy that is concerned with actually producing goods and services, as opposed to the
part of the economy that is concerned with buying and selling on the financial markets.
Refinery Processing Gain - The volumetric amount by which total output is greater than input. This difference is due to the
processing of crude oil into products that, in total, have lower specific gravity than the crude oil processed. Therefore, in terms of
volume, the total output of products is greater than input.
Renewable energy electricity generation - Renewable energy is energy that is collected from renewable resources, which are
naturally replenished on a human timescale, such as sunlight, wind, rain, tides, waves, and geothermal heat. Renewable energy
often provides energy in four important areas: electricity generation, air and water heating/cooling, transportation, and rural (off-
grid) energy services.
Saudi Arabia - officially the Kingdom of Saudi Arabia (KSA), is an Arab sovereign state in Western Asia constituting the bulk of the
Arabian Peninsula. With a land area of approximately 2,150,000 km2, Saudi Arabia is geographically the fifth-largest state in Asia
and second-largest state in the Arab world after Algeria. Saudi Arabia is bordered by Jordan and Iraq to the north, Kuwait to the
northeast, Qatar, Bahrain and the United Arab Emirates to the east, Oman to the southeast and Yemen to the south. It is separated
from Israel and Egypt by the Gulf of Aqaba. It is the only nation with both a Red Sea coast and a Persian Gulf coast and most of its
terrain consists of arid desert and mountains. Saudi Arabia has dominated the oil producing market for decades and maintains
the Petrodollar.
Second Oil Shock/Crisis (1979) The 1979 (or second) oil crisis or oil shock occurred in the United States due to decreased oil
output in the wake of the Iranian Revolution. Despite the fact that global oil supply decreased by only ~4%, widespread panic
resulted, driving the price far higher. The price of crude oil more than doubled to $39.50 per barrel over the next 12 months, and
long lines once again appeared at gas stations, as they had in the 1973 oil crisis.
Secondary raw materials Primary raw materials are used and then will finally end up as waste, from which secondary raw
materials can be derived through recycling. These recycled materials can be used as feed stock into manufacturing in place of
primary raw materials.
Seigniorage - (from Old French seigneuriage "right of the lord (seigneur) to mint money"), is the difference between the value of
money and the cost to produce and distribute it. The term can be applied in the following ways:
Seigniorage derived from speciemetal coinsis a tax, added to the total price of a coin (metal content and production
costs), that a customer of the mint had to pay to the mint, and that was sent to the sovereign of the political area.
Seigniorage derived from notes is more indirect, being the difference between interest earned on securities acquired in
exchange for bank notes and the costs of producing and distributing those notes.
The term also applies to monetary seignorage, where sovereign-issued securities are exchanged for newly minted bank notes by
a central bank, thus allowing the sovereign to 'borrow' without needing to repay. However, monetary seignorage refers to the
sovereign revenue obtained through routine debt monetization, including expanding the money supply during GDP growth and
meeting yearly inflation targets. Seigniorage is a convenient source of revenue for some governments. By providing the
government with increased purchasing power at the expense of the public's purchasing power, it imposes what is metaphorically
known as an inflation tax on the public.
Shadow Banking System - is a term for the collection of non-bank financial intermediaries that provide services similar to
traditional commercial banks but outside normal financial regulations. This definition was first put forward by PIMCO (Pacific
Investment Management COmpany) executive director Paul McCulley at FED (Federal Reserve System) annual meeting in 2007.
Shadow banking has grown in importance to rival traditional depository banking, and was a primary factor in the subprime
mortgage crisis of 2007-2008 and the global recession that followed. Former US Federal Reserve Chair Ben Bernanke provided
the following definition in November 2013:
"Shadow banking, as usually defined, comprises a diverse set of institutions and markets that, collectively, carry out
traditional banking functions but do so outside, or in ways only loosely linked to, the traditional system of regulated
depository institutions. Examples of important components of the shadow banking system include securitization vehicles,
asset-backed commercial paper [ABCP] conduits, and money market funds, markets for repurchase agreements,
investment banks, and mortgage companies"
Shale gas - Natural gas produced from wells that are open to shale formations. Shale is a fine-grained, sedimentary rock composed
of mud from flakes of clay minerals and tiny fragments (silt-sized particles) of other materials. The shale acts as both the source
and the reservoir for the natural gas.
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Shale oil - is an unconventional oil produced from oil shale rock fragments by pyrolysis, hydrogenation, or thermal dissolution.
These processes convert the organic matter within the rock (kerogen) into synthetic oil and gas. The resulting oil can be used
immediately as a fuel or upgraded to meet refinery feedstock specifications by adding hydrogen and removing impurities such as
sulfur and nitrogen. The refined products can be used for the same purposes as those derived from crude oil. The term "shale oil"
is also used for crude oil produced from shales of other very low permeability formations. However, to reduce the risk of confusion
of shale oil produced from oil shale with crude oil in oil-bearing shales, the term "tight oil" is preferred for the latter. The
International Energy Agency recommends to use the term "light tight oil" and World Energy Resources 2013 report by the World
Energy Council uses the term "tight oil" for crude oil in oil-bearing shales.
Shallow offshore drilling - is typically defined as drilling in a water depth that is less than 500 feet (150 meters). In general, rigs
drilling in this environment are drilling platforms, otherwise known as jackups, which are able to reach the sea bottom. Wells
being drilled in shallow offshore environments are typically located in mature fields. A mature field is one where production has
reached its peak and has started to decline.
Solar power generation - is the conversion of energy from sunlight into electricity, either directly using photovoltaics (PV),
indirectly using concentrated solar power, or a combination. Concentrated solar power systems use lenses or mirrors and tracking
systems to focus a large area of sunlight into a small beam. Photovoltaic cells convert light into an electric current using the
photovoltaic effect. Photovoltaics were initially solely used as a source of electricity for small and medium-sized applications,
from the calculator powered by a single solar cell to remote homes powered by an off-grid rooftop PV system. Commercial
concentrated solar power plants were first developed in the 1980s. The 392 MW Ivanpah installation is the largest concentrating
solar power plant in the world, located in the Mojave Desert of California. As the cost of solar electricity has fallen, the number of
grid-connected solar PV systems has grown into the millions and utility-scale solar power stations with hundreds of megawatts
are being built. Solar PV is rapidly becoming an inexpensive, low-carbon technology to harness renewable energy from the Sun.
The current largest photovoltaic power station in the world is the 850 MW Longyangxia Dam Solar Park, in Qinghai, China.
Sovereign debt default - is the failure or refusal of the government of a sovereign state to pay back its debt in full. Cessation of
due payments (or receivables) may either be accompanied by formal declaration (repudiation) of a government not to pay (or
only partially pay) its debts, or it may be unannounced. A credit rating agency will take into account in its gradings capital, interest,
extraneous and procedural defaults, and failures to abide by the terms of bonds or other debt instruments. Countries have at
times escaped the real burden of some of their debt through inflation. This is not "default" in the usual sense because the debt is
honoured, albeit with currency of lesser real value. Sometimes governments devalue their currency. This can be done by printing
more money to apply toward their own debts, or by ending or altering the convertibility of their currencies into precious metals
or foreign currency at fixed rates. Harder to quantify than an interest or capital default, this often is defined as an extraneous or
procedural default (breach) of terms of the contracts or other instruments.
Soviet Union - officially the Union of Soviet Socialist Republics (USSR; Russian:
()), also known unofficially as Russia, was a socialist state in Eurasia that existed from 1922 to 1991. Nominally a union of
multiple equal national Soviet republics, its government and economy were highly centralized. The country was a one-party
federation, governed by the Communist Party with Moscow as its capital.
Sour crude oil - is crude oil containing a high amount of the impurity sulfur. It is common to find crude oil containing some
impurities. When the total sulfur level in the oil is more than 0.5% the oil is called "sour". The impurities need to be removed
before this lower-quality crude can be refined into petrol, thereby increasing the cost of processing. This results in a higher-priced
gasoline than that made from sweet crude oil. Current environmental regulations in the United States strictly limit the sulfur
content in refined fuels such as diesel and gasoline. The majority of the sulfur in crude oil occurs bonded to carbon atoms, with
a small amount occurring as elemental sulfur in solution and as hydrogen sulfide gas. Sour oil can be toxic and corrosive, especially
when the oil contains higher levels of hydrogen sulfide, which is a breathing hazard. At low concentrations the gas gives the oil
the smell of rotting eggs.
Special Drawing Rights Currency (SDR) - (ISO 4217 currency code XDR, also abbreviated SDR) are supplementary foreign-exchange
reserve assets defined and maintained by the International Monetary Fund (IMF). The XDR is the unit of account for the IMF, and
is not a currency per se.[2] XDRs instead represent a claim to currency held by IMF member countries for which they may be
exchanged.[3] The XDR was created in 1969 to supplement a shortfall of preferred foreign-exchange reserve assets, namely gold
and the U.S. dollar. XDRs are allocated to countries by the IMF. Private parties do not hold or use them. The amount of XDRs in
existence was around XDR 21.4 billion in August 2009. During the global financial crisis of 2009, an additional XDR 182.6 billion
were allocated to "provide liquidity to the global economic system and supplement member countries official reserves". By
October 2014, the amount of XDRs in existence was XDR 204 billion.
The value of the XDR is based on a basket of key international currencies reviewed by IMF every five years. The weights assigned
to each currency in the XDR basket are adjusted to take into account their current prominence in terms of international trade and
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national foreign exchange reserves.[3] In the review conducted in November 2015, the IMF decided that the Renminbi (Chinese
yuan) would be added to the basket effective October 1, 2016. From that date, the XDR basket now consists of the following five
currencies: U.S. dollar 41.73%, Euro 30.93%, Renminbi (Chinese yuan) 10.92%, Japanese yen 8.33%, British pound 8.09%.
Spent nuclear fuel rods - occasionally called used nuclear fuel, is nuclear fuel that has been irradiated in a nuclear reactor (usually
at a nuclear power plant). It is no longer useful in sustaining a nuclear reaction in an ordinary thermal reactor and depending on
its point along the nuclear fuel cycle, it may have considerably different isotopic constituents. When a nuclear reactor has been
shut down and the nuclear fission chain reaction has ceased, a significant amount of heat will still be produced in the fuel due to
the beta decay of fission products. For this reason, at the moment of reactor shutdown, decay heat will be about 7% of the previous
core power if the reactor has had a long and steady power history. About 1 hour after shutdown, the decay heat will be about
1.5% of the previous core power. After a day, the decay heat falls to 0.4%, and after a week it will be 0.2%. The decay heat
production rate will continue to slowly decrease over time. Spent fuel that has been removed from a reactor is ordinarily stored
in a water-filled spent fuel pool for a year or more (in some sites 10 to 20 years) in order to cool it and provide shielding from its
radioactivity. Practical spent fuel pool designs generally do not rely on passive cooling but rather require that the water be actively
pumped through heat exchangers.
Spot price - is the current market price at which an asset is bought or sold for immediate payment and delivery. It is differentiated
from the forward price or the futures price, which are prices at which an asset can be bought or sold for delivery in the future.
Stagflation - In economics, stagflation, a portmanteau of stagnation and inflation, is a situation in which the inflation rate is high,
the economic growth rate slows, and unemployment remains steadily high. It raises a dilemma for economic policy, since actions
designed to lower inflation may exacerbate unemployment, and vice versa. The term is generally attributed to a British
Conservative Party politician who became Chancellor of the Exchequer in 1970, Iain Macleod, who coined the phrase in his speech
to Parliament in 1965. Keynes did not use the term, but some of his work refers to the conditions that most would recognise as
stagflation. In the version of Keynesian macroeconomic theory that was dominant between the end of World War II and the late
1970s, inflation and recession were regarded as mutually exclusive, the relationship between the two being described by the
Phillips curve. Stagflation is very costly and difficult to eradicate once it starts, both in social terms and in budget deficits.
Stand-alone-complex - A situation in which the observers can assume the conclusion that multiple subjects are acting as a system
for a common goal (a complex); but truly, all subjects had zero involvement with each other and it was merely coincidence that
they seemed to have a common goal (stand-alone).
Standard & Poor's 500 Index (S&P 500) - or just "the S&P", is an American stock market index based on the market capitalizations
of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 index components and their weightings
are determined by S&P Dow Jones Indices. It differs from other U.S. stock market indices, such as the Dow Jones Industrial Average
or the Nasdaq Composite index, because of its diverse constituency and weighting methodology. It is one of the most commonly
followed equity indices, and many consider it one of the best representations of the U.S. stock market, and a bellwether for the
U.S. economy. The National Bureau of Economic Research has classified common stocks as a leading indicator of business cycles.
Steam engine - A steam engine is a heat engine that performs mechanical work using steam as its working fluid. Steam engines
are external combustion engines, where the working fluid is separated from the combustion products.
Sub-bituminous coal - is a type of coal whose properties range from those of lignite to those of bituminous coal and are used
primarily as fuel for steam-electric power generation.
Substitute (synthetic) natural gas - Substitute natural gas (SNG), or synthetic natural gas, is a fuel gas that can be produced from
fossil fuels such as lignite coal, oil shale, or from biofuels (when it is named bio-SNG) or from renewable electrical energy.
Supply network - is a pattern of temporal and spatial processes carried out at facility nodes and over distribution links, which adds
value for customers through the manufacturing and delivery of products. It comprises the general state of business affairs in which
all kinds of material (work-in-process material as well as finished products) are transformed and moved between various value-
added points to maximize the value added for customers.
Supply chain - is a special instance of a supply network in which raw materials, intermediate materials and finished goods are
procured exclusively as products through a chain of processes that supply one another.
Sweet crude oil - is a type of petroleum. The New York Mercantile Exchange designates petroleum with less than 0.42% sulfur as
sweet. Petroleum containing higher levels of sulfur is called sour crude oil. Sweet crude oil contains small amounts of hydrogen
sulfide and carbon dioxide. High-quality, low-sulfur crude oil is commonly used for processing into gasoline and is in high demand,
particularly in the industrialized nations. Light sweet crude oil is the most sought-after version of crude oil as it contains a
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disproportionately large fraction that is directly processed (fractionation) into gasoline (naphtha), kerosene, and high-quality
diesel (gas oil). The term sweet originates from the fact that a low level of sulfur provides the oil with a mildly sweet taste and
pleasant smell. Nineteenth-century prospectors would taste and smell small quantities of oil to determine its quality.
Systemic banking crisis - is one where all or almost all of the banking capital in a country is wiped out. The resulting chain of
bankruptcies can cause a long economic recession as domestic businesses and consumers are starved of capital as the domestic
banking system shuts down.
Tar sands see Oil sands
Temporal marker - A temporal marker is any statement that helps answer the question When did this happen? Often used as
an analytical tool to correlate causality or help define the existence of a relationship between events over time.
Three Mile Island accident (The) - was caused by a nuclear meltdown that occurred on March 28, 1979, in reactor number 2 of
Three Mile Island Nuclear Generating Station (TMI-2) in Dauphin County, Pennsylvania, United States. It was the most significant
accident in U.S. commercial nuclear power plant history. The incident was rated a five on the seven-point International Nuclear
Event Scale: Accident With Wider Consequences.
Tidal power generation - Tidal power or tidal energy is a form of hydropower that converts the energy obtained from tides into
useful forms of power, mainly electricity. Although not yet widely used, tidal energy has potential for future electricity generation.
Tides are more predictable than the wind and the sun. Among sources of renewable energy, tidal energy has traditionally suffered
from relatively high cost and limited availability of sites with sufficiently high tidal ranges or flow velocities, thus constricting its
total availability. However, many recent[when? clarification needed] technological developments and improvements, both in
design (e.g. dynamic tidal power, tidal lagoons) and turbine technology (e.g. new axial turbines, cross flow turbines), indicate that
the total availability of tidal power may be much higher than previously assumed, and that economic and environmental costs
may be brought down to competitive levels.
Tight gas - is natural gas produced from reservoir rocks with such low permeability that massive hydraulic fracturing is necessary
to produce the well at economic rates. Tight gas reservoirs are generally defined as having less than 0.1 millidarcy (mD) matrix
permeability and less than ten percent matrix porosity.[1][2] Although shales have low permeability and low effective porosity,
shale gas is usually considered separate from tight gas, which is contained most commonly in sandstone, but sometimes in
limestone. Tight gas is considered an unconventional source of natural gas. Rock with permeabilities as little as one nanodarcy,
reservoir stimulation may be economically productive with optimized spacing and completion of staged fractures to maximize
yield with respect to cost.
Tight oil - Tight oil (also known as shale oil, shale-hosted oil or light tight oil, abbreviated LTO) is light crude oil contained in
petroleum-bearing formations of low permeability, often shale or tight sandstone. Economic production from tight oil formations
requires the same hydraulic fracturing and often uses the same horizontal well technology used in the production of shale gas.
While sometimes called "shale oil", tight oil should not be confused with oil shale, which is shale rich in kerogen, or shale oil, which
is oil produced from oil shales.
Thorium - is a chemical element with symbol Th and atomic number 90. Thorium metal is silvery and tarnishes black when exposed
to air, forming the dioxide; it is soft, malleable, and has a high melting point. Thorium is an electropositive actinide, whose
chemistry is dominated by the +4 oxidation state; it is quite reactive, prone to ignition on air when properly divided. Thorium is
weakly radioactive: all of its known isotopes are unstable. Thorium-232 (232Th), which has 142 neutrons, is the most stable isotope
of thorium and accounts for nearly all natural thorium, with six other natural isotopes occurring only as trace radioisotopes.
Thorium-based nuclear power - is nuclear reactor-based, fuelled primarily by the nuclear fission of the isotope uranium-233
produced from the fertile element thorium. According to proponents, a thorium fuel cycle offers several potential advantages
over a uranium fuel cycleincluding much greater abundance on Earth, superior physical and nuclear fuel properties, and reduced
nuclear waste production. However, development of thorium power has significant start-up costs.
Ukraine crisis - A prolonged crisis in Ukraine began on 21 November 2013, when then-president Viktor Yanukovych suspended
preparations for the implementation of an association agreement with the European Union. This decision resulted in mass protests
by its proponents, known as the "Euromaidan". After months of such protests, Yanukovych was ousted by the protesters on 22
February 2014, when he fled the Ukrainian capital city of Kiev. Following his ousting, unrest enveloped the largely Russophone
eastern and southern regions of Ukraine, from where he had drawn most of his support. An ensuing political crisis and Russian
military intervention in the Ukrainian autonomous region of Crimea resulted in the annexation of Crimea by Russia on 18 March
2014. Subsequently, unrest in Donetsk and Luhansk oblasts of Ukraine evolved into a war in Donbass between the post-
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revolutionary Ukrainian government and pro-Russian insurgents, supported and often assisted by the Russian military and special
forces.
Unconventional oil production - An umbrella term for oil and natural gas that is produced by means that do not meet the criteria
for conventional production. This is oil which requires advanced production methods due to its geologic formations and/or is
heavy and does not flow on its own. Note: What has qualified as "unconventional" at any particular time is a complex interactive
function of resource characteristics, the available exploration and production technologies, the current economic environment,
and the scale, frequency, and duration of production from the resource. Perceptions of these factors inevitably change over time
and they often differ among users of the term. Unconventional oil included:
oil shales
oil sands-based synthetic crudes and derivative products
tight oil
heavy oil and extra-heavy oil (Orimulsion)
coal-based liquid supplies
biomass-based liquid supplies
gas to liquid (GTL) - liquids arising from chemical processing of gas
natural bitumen (oil sands)
kerogen oil
liquids and gases arising from chemical processing of natural gas (GTL)
coal-to-liquids (CTL) and additives.
Unconventional natural gas production - An Unconventional gas is natural gas obtained from sources of production that are, in a
given era and location, considered to be new and different. Sources at times considered to be unconventional include:
Coalbed methane
Methane clathrate (gas hydrate)
Shale gas
Synthetic natural gas, such as oil shale gas
Tight gas
United States Congress - is the bicameral legislature of the federal government of the United States consisting of two chambers:
the Senate and the House of Representatives.
United States Department of the Treasury - is an executive department and the treasury of the United States federal government.
It was established by an Act of Congress in 1789 to manage government revenue. The Department is administered by the Secretary
of the Treasury, who is a member of the Cabinet.
United States treasury bonds see United States Treasury Securities
United States Treasury Securities - are government debt instruments issued by the United States Department of the Treasury to
finance the national debt of the United States. Treasury securities are often referred to simply as Treasuries. Since 2012 the
management of government debt has been arranged by the Bureau of the Fiscal Service, succeeding the Bureau of the Public
Debt. There are four types of marketable treasury securities: Treasury bills, Treasury notes, Treasury bonds, and Treasury Inflation
Protected Securities (TIPS).
Uranium - is a chemical element with symbol U and atomic number 92. It is a silvery-white metal in the actinide series of the
periodic table. A uranium atom has 92 protons and 92 electrons, of which 6 are valence electrons. Uranium is weakly radioactive
because all its isotopes are unstable (with half-lives of the five naturally known isotopes, uranium-233 to uranium-236 and
uranium-238, varying between 159200 years and 4.5 billion years). The most common isotopes in natural uranium are uranium-
238 (which has 146 neutrons and accounts for over 99%) and uranium-235 (which has 143 neutrons). Uranium has the highest
atomic weight of the primordially occurring elements. Its density is about 70% higher than that of lead, and slightly lower than
that of gold or tungsten.
$USD The United States dollar (sign: $; code: USD; also abbreviated US$ and referred to as the dollar, U.S. dollar, or American
dollar) is the official currency of the United States and its insular territories per the United States Constitution. Unofficially seen
as the global reserve currency.
US Federal Reserve See Federal Reserve Bank
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Venus Project (The) - The brain child of Jacque Fresco, wrote and lectured his views on sustainable cities, energy efficiency,
natural-resource management, cybernetic technology, automation, and the role of science in society. He directed the Venus
Project and advocated global implementation of a socioeconomic system which he referred to as a "resource-based economy".
The Venus Project proposes an alternative vision of what the future can be if we apply what we already know in order to achieve
a sustainable new world civilization. It calls for a straightforward redesign of our culture in which the age-old inadequacies of war,
poverty, hunger, debt and unnecessary human suffering are viewed not only as avoidable, but as totally unacceptable. Anything
less will result in a continuation of the same catalog of problems inherent in today's world.
Water table - The water table is the upper surface of the zone of saturation. The zone of saturation is where the pores and
fractures of the ground are saturated with water. The water table is the surface where the water pressure head is equal to the
atmospheric pressure (where gauge pressure = 0). It may be visualized as the "surface" of the subsurface materials that are
saturated with groundwater in a given vicinity. The groundwater may be from precipitation or from groundwater flowing into the
aquifer. In areas with sufficient precipitation, water infiltrates through pore spaces in the soil, passing through the unsaturated
zone. At increasing depths water fills in more of the pore spaces in the soils, until a zone of saturation is reached.
Wave power generation - is the transport of energy by wind waves, and the capture of that energy to do useful work for example,
electricity generation, water desalination, or the pumping of water (into reservoirs). A machine able to exploit wave power is
generally known as a wave energy converter (WEC). Wave power is distinct from the diurnal flux of tidal power and the steady
gyre of ocean currents. Wave-power generation is not currently a widely employed commercial technology, although there have
been attempts to use it since at least 1890. In 2008, the first experimental wave farm was opened in Portugal, at the Aguadoura
Wave Park.
Wet natural gas - A mixture of hydrocarbon compounds and small quantities of various non hydrocarbons existing in the gaseous
phase or in solution with crude oil in porous rock formations at reservoir conditions. The principal hydrocarbons normally
contained in the mixture are methane, ethane, propane, butane, and pentane. Typical nonhydrocarbon gases that may be present
in reservoir natural gas are water vapor, carbon dioxide, hydrogen sulfide, nitrogen and trace amounts of helium. Under reservoir
conditions, natural gas and its associated liquefiable portions occur either in a single gaseous phase in the reservoir or in solution
with crude oil and are not distinguishable at the time as separate substances. Note: The Securities and Exchange Commission and
the Financial Accounting Standards Board refer to this product as natural gas.
Wind power generation - Wind power is the use of air flow through wind turbines to mechanically power generators for electric
power. Wind power, as an alternative to burning fossil fuels, is plentiful, renewable, widely distributed, clean, produces no
greenhouse gas emissions during operation, consumes no water, and uses little land. The net effects on the environment are far
less problematic than those of nonrenewable power sources. Wind farms consist of many individual wind turbines which are
connected to the electric power transmission network. Onshore wind is an inexpensive source of electric power, competitive with
or in many places cheaper than coal or gas plants. Offshore wind is steadier and stronger than on land, and offshore farms have
less visual impact, but construction and maintenance costs are considerably higher. Small onshore wind farms can feed some
energy into the grid or provide electric power to isolated off-grid locations. Wind power gives variable power which is very
consistent from year to year but which has significant variation over shorter time scales. It is therefore used in conjunction with
other electric power sources to give a reliable supply.
World Bank - The World Bank is an international financial institution that provides loans to countries of the world for capital
programs. It comprises two institutions: the International Bank for Reconstruction and Development (IBRD), and the International
Development Association (IDA). The World Bank is a component of the World Bank Group. The World Bank's stated official goal is
the reduction of poverty. However, according to its Articles of Agreement, all its decisions must be guided by a commitment to
the promotion of foreign investment and international trade and to the facilitation of capital investment.
World Energy Council (WEC) - is a global and inclusive forum for thought-leadership and tangible engagement with headquarters
in London. Its mission is 'To promote the sustainable supply and use of energy for the greatest benefit of all people'. The World
Energy Council is the principal impartial network of leaders and practitioners promoting an affordable, stable and environmentally
sensitive energy system for the greatest benefit of all. Formed in 1923, the Council is the UN-accredited global energy body,
representing the entire energy spectrum, with more than 3000 member organisations located in over 90 countries and drawn
from governments, private and state corporations, academia, NGOs and energy-related stakeholders. The World Energy Council
informs global, regional and national energy strategies by hosting high-level events, publishing authoritative studies, and working
through its extensive member network to facilitate the worlds energy policy dialogue.
World Energy Outlook (WEO) - The annual World Energy Outlook is the International Energy Agency's flagship publication, widely
recognised as the most authoritative source for global energy projections and analysis. It represents the leading source for medium
to long-term energy market projections, extensive statistics, analysis and advice for both governments and the energy business.
It is produced by the Office of the Chief Economist, presently under the direction of Dr. Fatih Birol.
Year-over-year (YOY) - Is a comparison of a statistic for one period to the same period the previous year. The period is usually a
month or quarter. The year-over-year growth rate calculates the percent change during the past twelve months.
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Appendix A: Waste Incineration in Europe
Incineration is used as a treatment for a very wide range of wastes. Incineration itself is commonly only one
part of a complex waste treatment system that altogether, provides for the overall management of the broad
range of wastes that arise in society.
The incineration sector has undergone rapid technological development over the last 15 to 20 years. Much
of this change has been driven by legislation specific to the industry and this has, in particular, reduced
emissions to air from individual installations. Continual process development is ongoing, with the sector now
developing techniques which limit costs, whilst maintaining or improving environmental performance.
The objective of waste incineration, in common with most waste treatments, is to treat waste so as to reduce
its volume and hazard, whilst capturing (and thus concentrating) or destroying potentially harmful
substances. Incineration processes can also provide a means to enable recovery of the energy, mineral
and/or chemical content from waste.
Waste is generally a highly heterogeneous material, consisting essentially of organic substances, minerals,
metals and water. During incineration, flue-gases are created that will contain the majority of the available
fuel energy as heat. The organic substances in the waste will burn when they have reached the necessary
ignition temperature and come into contact with oxygen. The actual combustion process takes place in the
gas phase in fractions of seconds and simultaneously releases energy. Where the calorific value of the waste
and oxygen supply is sufficient, this can lead to a thermal chain reaction and self-supporting combustion, i.e.
there is no need for the addition of other fuels.
Although approaches vary greatly, the incineration sector may approximately be divided into the following
main sub-sectors:
1. Mixed municipal waste incineration treating typically mixed and largely untreated household and
domestic wastes but may sometimes including certain industrial and commercial wastes (industrial
and commercial wastes are also separately incinerated in dedicated industrial or commercial non-
hazardous waste incinerators).
2. Pretreated municipal or other pretreated waste incineration installations that treat wastes that
have been selectively collected, pretreated, or prepared in some way, such that the characteristics
of the waste differ from mixed waste. Specifically prepared refuse derived fuel incinerators fall in this
sub-sector
3. Hazardous waste incineration - this includes incineration on industrial sites and incineration at
merchant plants (that usually receive a very wide variety of wastes)
4. Sewage sludge incineration in some locations sewage sludges are incinerated separately from
other wastes in dedicated installations, in others such waste is combined with other wastes (e.g.
municipal wastes) for its incineration
5. Clinical waste incineration dedicated installations for the treatment of clinical wastes, typically
those arising at hospitals and other healthcare institutions, exist as centralized facilities or on the site
of individual hospital etc. In some cases certain clinical wastes are treated in other installations, for
example with mixed municipal or hazardous wastes.
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Waste and its management are a significant environmental issue. The thermal treatment of waste may
therefore be seen as a response to the environmental threats posed by poorly or unmanaged waste streams.
The target of thermal treatment is to provide for an overall reduction in the environmental impact that might
otherwise arise from the waste. However, in the course of the operation of incineration installations,
emissions and consumptions arise, whose existence or magnitude is influenced by the installation design
and operation.
The potential impacts of waste incineration installations themselves fall into the following main categories:
overall process emissions to air and water (including odour)

overall process residue production
process noise and vibration
energy consumption and production
raw material (reagent) consumption
fugitive emissions mainly from waste storage
reduction of the storage/handling/processing risks of hazardous wastes.
Other impacts beyond the scope of this BREF document (but which can significantly impact upon the overall
environmental impact of the whole chain of waste management) arise from the following operations:
transport of incoming waste and outgoing residues

extensive waste pretreatment (e.g. preparation of waste derived fuels).
The application and enforcement of modern emission standards, and the use of modern pollution control
technologies, has reduced emissions to air to levels at which pollution risks from waste incinerators are now
generally considered to be very low. The continued and effective use of such techniques to control emissions
to air represents a key environmental issue.
Other than its role in ensuring effective treatment of otherwise potentially polluting unmanaged wastes,
many waste incineration installations have a particular role as an energy-from-wasterecovery process.
Where policies have been implemented to increase the ability of, (most commonly municipal) waste
incineration installations to recover the energy value of the waste, this increases the exploitation of this
positive environmental contribution. A significant environmental opportunity for the industry is therefore to
increase its potential as an energy supplier.
The following main activities and applied processes are part of this technical area:
incoming waste reception

storage of waste and raw materials
pretreatment of waste (mainly on-site treatments and blending operations)
loading of waste into the furnace
techniques applied at the thermal treatment stage (furnace design etc.)
the energy recovery stage (e.g. boiler and energy supply options)
flue-gas cleaning techniques (grouped by substance)
flue-gas cleaning residue management
emissions monitoring and control
waste water control and treatment (e.g. from site drainage, flue-gas treatment, storage)
ash/bottom ash management and treatment (arising from the combustion stage).
Figure A1 below shows the proportion of waste being treated with incineration. Most of Europe still landfills
a significant portion of waste. As time goes this is to be phased out where possible. This implies that the
waste recycling business will grow in size and complexity. Germany (along with Switzerland) is one of the
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few countries in the world that does not land fill and processes all waste material. As European population
grows, this change is inevitable.
Figure A2 shows the different kinds of waste generation over time. Note there is a reduction of the total
volume of waste processed in in 2007, and a steady increase in the fraction of incinerated waste across the
entire time frame shown.
Figure A1. Municipal waste generation and treatment 1995-2013

(Source: Eurostat)
Figure A2. Municipal waste generation and treatment 1995-2013

(Source: Eurostat)
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A1 Energy Recovery from Waste Treatment
There have been a number of technological developments in the process engineering of waste incineration.
Waste-to-energy or energy-from-waste is the process of generating energy in the form of electricity and/or
heat from the primary treatment of waste. WtE is a form of energy recovery. Most WtE processes produce
electricity and/or heat directly through combustion, or produce a combustible fuel commodity, such as
methane, methanol, ethanol or synthetic fuels.
Figure A3. Typical waste to energy plant conceptual flow sheet
Incineration, the combustion of organic material such as waste with energy recovery, is the most common
WtE implementation. All new WtE plants in OECD countries incinerating waste (residual MSW, commercial,
industrial or RDF) must meet strict emission standards, including those on nitrogen oxides (NOx), sulphur
dioxide (SO2), heavy metals and dioxins.[7][8] Hence, modern incineration plants are vastly different from
old types, some of which neither recovered energy nor materials. Modern incinerators reduce the volume
of the original waste by 95-96 percent, depending upon composition and degree of recovery of materials
such as metals from the ash for recycling.[4]
Incinerators may emit fine particulate, heavy metals, trace dioxin and acid gas, even though these emissions
are relatively low[9] from modern incinerators. Other concerns include proper management of residues:
toxic fly ash, which must be handled in hazardous waste disposal installation as well as incinerator bottom
ash (IBA), which must be reused properly.[10]
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Critics argue that incinerators destroy valuable resources and they may reduce incentives for recycling.[10]
The question, however, is an open one, as countries in Europe recycling the most (up to 70%) also incinerate
their residual waste to avoid landfilling.[11]
Incinerators have electric efficiencies of 14-28%.[10] In order to avoid losing the rest of the energy, it can be
used for e.g. district heating (cogeneration). The total efficiencies of cogeneration incinerators are typically
higher than 80% (based on the lower heating value of the waste).
The method of using incineration to convert municipal solid waste (MSW) to energy is a relatively old method
of WtE production. Incineration generally entails burning waste (residual MSW, commercial, industrial and
RDF) to boil water which powers steam generators that make electric energy and heat to be used in homes,
businesses, institutions and industries. One problem associated with incinerating MSW to make electrical
energy is the potential for pollutants to enter the atmosphere with the flue gases from the boiler. These
pollutants can be acidic and in the 1980s were reported to cause environmental damage by turning rain into
acid rain. Since then, the industry has removed this problem by the use of lime scrubbers and electro-static
precipitators on smokestacks. By passing the smoke through the basic lime scrubbers, any acids that might
be in the smoke are neutralized which prevents the acid from reaching the atmosphere and hurting the
environment. Many other devices, such as fabric filters, reactors, and catalysts destroy or capture other
regulated pollutants.[12] According to the New York Times, modern incineration plants are so clean that
"many times more dioxin is now released from home fireplaces and backyard barbecues than from
incineration. "[13] According to the German Environmental Ministry, "because of stringent regulations,
waste incineration plants are no longer significant in terms of emissions of dioxins, dust, and heavy
metals".[14]
A2 Emerging Technologies of Incineration

There are a number of other new and emerging technologies that are able to produce energy from waste
and other fuels without direct combustion. Many of these technologies have the potential to produce more
electric power from the same amount of fuel than would be possible by direct combustion. This is mainly
due to the separation of corrosive components (ash) from the converted fuel, thereby allowing higher
combustion temperatures in e.g. boilers, gas turbines, internal combustion engines, fuel cells.
Figure A4. Possible outputs from waste incineration plants
Some are able to efficiently convert the energy into liquid or gaseous fuels:
Thermal technologies:
Gasification: produces combustible gas, hydrogen, synthetic fuels
Thermal depolymerization: produces synthetic crude oil, which can be further refined
Pyrolysis: produces combustible tar/biooil and chars
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Plasma arc gasification or plasma gasification process (PGP): produces rich syngas including hydrogen
and carbon monoxide usable for fuel cells or generating electricity to drive the plasma arch, usable
vitrified silicate and metal ingots, salt and sulphur
Non-thermal technologies:
Anaerobic digestion: Biogas rich in methane
Fermentation production: examples are ethanol, lactic acid, hydrogen
Mechanical biological treatment (MBT)
o MBT + Anaerobic digestion
o MBT to Refuse derived fuel
Appendix A References
1. "NW BIORENEW".
2. Herbert, Lewis (2007). "Centenary History of Waste and Waste Managers in London and South East England" (PDF). Chartered
Institution of Wastes Management.
3. "Energy Recovery - Basic Information". US EPA.
4. Waste to Energy in Denmark by Ramboll Consult
5. Lapk; et al. (Dec 2012). "Monosti Energetickho Vyuit Komunlnho Odpadu". GeoScience Engineering.
6. The Viability of Advanced Thermal Treatment of MSW in the UK by Fichtner Consulting Engineers Ltd 2004
7. "Waste incineration". Europa. October 2011.
8. "DIRECTIVE 2000/76/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 4 December 2000 on the incineration of
waste". European Union. 4 December 2000.
9. Emissionsfaktorer og emissionsopgrelse for decentral kraftvarme, Kortlgning af emissioner fra decentrale
kraftvarmevrker, Ministry of the Environment of Denmark 2006 (in Danish)
10. "Waste Gasification: Impacts on the Environment and Public Health" (PDF).
11. "Environment in the EU27 Landfill still accounted for nearly 40% of municipal waste treated in the EU27 in 2010". European
Union. 27 March 2012.
12. "WastetoEnergy in Austria, White Book, 2nd Edition 2010" (PDF). Austrian Ministry of Life.
13. Rosenthal, Elisabeth (12 April 2010). "Europe Finds Clean Energy in Trash, but U.S. Lags". The New York Times.
14. "Waste incineration A potential danger? Bidding farewell to dioxin spouting" (PDF). Federal Ministry for Environment, Nature
Conservation and Nuclear Safety. September 2005.
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Appendix B Description of Different Energy Resources
Ever since the Industrial Revolution took off in the 18th century, vast quantities of fossil fuels have been used
to power the economy and deliver unprecedented affluence to huge numbers of people. Energy for the
modern industrial world is generated from many sources. The usage of fossil fuels has been increasing in
step with economic growth. Fossil fuels were prerequisites for the birth of a new industrial civilization that
transformed our world.
But the different sources of energy are not equal in calorific content. Nor are they used in the same
applications. Transfer of energy source to power technology from one resource to another is often not
possible. With the exception of oil and to a lesser extent gas, once these energy resources are used to
generate power, those power stations have to run at a consistent supply to grid level or suffer degradation
in their infrastructure. Oil and gas are flexible in use, coal and nuclear are not.
Figure B1: Composition of the primary energy entering the global energy system in 2013
(Source: European Environmental Agency)
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B1 Oil and Petroleum Products
B1.1 Use of oil and petroleum products
Since the modest beginnings of the oil industry in the mid-19th century, petroleum has risen to global
prominence. Initially, kerosene, used for lighting and heating, was the principal product derived from
petroleum. However, the development of drilling technology for oil wells in mid-19th century America put
the petroleum industry on a new footing, leading to mass-consumption of petroleum as a highly versatile
fuel powering transportation in the form of automobiles, ships, airplanes and so on, applied to generate
electricity, used for heating and to provide hot water supplies. The most common use of petroleum now is
in the internal combustion engine, used across all industries, especially transport.
Figure B2. Internal combustion engines power most trucks and automobiles
Figure B3. Proportion of how oil is used in 2015
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Table B1: Products that are made from oil
American society consumes petroleum products at a rate of three-and-a-half gallons of oil and more than
250 cubic feet of natural gas per day each! But, as shown here petroleum is not just used for fuel.
For decades western society has become and has been a petroleum driven economy. Economic activity
correlates strongly with the transport of goods. All industrial activity, energy use in general and economic
indicators like GDP all correlate strongly with oil consumption (Figure B4) (Heinberg and 2012, Ruppert 2004,
Martenson 2011).
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Figure B4. We are a Petroleum Based Industrial Society
(Source: OurFiniteWorld.com)
Industrial Agriculture is dependent on oil and gas

The systems that produce the worlds food supply are heavily dependent on fossil fuels (Green 1978). In
2000, for every calorie of food consumed, there was 10 calories of fossil fuel energy consumed to create and
deliver that food (Ruppert 2004, Martenson 2011 and Turner 2008).
Vast amounts of oil and gas are used as raw materials and energy in the manufacture of fertilisers and
pesticides, and as cheap and readily available energy at all stages of food production: from planting,
irrigation, feeding and harvesting, through to processing, distribution and packaging. In addition, fossil fuels
are essential in the construction and the repair of equipment and infrastructure needed to facilitate this
industry, including farm machinery, processing facilities, storage, ships, trucks and roads. The industrial food
supply system is one of the biggest consumers of fossil fuels.
Use of fossil fuels to make plastics

Although crude oil is a source of raw material (feedstock) for making plastics, it is not the major source of
feedstock for plastics production. Plastics are often produced from natural gas, feedstocks derived from
natural gas processing, and feedstocks derived from crude oil refining. Petrochemical feedstock naphtha
and other oils refined from crude oil are used as feedstock for petrochemical crackers that produce the basic
building blocks for making plastics. However, the petrochemical industry also consumes large quantities of
hydrocarbon gas liquids (HGL), which may be produced by petroleum refineries or natural gas processing
plants.
In 2016, most of the HGL produced globally, 85% were byproducts of natural gas processing, and the
remaining 15% were from crude oil refineries. The HGL produced by U.S. petroleum refineries contain both
alkanes and olefins. Alkanes can be used as feedstock for petrochemical crackers, whereas refinery olefins,
primarily propylene, but also minor quantities of ethylene and butylenes, can be used as direct inputs into
plastics manufacturing. Because the petrochemical industry has a high degree of flexibility in the feedstock
it consumes, it is not possible to easily identify the actual amounts and origin of the materials used as inputs
by industry to manufacture plastics.
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There are alternatives to making plastics from fossil fuels. They are not nearly as effective but they are
economically viable. Oil produced from pyrolysis of plastics have been known for its higher calorific value
than wood-based oil, in which comparable to conventional diesel. Even though many studies have been
conducted on pyrolysis of plastics, the findings of those studies are not applied and reported yet according
to the real portion of plastic waste.
B1.2 Conventional oil production
Oil and oil derivatives are refined and transformed into useful petroleum products. Conventional sources of
oil are:
Conventional oil
Crude oil
Lease Condensate
The geology of organic rich rocks (hydrocarbon source rocks) is well understood. The petroleum system
resides inside a sedimentary basin, often trapped between geological structures (Figure B3). The basic
elements of a petroleum system consists of a source rock, a porous and permeable reservoir rock and a tight
cap rock. These systems are found on dry land (onshore) and under the ocean (offshore).
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Figure B5. Oil and gas geology
Oil and gas are extracted from under the surface through drilling then pumping. The kinds of drilling are:
Onshore or land base drilling
Shallow offshore drilling
Deep offshore drilling
Arctic drilling
Originally, oil was extracted easily from comparatively shallow oil wells. Figures B6 and B7 show the classic
oil pumpjack and derrick tower for pumping out of the drilled well.
Figure B6. Oil fields and pumpjacks extracting oil in Texas USA
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Figure B7. Onshore oil and gas drilling platform (RHS operating in China)
As drilling technology improved, the capability to drill for oil and gas into deposits under the ocean became
possible. Over time, demand for oil and gas required offshore drilling platforms to be developed and
operated. Figure B8 shows the proportion of oil production sourced from offshore platforms. About 1/3 of
oil production in 2015 was extracted from under the ocean. Figure 9 shows a basic schematic cross section
of an offshore platform. As time has progressed, the scale of these structures has become ever more
impressive.
Figure B8. Onshore vs. offshore oil production (global)

(Source: BP Petroleum Statistics Infield Systems)
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Figure B9. Offshore oil & gas drilling platform basic schematic
Figure B9. Deep water oil & gas drilling platform
Figure B10 shows the progression of offshore platform design as the ocean depths got deeper. Currently
the record ocean depth for drilling is held by offshore oil drilling group Transocean whom had set a world
record of deep water drilling at a depth of 3107 metres.
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Horizontal
Drilling Max
4,000m
Water Depth (m) 600m 450-900m 450-2,100m 450-1,800m 1,000-3,000m
Total Drilling Depth (m) 9,000+ m 9,000+ m 10,000+ m 10,000+ m 12,000+ m
Figure B10. Types and depth capabilities of different offshore drilling platforms
The record for the deepest drill hole into the earths crust is currently held by Rosneft. Russian drilling
consortium Rosneft, as part of the Sakhalin-1 consortium, has finished drilling the worlds longest well
production well O-14at Chayvo field, offshore Sakhalin Island. Well O-14 was drilled from the Orlan drilling
platform towards the south-eastern point of Chayvo field, which lies to the northeast of Russia's Sakhalin
Island. The well has a record breaking measured depth of 13,500 m and a horizontal reach of 12,033 m, as
of 2015.
Figure B11 shows a modern oil refinery and Figure B12 shows a process flow chart of an oil refinery.
Petroleum refining begins with the distillation, or fractionation, of crude oils into separate hydrocarbon
groups. The resultant products are directly related to the characteristics of the crude oil being processed.
Most of these products of distillation are further converted into more useable products by changing their
physical and molecular structures through cracking, reforming and other conversion processes. These
products are subsequently subjected to various treatment and separation processes, such as extraction,
hydrotreating and sweetening, in order to produce finished products. Whereas the simplest refineries are
usually limited to atmospheric and vacuum distillation, integrated refineries incorporate fractionation,
conversion, treatment and blending with lubricant, heavy fuels and asphalt manufacturing; they may also
include petrochemical processing.
B1.3 Oil Refinings Basic Steps

Most refineries, regardless of complexity, perform a few basic steps in the refining process: DISTILLATION,
CRACKING, TREATING and REFORMING. These processes occur in the main operating areas
Crude/Aromatics, Cracking I, RDS/Coker, Cracking II, and at the Sulfur Recovery Unit (using example of the
Chevron operation Pascagoula Refinery).
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1. Distillation
Modern distillation involves pumping oil through pipes in hot furnaces and separating light hydrocarbon
molecules from heavy ones in downstream distillation towers the tall, narrow columns that give refineries
their distinctive skylines.
The example operation (Chevron's Pascagoula Refinery processes 330,000 barrels (13.9 million gallons) of
crude oil a day) refining process begins when crude oil is distilled in two large Crude Units that have three
distillation columns, one that operates at near atmospheric pressure, and two others that operate at less
than atmospheric pressure, i.e., a vacuum.
Figure B11. Distillation Column Diagram
During this process, the lightest materials, like propane and butane, vaporize and rise to the top of the first
atmospheric column. Medium weight materials, including gasoline, jet and diesel fuels, condense in the
middle. Heavy materials, called gas oils, condense in the lower portion of the atmospheric column. The
heaviest tar-like material, called residuum, is referred to as the bottom of the barrel because it never really
rises.
This distillation process is repeated in many other plants as the oil is further refined to make various
products.
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In some cases, distillation columns are operated at less than atmospheric pressure (vacuum) to lower the
temperature at which a hydrocarbon mixture boils. This vacuum distillation (VDU) reduces the chance of
thermal decomposition (cracking) due to overheating the mixture.
Using the computer control systems, refinery operators control the temperatures in the distillation columns
which are designed with pipes to withdraw the various types of products where they condense. Products
from the top, middle and bottom of the column travel through these pipes to different plants for further
refining.
2. Cracking
The middle distillate, gas oil and residuum is converted into primarily gasoline, jet and diesel fuels by using
a series of processing plants that literally crack large, heavy molecules into smaller, lighter ones.
Heat and catalysts are used to convert the heavier oils to lighter products using three cracking methods:
fluid catalytic cracking (FCC), hydrocracking (Isomax), and coking (or thermal-cracking).
Figure B12. Catalytic cracking
The Fluid Catalytic Cracker (FCC) uses high temperature and catalyst to crack 86,000 barrels (3.6 million
gallons) each day of heavy gas oil mostly into gasoline. Hydrocracking uses catalysts to react gas oil and
hydrogen under high pressure and high temperature to make both jet fuel and gasoline.
Also, about 58,000 barrels (2.4 million gallons) of lighter gas oil is converted daily in two Isomax Units, using
this hydrocracking process.
Figure B13. Hydrocracking
We blend most of the products from the FCC and the Isomaxes directly into transportation fuels, i.e.,
gasoline, diesel and jet fuel. We burn the lightest molecules as fuel for the refinerys furnaces, thus
conserving natural gas and minimizing waste.
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In the Delayed Coking Unit (Coker), 98,000 barrels a day of low-value residuum is converted (using the
coking, or thermal-cracking process) to high-value light products, producing petroleum coke as a by-product.
The large residuum molecules are cracked into smaller molecules when the residuum is held in a coke drum
at a high temperature for a period of time. Only solid coke remains and must be drilled from the coke drums.
Modifications to the refinery during its 2003 Clean Fuels Project increased residuum volume going to the
Coker Unit. The project increased coke handling capacity and replaced the 150 metric-ton coke drums with
new 300 metric-ton drums to handle the increased residuum volume.
The Coker typically produces more than 6,000 tons a day of petroleum coke, which is sold for use as fuel or
in cement manufacturing.
Combining
While the cracking processes break most of the gas oil into gasoline and jet fuel, they also break off some
pieces that are lighter than gasoline. Since refinerys primary focus is on making transportation fuels, the
process is to recombine 14,800 barrels (622,000 gallons) each day of lighter components in two Alkylation
Units. This process takes the small molecules and recombines them in the presence of sulfuric acid catalyst
to convert them into high octane gasoline.
Figure B14. Alkylation
3. Treating (Removing Impurities)

The products from the Crude Units and the feeds to other units contain some natural impurities, such as
sulfur and nitrogen. Using a process called hydrotreating (a milder version of hydrocracking), these
impurities are removed to reduce air pollution when our fuels are used.
Because about 80 percent of the crude oil processed by the Pascagoula Refinery is heavier oils that are high
in sulfur and nitrogen, various treating units throughout the refinery work to remove these impurities.
In the RDS Units six 1,000-ton reactors, sulfur and nitrogen are removed from FCC feed stream. The sulfur
is converted to hydrogen sulfide and sent to the Sulfur Unit where it is converted into elemental sulfur.
Nitrogen is transformed into ammonia which is removed from the process by water-washing. Later, the
water is treated to recover the ammonia as a pure product for use in the production of fertilizer.
The RDSs Unit main product, low sulfur vacuum gas oil, is fed to the FCC (fluid catalytic cracker) Unit which
then cracks it into high value products such as gasoline and diesel.
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4. Reforming
Octane rating is a key measurement of how well a gasoline performs in an automobile engine. Much of the
gasoline that comes from the Crude Units or from the Cracking Units does not have enough octane to burn
well in cars.
The gasoline process streams in the refinery that have a fairly low octane rating are sent to a Reforming Unit
where their octane levels are boosted. These reforming units employ precious-metal catalysts platinum
and rhenium and thereby get the name rheniformers. In the reforming process, hydrocarbon molecules
are reformed into high octane gasoline components. For example, methyl cyclohexane is reformed into
toluene.
Figure B15. Reforming
The reforming process actually removes hydrogen from low-octane gasoline. The hydrogen is used
throughout the refinery in various cracking (hydrocracking) and treating (hydrotreating) units.
Our refinery operates three catalytic reformers, where we rearrange and change 71,000 barrels (about 3
million gallons) of gasoline per day to give it the high octane cars need.
Blending
A final and critical step is the blending of products. Gasoline, for example, is blended from treated
components made in several processing units. Blending and Shipping Area operators precisely combine
these to ensure that the blend has the right octane level, vapor pressure rating and other important
specifications. All products are blended in a similar fashion.
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Figure B16. Whiting oil refinery in Indiana USA
Figure B17. Oil refinery process flowchart
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B1.4 Unconventional oil production
An umbrella term for oil that is produced by means that do not meet the criteria for conventional production.
This is oil which requires advanced production methods due to its geologic formations and/or is heavy and
does not flow on its own. Note: What has qualified as "unconventional" at any particular time is a complex
interactive function of resource characteristics, the available exploration and production technologies, the
current economic environment, and the scale, frequency, and duration of production from the resource.
Perceptions of these factors inevitably change over time and they often differ among users of the term.
Unconventional oil included:
Heavy crude oil (or extra heavy crude oil)

Oil sands
Oil shale
LTO - light tight oil, abbreviated LTO, known also as tight oil or shale oil.
Tight oil
Coal-based liquid supplies through coal liquefaction
Biomass-based liquid supplies
Gas to liquids (GTL)
Kerogen (oil)
Developing unconventional sources is more energy intensive and expensive. Figures B18 to B20 show some
of the operational steps for oil shale processing (Mech 2011).
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Figure B18. The Athabasca oil sands process steps
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Figure B19. The Athabasca oil sands reserves in Alberta Canada
Figure B20. Operation stages of extracting oil from an oil shale deposit
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B2 Gas
B2.1 Use of gas and gas products
Natural gas is a versatile fuel - as well as being used as an efficient energy source in its own right, for heating,
cooking and hot water, it is also a means for electricity production. Gas power stations convert the heat
energy from the combustion of natural gas into electricity, which can be used in homes and businesses.
Figure B21. Uses of natural gas

(Source: International Energy Agency, www.iea.org/etp/explore)
Gas is the primary energy resource by heavy industry, especially in areas away from large populations. A gas
pipeline would supply gas to a small gas fired power station, which would in turn supply electrical power to
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an industrial site. Often primary raw material extraction has this profile. Often a mine site, with a smelter
or refinery would be sited together to draw power from a single power station, which was built for that
purpose.
There are two main types of power stations used to convert natural gas into electricity - open cycle and
combined cycle. The most common of the two is open cycle, in which natural gas is burned to produce
pressurised gas. This powers a turbine, which is connected to a generator, causing the generators magnets
to spin and create an electrical current.
In a combined cycle power station, the waste heat from the gas burnt to operate the turbine is used to boil
water and create steam, driving a second turbine to produce even more electricity. This allows such power
stations to convert as much as 50% of the energy contained in natural gas - far more than the 33% conversion
of coal power stations. For this reason, combined cycle gas-fired power stations tend to be used to supply
daily baseload power, whilst open cycle stations operate during peak demand.
One of the major advantages of using gas to generate electricity is that gas-fired power stations have
extremely quick start-up times, which is why theyre often used to meet peak power demands. It takes a
mere 10-20 minutes for a gas turbine power station to reach full load capacity, compared to multiple hours
for coal power stations and up to two days for nuclear stations.
Gas is also used extensively in the manufacture of fertilizers and plastics similar to oil.
B2.2 Conventional gas production
Conventional gas is found in similar geology as oil and is extracted with similar infrastructure. Gas and Gas
derivatives are refined and transformed into useful petroleum products. Conventional sources of Gas are:
Conventional gas
Liquefied petroleum gases (LPG)
Liquefied natural gas (LNG)
Low Btu gas
Figure B22. Gas turbine combined cycle power generation
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Figure B23. Schematic process flow diagram of a typical facility for processing raw natural gas to produce pipeline sales gas.
B2.3 Unconventional natural gas production
An Unconventional gas is natural gas obtained from sources of production that are, in a given era and
location, considered to be new and different. Sources at times considered to be unconventional include:
Coalbed methane or CSG (Fracking)
Natural gas hydrates
Substitute (synthetic) natural gas
Tight gas
Unconventional gas is often extracted through the process of hydraulic fracturing or fracking. The process
involves the high-pressure injection of 'fracking fluid' (primarily water, containing sand or other proppants
suspended with the aid of thickening agents) into a wellbore to create cracks in the deep-rock formations
through which natural gas, petroleum, and brine will flow more freely.
Environmental impact of hydraulic fracturing in the United States has been an issue of public concern, and
includes the potential contamination of ground and surface water, methane emissions, air pollution,
migration of gases and hydraulic fracturing chemicals and radionuclides to the surface, the potential
mishandling of solid waste, drill cuttings, increased seismicity and associated effects on human and
ecosystem health. A number of instances with groundwater contamination have been documented,
however opponents of water safety regulation claim hydraulic fracturing has never caused any drinking
water contamination.
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As early as 1987, researchers at the United States Environmental Protection Agency (EPA) expressed concern
that hydraulic fracturing might contaminate groundwater. With the growth of hydraulic fracturing in the
United States in the following years, concern grew. "Public exposure to the many chemicals involved in
energy development is expected to increase over the next few years, with uncertain consequences" wrote
science writer Valerie Brown in 2007. It wasn't until 2010 that Congress asked the EPA to conduct a full study
of the environmental impact of fracking. The following documentaries available on YouTube provide good
insight into the environmental impact and the impact on society communities of the use of hydraulic
fracturing in oil/gas shale reserves.
Fox, J. (2010) GasLand Media documentary produced on fracking of shales and CSG in America
https://www.youtube.com/watch?v=Xvz_m5uPV4s
Fox, J. (2013) Gasland Part II. Media documentary produced on fracking of shales and CSG in America
https://www.youtube.com/watch?v=weGjWsU0Hd8
Lock the Gate Alliance (2014) Fractured Country - An Unconventional Invasion Media documentary on
fracking and CSG in Australia
https://www.youtube.com/watch?v=XrE7LzZCn1E
There is mounting evidence that CSG mining poses substantial risks, including:
Threats of pollution to water systems and supplies
Leaking methane;
Health impacts on local communities;
Above ground footprint; and
Related seismic activity.
Figure B24. A hydraulic fracturing drill rig operating in a CSG deposit in Australia
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It is the authors opinion that the hydraulic fracturing or fracking is inappropriate to apply. It is possible to
do this method with a lower risk of environmental pollution, however to do so would require a much higher
cost of operation (which could make the operation economically unviable). A critical problem is also that if
an operator did not do best practice methods and caused environmental pollution, it would be impossible
to prove which operator (different leases with different operators are often in the same environmental
impact region).
CSG and fracking seems to a bubble in terms of investment viability. It is not nearly as productive as
conventional gas. The application of fracking has pushed total peak energy back 10-15 years. The resulting
environmental devastation is most certainly not an acceptable outcome in return for this extra time for
operation of the exiting energy systems.
Figure B25. Hydraulic fracturing or fracking process
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B3 Coal
B3.1 Use of coal in power generation
The history of coal mining goes back thousands of years. It became important in the Industrial Revolution of
the 19th and 20th centuries, when it was primarily used to power steam engines, heat buildings and generate
electricity. Coal mining continues as an important economic activity today. By the middle of the 16 th Century,
the British Isles had almost run out of wood lumber to make charcoal out of as a heat source (Nef 1977). By
the early 1700s coal had been phased in as the new energy source in the British Isles. The coal resources of
the British Isles were mined out over time down to the water table. The development of the steam engine
by James Watt, was for the purpose of pumping water out of coal mines so they could mine below the water
table.
The development of the Watt steam engine in the late eighteenth century spurs a wave of mechanization in
Europe and the United States known as the Industrial Revolution. Coal is the main energy source driving the
revolution in its beginning years. The Industrial Revolution marks a major turning point in history; almost
every aspect of daily life was influenced in some way. In particular, average income and population began to
exhibit unprecedented sustained growth.
After the internal combustion engine powered with petroleum made the coal fired steam obsolete, coal use
was continued for electrical power generation in coal fired power stations.
B3.2 Coal production
Coal fired power plants are a type of power plant that make use of the combustion of coal in order to
generate electricity. Their use provides around 40% of the world's electricity and they are primarily used in
developing countries.
Figure B26. Coal fired power plant
Coal is ranked in terms of quality, ash content and calorific content. The ranks are as follows:
Anthracite coal
Bituminous coal
Sub-bituminous coal
Lignite coal
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Figure B27. Ranks of coal and their calorific value
CARBON/ENERGY CONTENT OF COAL HIGH
HIGH MOISTURE CONTENT OF COAL
Low Rank Coals Hard Coal

% OF WORLD RESERVES
47% 53%
Lignite Sub-Bituminous Bituminous Anthracite

17% 30% 52% >1%
Thermal Metallurgical
Steam Coal Coking Coal
USES
Largely power Power generation Power generation Manufacture of Domestic/industrial

generation Cement manufacture Cement manufacture Iron and steel Including smokeless
Industrial uses Industrial uses fuel
Figure B28. Ranks of coal and their uses

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B4 Nuclear Power and Uranium
Nuclear technology uses the energy released by splitting the atoms of certain elements. It was first
developed in the 1940s, and during the Second World War to 1945 research initially focussed on producing
bombs which released great energy by splitting the atoms of particular isotopes of either uranium or
plutonium. In the 1950s attention turned to the peaceful purposes of nuclear fission, controlling it for power
generation. Currently, the world produces as much electricity from nuclear energy as it did from all sources
combined in the early years of nuclear power.
The civil nuclear power station fleet can now reference 17,000 reactor years of experience and supplies
11.5% of global electricity needs, from reactors in 31 countries through regional transmission grids. Many
countries have also built research reactors to provide a source of neutron beams for scientific research and
the production of medical and industrial isotopes.
Currently in 2017, only eight countries are known to have a nuclear weapons capability. By contrast, 55
countries operate about 245 civil research reactors, over one-third of these in developing countries. About
60 further nuclear power reactors are under construction, equivalent to 16% of existing capacity, while over
160 are planned, and equivalent to nearly half of present capacity.
Nuclear Power Generation is the use of nuclear reactions that release nuclear energy to generate heat, which
most frequently is then used in steam turbines to produce electricity in a nuclear power plant. The term
includes nuclear fission, nuclear decay and nuclear fusion. Presently, the nuclear fission of elements in the
actinide series of the periodic table produce the vast majority of nuclear energy in the direct service
electricity generation, with nuclear decay processes, primarily in the form of geothermal energy, and
radioisotope thermoelectric generators, in niche uses making up the rest.
In nuclear physics and nuclear chemistry, nuclear fission is either a nuclear reaction or a radioactive decay
process in which the nucleus of an atom splits into smaller parts (lighter nuclei). The fission process often
produces free neutrons and gamma photons, and releases a very large amount of energy even by the
energetic standards of radioactive decay.
An induced fission reaction. A neutron is absorbed by a uranium-

235nucleus, turning it briefly into an excited uranium-236 nucleus,
with the excitation energy provided by the kinetic energy of the
neutron plus the forces that bind the neutron. The uranium-236, in
turn, splits into fast-moving lighter elements (fission products) and
releases three free neutrons. At the same time, one or more
"prompt gamma rays" (not shown) are produced, as well.
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Figure B29. Nuclear power plant layout
The fuel that is used in nuclear power generation are isotopes of uranium, plutonium and recently thorium.
Nuclear fuel is a substance that is used in nuclear power stations to produce heat to power turbines. Heat is
created when nuclear fuel undergoes nuclear fission. Most nuclear fuels contain heavy fissile elements that
are capable of nuclear fission, such as uranium-235 or plutonium-239. When the unstable nuclei of these
atoms are hit by a slow-moving neutron, they split, creating two daughter nuclei and two or three more
neutrons. These neutrons then go on to split more nuclei. This creates a self-sustaining chain reaction that
is controlled in a nuclear reactor, or uncontrolled in a nuclear weapon. The processes involved in mining,
refining, purifying, using, and disposing of nuclear fuel are collectively known as the nuclear fuel cycle. Not
all types of nuclear fuels create power from nuclear fission; plutonium-238 and some other elements are
used to produce small amounts of nuclear power by radioactive decay in radioisotope thermoelectric
generators and other types of atomic batteries. Nuclear fuel has the highest energy density of all practical
fuel sources.
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Figure B30. The nuclear fuel cycle
Once the nuclear fuel rods are exhausted, they need to be handled carefully as they are still highly radioactive
and generate a lot of heat (Lochbaum 2017). When the uranium fuel is used up, usually after about 18
months, the spent rods are generally moved to deep pools of circulating water to cool down for about 10
years, though they remain dangerously radioactive for about 10,000 years. Spent fuel that has been
removed from a reactor is ordinarily stored in a water-filled spent fuel pool for a year or more (in some sites
10 to 20 years) in order to cool it and provide shielding from its radioactivity. Practical spent fuel pool designs
generally do not rely on passive cooling but rather require that the water be actively pumped through heat
exchangers. As the pools near capacity, utilities move some of the older spent fuel into "dry cask" storage.
Fuel is typically cooled at least 5 years in the pool before transfer to cask. The American NRC has authorized
206
transfer as early as 3 years; the industry norm is about 10 years. After 10 years of powered storage, the
spent rods can be stored underground while the radioactive half-life runs its course.
The most recent waste confidence findings (US NRC) say that fuel can be stored safely for 60 years beyond
the reactor's licensed life. The NRC staff is currently developing an extended storage and transportation (EST)
regulatory program. One aspect of this program is a safety and environmental analysis to support long-term
(up to 300 years) storage and handling of spent fuel, as well as associated updates to the waste confidence"
rulemaking. This analysis will include an Environmental Impact Statement (EIS) on the environmental impacts
of extended storage of fuel. The 300-year timeframe is appropriate for characterizing and predicting aging
effects and aging management issues for EST.
It is the authors opinion that these measures are not enough as the true state of spent nuclear fuel rods is
not known. The documented handling and storage of spent nuclear fuel rods to complete decay of
radioactive activity has yet to be achieved. So these storage and monitoring requirements are most certainly
inadequate.
B5 Renewable Power
B5.1 Use renewable power sources to generate electricity
Renewable energy is energy that comes from sources that replenish themselves over short periods of time.
For the most part, renewable energy sources also provide clean energy, or energy that emits few greenhouse
gases or pollutants. For this reason, many policy experts and scientists advocate renewable energy sources
over traditional fossil fuels. The difficulty is achieving the technology, infrastructure, and political support to
make this transition.
Hydroelectric energy is by far the most prevalent, accounting for 83% of the world's electricity generation
from renewable sources. This is most likely because the requisite technology to generate electricity by
harnessing the flow of water has been around the longest, dating back to the early 20th century. Wind energy
is the next largest, at just over 7% of the electricity generated from renewable sources, followed by biowaste
and biomass energy (7%), geothermal energy (2%), and solar, tidal, and wave energy (less than 1%).
Alternative renewable energies lack many of the undesirable characteristics of fossil fuels, including direct
productions of carbon dioxide and other pollutants, but also lack many of the highly desirable traits of
non-renewable fossil fuels. Specifically, renewable energy sources:
are not sufficiently energy dense,
tend to be intermittent,
lack transportability,
most have relatively low EROI values (especially when corrections are made for intermittency), and
currently, lack the infrastructure that is required to meet current societal demands.
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B5.2 Renewable Electricity Generation
Renewable energy is energy that is collected from renewable resources, which are naturally replenished on
a human timescale, such as sunlight, wind, rain, tides, waves, and geothermal heat. Renewable energy often
provides energy in four important areas: electricity generation, air and water heating/cooling,
transportation, and rural (off-grid) energy services.
Biomass power generation - Bioenergy is renewable energy made available from materials derived from
biological sources. Biomass is any organic material which has stored sunlight in the form of chemical energy.
As a fuel it may include wood, wood waste, straw, manure, sugarcane, and many other by-products from a
variety of agricultural processes. By 2010, there was 35 GW (47,000,000 hp) of globally installed bioenergy
capacity for electricity generation, of which 7 GW (9,400,000 hp) was in the United States. In its most narrow
sense it is a synonym to biofuel, which is fuel derived from biological sources. In its broader sense it includes
biomass, the biological material used as a biofuel, as well as the social, economic, scientific and technical
fields associated with using biological sources for energy. This is a common misconception, as bioenergy is
the energy extracted from the biomass, as the biomass is the fuel and the bioenergy is the energy contained
in the fuel. There is a slight tendency for the word bioenergy to be favoured in Europe compared with biofuel
in America.
Figure B31. Third and fourth generation biofuels
Figure B32. Biomass thermal conversion process
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Figure B33. Biomass Gasification Power Generation System
Geothermal power generation - is power generated by geothermal energy. Technologies in use include dry
steam power stations, flash steam power stations and binary cycle power stations. Geothermal electricity
generation is currently used in 24 countries, while geothermal heating is in use in 70 countries. As of 2015,
worldwide geothermal power capacity amounts to 12.8 gigawatts (GW), of which 28 percent or 3,548
megawatts are installed in the United States. International markets grew at an average annual rate of 5
percent over the last three years and global geothermal power capacity is expected to reach 14.517.6 GW
by 2020. Based on current geologic knowledge and technology, the Geothermal Energy Association (GEA)
estimates that only 6.5 percent of total global potential has been tapped so far, while the IPCC reported
geothermal power potential to be in the range of 35 GW to 2 TW. Countries generating more than 15 percent
of their electricity from geothermal sources include El Salvador, Kenya, the Philippines, Iceland and Costa
Rica. Geothermal power is considered to be a sustainable, renewable source of energy because the heat
extraction is small compared with the Earth's heat content.
Figure B34. Geothermal power generation plant
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Solar power generation - is the conversion of energy from sunlight into electricity, either directly using
photovoltaics (PV), indirectly using concentrated solar power, or a combination. Concentrated solar power
systems use lenses or mirrors and tracking systems to focus a large area of sunlight into a small beam.
Photovoltaic cells convert light into an electric current using the photovoltaic effect. Photovoltaics were
initially solely used as a source of electricity for small and medium-sized applications, from the calculator
powered by a single solar cell to remote homes powered by an off-grid rooftop PV system. Commercial
concentrated solar power plants were first developed in the 1980s. The 392 MW Ivanpah installation is the
largest concentrating solar power plant in the world, located in the Mojave Desert of California. As the cost
of solar electricity has fallen, the number of grid-connected solar PV systems has grown into the millions and
utility-scale solar power stations with hundreds of megawatts are being built. Solar PV is rapidly becoming
an inexpensive, low-carbon technology to harness renewable energy from the Sun. The current largest
photovoltaic power station in the world is the 850 MW Longyangxia Dam Solar Park, in Qinghai, China.
Figure B35. Solar power generation of electricity plant layout example
Figure B36. Concentrated solar thermal power plant 2014 December - Crescent Dunes completed site.
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Tidal power generation - Tidal power or tidal energy is a form of hydropower that converts the energy
obtained from tides into useful forms of power, mainly electricity. Although not yet widely used, tidal energy
has potential for future electricity generation. Tides are more predictable than the wind and the sun. Among
sources of renewable energy, tidal energy has traditionally suffered from relatively high cost and limited
availability of sites with sufficiently high tidal ranges or flow velocities, thus constricting its total availability.
However, many recent[when? clarification needed] technological developments and improvements, both in
design (e.g. dynamic tidal power, tidal lagoons) and turbine technology (e.g. new axial turbines, cross flow
turbines), indicate that the total availability of tidal power may be much higher than previously assumed,
and that economic and environmental costs may be brought down to competitive levels.
Figure B37. Tidal power generation
Wave power generation - is the transport of energy by wind waves, and the capture of that energy to do
useful work for example, electricity generation, water desalination, or the pumping of water (into
reservoirs). A machine able to exploit wave power is generally known as a wave energy converter (WEC).
Wave power is distinct from the diurnal flux of tidal power and the steady gyre of ocean currents. Wave-
power generation is not currently a widely employed commercial technology, although there have been
attempts to use it since at least 1890. In 2008, the first experimental wave farm was opened in Portugal, at
the Aguadoura Wave Park.
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Figure B38. Wave power generation
Wind power generation - Wind power is the use of air flow through wind turbines to mechanically power
generators for electric power. Wind power, as an alternative to burning fossil fuels, is plentiful, renewable,
widely distributed, clean, produces no greenhouse gas emissions during operation, consumes no water, and
uses little land. The net effects on the environment are far less problematic than those of nonrenewable
power sources.
Wind farms consist of many individual wind turbines which are connected to the electric power transmission
network. Onshore wind is an inexpensive source of electric power, competitive with or in many places
cheaper than coal or gas plants. Offshore wind is steadier and stronger than on land, and offshore farms
have less visual impact, but construction and maintenance costs are considerably higher. Small onshore wind
farms can feed some energy into the grid or provide electric power to isolated off-grid locations.
Wind power gives variable power which is very consistent from year to year but which has significant
variation over shorter time scales. It is therefore used in conjunction with other electric power sources to
give a reliable supply.
Figure B39. Wind power generation

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Figure B40. Wind power generation
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Appendix C The Use and Application of Energy Resources in Europe
Due to how each of these energy resources are used, it is highly unlikely to impact the use of petroleum
products (oil) and gas. Each of the energy resources are used for different applications. As such, it is not
easy to substitute one for another. Electricity is the primary energy use. Table C1 and C2 shows some of
this data. Figure C1 is a repeat of Figure 2 from the report main body.
Figure C1: Energy consumption of Europe EU- 28 nation states 1990-2015

Figure C2: per capita energy consumption (kg oil equivalent) vs. per capita GDP, PPP (2016 $USD). The size of the bubbles
denotes total population per country. All values refer to the year 2011.
(Source: European Environment Agency)
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Table C1. Gross electricity production by fuel, GWh, EU-28, 1990-2014 (Source: Eurostat)
A partial list of products made from Petroleum (144 of 6000 items). One 42-gallon barrel of oil creates 19.4
gallons of gasoline. The rest (over half) is used to make things like:
Figures C3 to C4 show how much energy from each source was used over time and the application the energy
sources were consumed.
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Figure C3: Gross electricity production by fuel, GWh, EU-28, 1990-2014
(Source: Eurostat)
Figure C4: Consumption of electricity by sector, GWh, EU-28, 1990-2014

(Source: Eurostat)
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Figure C5: Composition of the primary energy entering the energy system of the EU-28 in 2013
(Source: European Environmental Agency)
217
Figure C5 diagram shows the composition of the primary energy entering the energy system of the EU-28 in
2013, and where this primary energy was used, either as losses or as consumption by specific sectors of the
economy. The units are million tonnes of oil equivalent (Mtoe).
C1 Use of petroleum products in Europe
Petroleum products include transportation fuels, fuel oils for heating and electricity generation, asphalt and
road oil, and feedstocks for making the chemicals, plastics, and synthetic materials that are in nearly
everything society uses.
The difference between crude oil, petroleum products, and petroleum is that crude oil is a mixture of
hydrocarbons that exists as a liquid in underground geologic formations and remains a liquid when brought
to the surface. Petroleum products are produced from the processing of crude oil and other liquids at
petroleum refineries, from the extraction of liquid hydrocarbons at natural gas processing plants, and from
the production of finished petroleum products at blending facilities. Petroleum is a broad category that
includes both crude oil and petroleum products. The terms oil and petroleum are sometimes used
interchangeably. Figure C6 shows the consumption of oil and petroleum products in the EU-28 states by
industry sector.
Figure C6. Consumption of oil and petroleum products by industry EU-28, as of 2014
(Data Source: Eurostat)
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Figure C7. Consumption of oil EU-28, 1990-2014, Mtoe
(Data Source: Eurostat)
Figure C7 shows uses and applications of oil and petroleum products in the EU-28.
C2 Use of gas in Europe
In 2016, gross inland consumption of natural gas in EU-28 increased by 7.0 % in comparison with 2015, to
reach 17 903 thousand terajoules. EA-19 consumption also increased, by 5.8 %, to 12 456 thousand
terajoules. The most significant increases in consumption in comparison with 2015 were recorded in Greece
(+30.2 %), Sweden (+13.0 %), United Kingdom (+12.9 %), Portugal (+12.4 %) and Ireland (+11.6 %). The
biggest falls in consumption compared with 2015 were in Lithuania (-10.9 %), Luxembourg (-7.8 %), Finland
(-6.7 %) and the Netherlands (-1.6 %).
Total EU-28 imports (entries) of natural gas increased by 5.5 % to total 25 452 thousand terajoules. The most
significant increase in 2016 compared with 2015 was observed in Romania, with very high proportional
increases also recorded in Greece, Croatia, Hungary, Slovenia and Sweden. In EA-19, imports of natural gas
increased by 5.1 % to total 19 318 thousand terajoules in 2016. It is important to remember that following
the change in methodology in reporting monthly natural gas trade, introduced starting with reference month
January 2013, monthly data concerning imports by country of origin are no longer completely comparable
with previous years' figures. The new reporting provides import figures by last transit country (mostly
neighbouring countries) instead of by country of primary / indigenous production. As regards the origin of
imports, Norway is the source of 26.9 % of the natural gas entering the EU (Intra-EU trade excluded) and
Russia of 18.3 %, while also 17.1 % comes from Ukraine and 11.5 % from Belarus. Natural gas dependency in
EU-28 was 70.4 % in 2016, slightly up from 69.3 % in 2015. Denmark and Netherlands are the only net
exporters. In 16 Member States energy dependency is higher than 90 %.
Figure C8 shows the applications and use of gas for heating applictions.
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Figure C8. Consumption use for gas in heating in 2013
(Source: HIS Multi-client study Beyond the Flame)
C3 Use of coal in Europe
Coal has many important uses. The most significant uses of coal are in electricity generation, steel
production, cement manufacturing and as a liquid fuel. Different types of coal have different uses.
Steam coal - also known as thermal coal - is mainly used in power generation.
Coking coal - also known as metallurgical coal - is mainly used in steel production.
Figure C9 shows how coal was used gloablly up till 2007. While this is an old chart it does show the
applications in their approximate proportions. Note, most of coal consumption gloablly is associated with
electrical power generation. A small fraction is realted to steel manufacture. To manufacture steel, coal of
a high grade and rank called coking coal is required.
Coal is slowly being phased out and being replaced by renewable energy sources for electrical power
generation.
Figure C9. Coal use by sector, from 1971 to 2007, in million tons oil equivalent.
(Source : International Energy Agency, 2009)
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C4 Applications and use of renewable energy in Europe
There has been a steady increase in the development and application of electrical power generation in
Europe for more than a decade. This has been supported by policy changes and initataives from the EU
government. In doing so, EU commitments in the reduction of carbon emissions can be met with the phasing
out of coal consumption. Figure C10 show the proportions of the different kinds of renewable energy
primary production in Europe.
Figure C10. Coal use by sector, from 1971 to 2007, in million tons oil equivalent.
(Source : Eurostat)
C5 Use of fossil fuels to make plastics
Although crude oil is a source of raw material (feedstock) for making plastics, it is not the major source of
feedstock for plastics production. Plastics are often produced from natural gas, feedstocks derived from
natural gas processing, and feedstocks derived from crude oil refining. Petrochemical feedstock naphtha
and other oils refined from crude oil are used as feedstock for petrochemical crackers that produce the basic
building blocks for making plastics. However, the petrochemical industry also consumes large quantities of
hydrocarbon gas liquids (HGL), which may be produced by petroleum refineries or natural gas processing
plants.
In 2016, most of the HGL produced globally, 85% were byproducts of natural gas processing, and the
remaining 15% were from crude oil refineries. The HGL produced by U.S. petroleum refineries contain both
alkanes and olefins. Alkanes can be used as feedstock for petrochemical crackers, whereas refinery olefins,
primarily propylene, but also minor quantities of ethylene and butylenes, can be used as direct inputs into
plastics manufacturing. Because the petrochemical industry has a high degree of flexibility in the feedstock
it consumes, it is not possible to easily identify the actual amounts and origin of the materials used as inputs
by industry to manufacture plastics.
There are alternatives to making plastics from fossil fuels. They are not nearly as effective but they are
economically viable. Oil produced from pyrolysis of plastics have been known for its higher calorific value
than wood-based oil, in which comparable to conventional diesel. Even though many studies have been
conducted on pyrolysis of plastics, the findings of those studies are not applied and reported yet according
to the real portion of plastic waste.
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Appendix D - ERoEI Comparison of Energy Resources
Not all energy sources are interchangeable (Appendix B Description of Different Energy Resources). In
addition to this, the effort and complexity in extracting useful energy out of each of these resources has
been degrading over time. The golden era of the last century when much of our industrialisation technology
was developed and constructed, energy resources had a much higher return. A method of analysis that
describes this deterioration is the Energy Returned on Energy Invested (ERoEI). The ratio of energy extracted
to the energy expended in the process is often referred to as the Energy Return on Energy Investment (ERoEI
or EROI). Should the ERoEI drops to one, or equivalently the Net energy gain falls to zero, the oil production
is no longer a net energy source. The ERoEI ratio is defined in Equation 1.
Energy Returned to do useful physical work from resource (Equation 1)

ERoEI =
Energy Invested through consumption of energy to gather resource
There are a number of excellent references that examine ERoEI analysis more completely than shown in this
report (Mearns 2016, Hall et al. 2012, Hall et al. 2014, Hu et al. 2011, Ferroni & Hopkirk 2016, Fizaine & Court
2016, and Murphy et al. 2011). In doing so, an attempt is made to directly compare all energy sources into
the same analysis, where the effort expended to operate at different time periods is also compared. This is
not to be confused with the Economic Cost of Energy (Equation 2) (Hall and Klitgaard, 2012). Much of the
modern economic development has been assumed that Equation 2 matches reality.
Dollars to buy energy
(Equation 2)
Economic Cost of Energy =
GDP
Actually conducting these studies is not straight forward. It is not clear what should and should not be
included. The straight energy consumption from the relevant resource to power equipment in extraction is
just the beginning. The energy consumed in extracting the raw materials to make the equipment also needs
to be considered. As does refining and transportation from source to point of application, in all forms. Where
matters get unclear is how to include human labour, efficiency of extraction at different geographies and
climates, the development and application of new technologies, maintenance and replacement cycles,
depreciation and deterioration of assets and how to include all of this in the same analysis where the
outcome makes logical sense. It is for this reason that many ERoEI studies differ in their conclusions.
D1 The Oil Industry as an ERoEI Example
An excellent example of how this happens and how it may appear has been the oil industry. When oil was
discovered in the Pennsylvania oil rush from 1859 to the early 1870s, the first oil boom in the United States
began. Oil quickly became one of the most valuable commodities in the United States and railroads expanded
into Western Pennsylvania to ship petroleum to the rest of the country. By the mid-1870s, the oil industry
was well established, and the "rush" to drill wells and control production was over. Pennsylvania oil
production peaked in 1891, and was later surpassed by western states such as Texas and California.
In this early period of oil exploration and extraction, oil was comparatively easy to gain energy from. Crude
oil would often bubble to the surface in small springs, which still occur in small examples today (Figure D1).
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Figure D1. Natural oil seeps such as this in the McKittrick area of California were used by the Native Americans and
later mined by settlers
Most of the oil found in the 1860 to 1920 time period would today be classified light sweet crude,
containing small amounts of hydrogen sulfide and carbon dioxide (less than 0.42%). This kind of oil
requires very little (and in some case none at all) processing steps before use as a saleable commodity
(Burrough 2010).
Drilling depths very shallow by current standards. During this time period, a drill depth of 1,300ft (400m)
was considered standard (Burrough 2010), with some producing wells as shallow as 200ft (60m). Also, some
of these early reserves had extraordinary oil pressure. There are many examples where oil would blowout
and fountain high into the air (Figure D2). There were initially all kinds of logistical problems in managing
these gusher blowouts as a single spark could cause an uncontrollable fire.
Figure D2. The Pennsylvania oil rush in northwestern Pennsylvania from 1859 to the early 1870s
(LHS) The Tulsa gusher at Oaklahoma and (Middle) The Lucas gusher at Spindletop and (RHS) Gusher in Port Arthur,
Texas Oil Well in 1901
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Very quickly the oil boom took hold and oil became the foundation master resource for the industrial
economy (Burrough 2010). In this era of oil extraction, ERoEI was approximately 100:1 with examples of
even higher values. What is interesting to note that investment culture at the time also saw oil in terms of
100:1 for return on investment. As in, for every dollar you invest, you would get a return of 100 dollars. So
in 1900, the difference between Equation 1 and Equation 2 would be very little compared to the same
comparison in 2017. Coal and steam power was made obsolete by the internal combustion engine.
Extensive infrastructure was constructed to exploit vast oil fields in the United States as quickly as possible
(Figure D3).
Figure D3. A forest of oil derricks sprouts up on the Signal Hill oil field, Long Beach, California, in 1937
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After decades of aggressive exploitation, these American oil fields (lower 48 states) peaked production and
declined (Figure D4). This was one of the first and best documented observations of the concept of Peak Oil.
The peak oil production date for the lower United States was correctly predicted years ahead of time
(Hubbert 1956 and 1962). Most of these fields were abandoned, often resulting in serious environmental
pollution (Figure D5).
Figure D4. US Crude Oil Production

Figure D5. An abandoned oil field SOCAR in California
Since the the peak and decline of US oil fields, other international sources of oil porduction like the Middle
East have dominated the market for the last five decades.
Most of the light sweet crude has been consumed. The largest remaining deposits of light sweet crude are
in Libya. Libya produces less than 2 percent of the world's oil, but its light sweet crude magnifies its
importance. Libyas sweet crude oil cannot be easily replaced in the production of gasoline, diesel and jet
fuel, particularly by the many European and Asian refineries that are not equipped to refine sour crude,
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which is higher in sulfur content. Saudi Arabia has more than four million barrels of spare capacity and has
promised to tap it if necessary, but that capacity is mostly for sour grades of oil.
In 2017 however, much more effort is required to get the same unit of oil compared to 1900 in Texas.
Processing and refining steps are now much more complex (Appendix B). The startup CAPEX capital
expediture costs of of commissoning an oil extraction well have been steadily increasing. Figure D6 shows
this increase between 2000 and 2010. Figure D8 shows the increasing cost of oil production through refining.
Figure D6. Oil startup Capital CAPEX is increasing

(Source: Evaluateenergy.com)
Figure D7. Deep water oil & gas drilling platform
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Figure D8. Cost of oil prodcution increasing
(Source: Rystad Energy research and analysis)
In terms of oil extarction infrastructure, offshore drill platforms are now accounting for 1/3 of global oil
production. These structure are quite large in size and scale (Figure D7). In addition to this, these large
scale industrial strucres are required to operate in increasingly deep areas of ocean and drill to increasingly
deep drill depths starting from the ocean floor (Figure D9).
Horizontal
Drilling Max
4,000m
Water Depth (m) 600m 450-900m 450-2,100m 450-1,800m 1,000-3,000m
Total Drilling Depth (m) 9,000+ m 9,000+ m 10,000+ m 10,000+ m 12,000+ m
Figure D9. Deep water oil & gas drilling platform

227
Also, as most oil extracted now is classified as sour crude, the stages of oil refining have become more
complex. The size and scope of of an oil refinery (See Appendix B) have become much more complex than
oil refining in 1900. Figure D10 is a picture of a modern oil refinery.
The energy cost of refining is also getting more difficult. For every 100MJ of energy per unit of oil extracted,
only 20.5MJ of energy per unit of oil is delivered to market point of application (Hall et al. 2014 and Figure
D11)
Figure D10. Whiting oil refinery in Indiana USA
Figure D11. Boundaries of various types of EROI analyses and energy loss associated with the processing of oil as it is
transformed from oil at the well-head to consumer ready fuels (Hall et al. 2014, figure from Lambert and Lambert, based on
calculations by Hall et al. (2009)).
228
Figure D12 to D13 show how more physical work and infrastructure has gone into producing a given unit
volume of oil saleable oil in 2013 compared to 1900. More energy has been invested than ever before for
the same return. Thus the ERoEI for oil in has degraded and reduced. Appendix B gives a more complete
description of oil production and refining.
Alternatively oil based technology developed over approximately the same time has developed in capability
and complexity. In 1915, the Austin 10 (Figure D12) had a top speed of approximately 60km/hr, delivered a
power of 10.6 kW and cost 260. In 2013, the Lamborghini Aventador LP 7004 (Figure D13) had a top speed
of approximately 354km/hr, delivered a power of 510 kW and cost US$4,500,000.
Not had the effort to extract energy gotten more complex and expensive, but the applications in its use also
became more complex and expensive.
Figure D12. (LHS)The Austin 10 hp is a small car produced between 1910 and 1915 by the British car manufacturer Austin The
original small 4-cylinder 1125 cc engine (RHS) was replaced in 1913 with a larger 14.32 horsepower 1615 cc engine. Though rated
for tax at 14.3 horsepower (10.6 kW) this larger engined model is sometimes referred to as the Austin 10/12., The 10 hp (of 14.32-
h.p.) costing 260 for a chassis with tyres. Top practical speed about 37 or 38 miles per hour (approx. 60km/hr).
Figure D13. (LHS)The Lamborghini Aventador LP 7004 uses Lamborghini's new 700 PS (510 kW; 690 bhp) 6.5 litre 60 V12 engine
weighing 235 kg. (RHS). Top speed: Official: 354 km/h. When introduced in 2013 at a price of US$4,500,000.
An effective way to include this in ERoEI analysis is to calculate the sunk energy (embedded) cost associated
with the raw materials in used in manufacture of infrastructure at each stage of the process, associated with
the appropriate energy resource (Weber July 2017). An example of this for the metal copper is shown in
Table D1.
229
Table D1. Stages of operating energy costs by fuel type available to process routes for producing Copper
(Source: Renewable Future Blog and (Ginley & Cahen 2011))
(Analyst John Weber)
Process Breakdown and Energy Cost by Fuel Type
Energy Source Electricity Natural Gas Diesel/Oil Wear Steel Energy Equiv. Total
Units (kJ/t) (kJ/t) (kJ/t) (kJ/t) (kJ/t)
Mining (to feed ROM Leach) 3,177 0 31,064 44 34,285
Mining (to feed all other processes) 5,083 0 49,702 44 54,829
ROM leaching 3,968 0 0 0 3,968
Primary crushing and conveying 7,915 0 0 22 7,937
Secondary crushing 3,946 0 0 22 3,968
Tertiary crushing 3,946 0 0 22 3,968
Ball Milling (after tertiary crushing) 37,781 0 0 21,621 59,402
SAG Milling (SABC) 27,800 0 0 16,185 43,985
Ball Milling (after SAG) 31,786 0 0 12,890 44,676
HPGR 9,530 0 0 42 9,572
Ball Milling (after HPGR) 29,667 0 0 12,890 42,557
Flotation and Regrinding 15,885 0 0 2,079 17,964
Units (MJ/t) (MJ/t) (MJ/t) (MJ/t) (MJ/t)
Trasnporation to Smelter 0 0 7,158 0 7,158
Smelting 5,046 6,296 0 0 11,342
Refining 1,592 4,356 0 0 5,948
MT Concentrate Leaching 4,885 205 46 0 5,136
HT Concentrate Leaching 6,583 205 46 0 6,834
SX 4,354 0 0 0 4,354
Incremental SX (concentrate leach) 441 0 0 0 441
Electrowinning (EW) 7,145 1,325 0 0 8,470
EW (alternative anode) 6,071 1,325 0 0 7,396
EW (ferrous/ferric) 4,786 117 0 0 4,903
Transportation to Market 0 0 269 0 269
Total (GJ/t) 41.08 13.83 7.60 0.07 62.58
As there is now a link between ERoEI for technology complexity as well as physical work, it is possible to
examine what society requires to operate (Weber Jan & May 2011). Figure D14 shows the inverted pyramid
structure of complexity for ERoEI.
Figure D14. The Social Inverted Pyramid on the Energy Needs (Minimum ERoEI)
(Source: Graphic from Prieto and Hall
http://science-and-energy.org/wp-content/uploads/2016/03/20160307-Des-Houches-Case-Study-for-Solar-PV.pdf )
230
As time has progress, our society has become more complex and dependant on complex information systems
that require a lot of power and a constant supply of raw materials, yet most activities are not absolutely
necessary. Our current society needs an ERoEI of the range 12:1 to 25:1, when all aspects of society are
functioning normally and have all aspects of that society resourced appropriately. Statistically speaking, the
US economy cannot afford to allocate more than 11% of its GDP to energy expenditures in order to have a
positive growth rate. This corresponds to a maximum tolerable average price of energy of twice the current
level. In the same way, US growth is only possible if its primary energy system has at least a minimum EROI
of approximately 11:1 (Fizaine & Court 2016). Mearns 2016 describes the minimum ERoEI for western
society is closer to 7:1 or even 5:1.
The author is of the opinion that ERoEI of 11:1 is a minimum to retain certain parts of our industrialisation
and information based structures like the stock market, credit transfer banking system, manufacturing of
electronic goods, the internet and the just in time supply grid, etc. This is a sliding scale however. An ERoEI
of 7:1 is required to retain parts of our industrialisation that are less complex like the sewerage sanitation
network, and potable drinking water network. In an emergency situation, parts of society are shut for a
period of time, to allow the necessities to function. This describes a society that is not able to do much more
than the bare necessities with luxury activities are cancelled.
This implies that if current Western society was to fall below an ERoEI ratio of 7:1, it would cease to function
in that form, requiring a fundamental transformation to a lower ERoEI state (Hall et al. 2009). (This is shown
below with the Net Energy Cliff.) The society of the early Industrial Revolution of the late 1800s had an
ERoEI of 6:1 ranging to 13:1. The European Renaissance society of the late 1600s had an ERoEI range of 5:1
to 6:1. This is to be remembered when considering the usefulness of different energy resources.
D2 The Net Energy Cliff
A graphical method to describe the relevance of ERoEI has been developed by a number of analysts on the
internet blog The Oil Drum (http://www.theoildrum.com/) (Mearns 2016) called the Net Energy Cliff (Figure
D15).
Net energy as (%) of total energy expended
ERoEI > 11:1 for minimum

for modern complex society
needs to function
ERoEI > 7:1 for minimum

for modern basic society
needs to function
(ERoEI)
Figure D15. The Net Energy Cliff
231
The dark grey section is the net energy available for society to use. The pale grey section is proportion of
energy consumed in collecting that energy to make it useable. An energy resource that has an ERoEI of 25:1,
then for every unit of energy consumed to gather the energy, 25 units are made accessible to society. An
ERoEI of 1:1 means that for every unit of energy consumed to gather that energy resource, 1 unit is returned.
This is a breakeven point or where zero energy is actually delivered to the point of application. Energy used
by society is consumed to make infrastructure like the potable drinking water system or the sewerage
sanitation system, the transport rail and road networks, etc. This is the real physical work that allows our
society to function.
D2.1 Energy Inputs to ERoEI
For any given system of energy extraction/processing/delivery infrastructure, there are a number of
elements to consider. References in the literature have not been able to provide agreement on how this
should or should not be done. Mearns 2016 provides an excellent summary with regard to how ERoEI is
calculated.
Figure D16. Classic EROI Vision of an Energy System A simplified scheme for an energy system divided into construction,
operation and decommissioning with accumulated inputs and outputs.
(Source: Ferroni & Hopkirk, 2016) and Graphic from Prieto and Hall
http://science-and-energy.org/wp-content/uploads/2016/03/20160307-Des-Houches-Case-Study-for-Solar-PV.pdf)
Each part of physical infrastructure of an energy system has four basic stages of life cycle.
Construction (CAPEX capital investment cost)
Operation (OPEX or operating costs)
Decommissioning and shutdown (often planned for inappropriately)
Land rehabilitation (often not considered as part of the business model)
Energy inputs in this kind of system could be defined as:
On site energy consumption (requires efficiency of transfer terms)
Energy embedded in materials used (Table D1)
Energy consumed by labour (difficult to define consistently)
Auxiliary services (difficult to define)
232
D2.2 Energy Outputs of ERoEI
Defining energy output can be just as difficult as analysis inputs.
What is defined as an acceptable and consistent output?
What units of measurement should be used?
How should energy quality be quantified?
Where should energy losses from grid power transfer be in the analysis?
What terms should be used for maintenance and replacement cycles?
How does one account for increase in efficiencies associated with new technologies?
How to incorporate disruptive new technologies that cannot be described in historical terms?
How to define and incorporate industrial disasters that were part of the energy resource extraction
(for example the Deep Water Horizon disaster in 2011).
These all differ between the studies. However, over time, this is getting more sophisticated in the literature.
D2.3 Using Energy Proxies
In an ERoEI analysis, direct energy consumption can be measured and efficiency terms can be estimated.
For example electricity, gas, petroleum consumed in operation of an off shore oil drill platform. But there
are indirect costs like materials used to manufacture the platform or all the support auxiliary systems that
allow the platform to function are all much harder to define. Thus the range of results.
Table D2. Various Conversions used in ERoEI Analysis (Murphy et al. 2011)
233
D3 ERoEI of Energy Resources
Consistently and appropriately defining an ERoEI has been difficult. To do this effectively, a large data
analysis project of the scale of a PhD is required to be undertaken, with the focus of developing a
comprehensive value of ERoEI for each and every energy resource that accounts for the full scope of logistics
and supply chain in exergy terms. Also different aspects of society needs to separated out in this study
(necessity vs. whim). Table D3 shows some of the published ERoEI results.
Table D3. Published ERoEI values for various fuel sources and regions
(Source: Hall et al. 2014, Adapted from original source: Murphy et al. 2011)
(Analyst: Euan Mearns)
Resource Year Nation State ERoEI (X:1)1 Reference

Fossil Fuels (Oil & Gas)
Oil and gas production 1999 Global 35 Gagnon 2009
Oil and gas production 2006 Global 18 Gagnon 2010
Oil and gas (Domestic) 1970 US 30 Cleveland et al. 1984, Hall et al 1986
Discoveries 1970 US 8 Cleveland et al. 1984, Hall et al 1987
Production 1970 US 20 Cleveland et al. 1984, Hall et al 1988
Oil and gas (Domestic) 2007 US 11 Guilford et al. 2011
Oil and gas (Imported) 2007 US 12 Guilford et al. 2012
Oil and gas production 1970 Canada 65 Freise 2011
Oil and gas production 2010 Canada 15 Freise 2011
Oil, gas & tar sand
production 2010 Canada 11 Poisson and Hall, in press
Oil and gas production 2008 Norway 40 Grandell 2011
Oil production 2008 Norway 21 Grandell 2011
Oil and gas production 2009 Mexico 45 Ramirez in preparation
Oil and gas production 2010 China 10 Hu et al. 2013
Fossil Fuels (Other)

Natrual Gas 2005 US 67 Sell et al. 2011
Natrual Gas 1993 Canada 38 Freise 2011
Coal (mine - mouth) 1950 US 80 Cleveland et al. 1984
Coal (mine - mouth) 2000 US 80 Hall and Day 2009
Coal (mine - mouth) 2007 US 60 Balogh et al. unpublished
Coal (mine - mouth) 1995 China 35 Hu et al. 2013
Coal (mine - mouth) 2010 China 27 Hu et al. 2013
Other non-renewables
Nuclear n/a US 5 to 15 Hall and Day 2009, Lenzen2008
Renewables
Hydropower n/a n/a >100 Cleveland et al. 1984
Wind turbine n/a n/a 18 Kubiszewski et al. 2010
Geothermal n/a n/a n/a Gupta and Hall 2011
Wave energy n/a n/a n/a Gupta and Hall 2011
Solar collector
Flat plate n/a n/a 1.9 Cleveland et al. 1984
Concentrating collector n/a n/a 1.6 Cleveland et al. 1984
Photovoltaic n/a n/a 6 to 12 Kubiszewski et al. 2010
Passive solar n/a n/a n/a Cleveland et al. 1984
Biomass
Ethanol (sugar cane) n/a n/a 0.8 to 10 Goldemberg 2007
Corn based ethanol n/a US 0.8 to 1.6 Patzek 2004, Farrell et al. 2006
Biodiesel n/a US 1.3 Pimentel and Patzek 2005
(1) ERoEI values in excess of 5:1 are rounded to the nearest whole number
(2) ERoEI values are assumed to vary based on geography and climate and are not attrubuted to a specific region/country
234
The author of this report has assessed multiple ERoEI studies (not exhaustively), including unpublished studies he has taken part
in and has made the following judgements (Table D4):
Table D4. Estimated ERoEI ratios for energy resources

Energy Resource ERoEI
Conventional Oil 11-25:1

Tar Sands Oil 1.8-4.5:1
Shale Oil (Fracking) 5:1
Conventional LNG gas 10-45:1

Shale Gas (CSG & Fracking) 6.5:1
Coal 50-80:1
Nuclear 15:1
Nuclear (including mining U & storage of spent fuel) 4-5:1
Solar Power 1.6-12:1

Wind Power 18:1
Hydro Power 40-100:1
Biogas 1.3:1
Corn Based Ethanol 0.8-1.6:1
Biodiesel 1.3:1
Conventional Oil & gas ERoEI

Conventional oil and gas are considered together as they are often extracted together and processed in the same refinery. There
is great variation on the ERoEI of different fields and operations.
Is the operation on land or offshore?
If its offshore, in how deep water out in the ocean?
How deep is the drill depth?
What is the quality of the oil? (For example sulphur content)
What steps in refining are required to make a saleable product?
This can get complicated very quickly so assumptions are often made and energy proxies are often used. Most references had an
ERoEI ranging from 11-25:1 for oil and from 10-60:1 for gas. The high examples of ERoEI for gas were often comparatively small
deposits in capacity. The overall conventional LNG gas ERoEI is approximately 10:1.
Unconventional Oil & gas ERoEI

Sources like shale oil and shale gas or Coal Seam Gas (CSG) have ERoEI ratios of around 5-6.5:1 depending on circumstance. What
this does not account for at is the environmental impact these methods have. Fracking methods have a history of destroying
fossilised drinking water reserves that communities depend on for their livelihood. Also, fracking often results in large quantities
of saline water deposited on the surface, which can lead to sterilisation of arable land previously used for agriculture. To date the
fracking industry has not been held accountable for any of these environmental problems, so including them in an ERoEI is difficult.
If they were included, fracking of shale oil or shale gas would result in a negative ERoEI.
Coal ERoEI
Coal had a comparatively large ERoEI ranging from 50-80:1. Technological advances in coal extraction had made a big difference
in the efficiency and ERoEI in the 1970s creating the range in quoted values. Considering coal as a useful resource is politically
incorrect due to its propensity to generate carbon pollution. It may well be the last stable and universally applicable energy source
current society has (coal is projected to peak in production well after oil and gas see Appendix E).
Nuclear power ERoEI

Nuclear power has a number of issues associated with it that other energy resources do not have. Some references quote nuclear
power ERoEI at 15:1. These studies often do not account for the mining of uranium, refining of nuclear fuel, and most commonly,
storage of spent fuel for 10 years in a powered facility. As there is not technical solution to deal with nuclear waste beyond dry
storing it underground for thousands of years (after powered cooling for 10 years), the true ERoEI is unknown. The value of 5:1 is
an estimate of conventional fission based nuclear power.
235
Solar Power ERoEI
Solar ERoEI studies varied immensely. Descriptions of the system itself made a big difference and its application has complex
implications. Geographic position has an influence in efficiency and effectiveness. Current solar systems have a dependence on
fossil fuels for manufacture and maintenance (Weber 2015). If the system was grid tied vs. off grid was decisive. An off grid
system requires a battery bank. Current battery technology is expensive and makes the ERoEI negative. Solar Photo Voltaic (PV)
systems using 2015 technology had an ERoEI of approximately 4:1. Whereas solar concentrating systems using heat had an ERoEI
of approximately 12:1. Solar technology certainly has its place and purchase of such systems is a useful exercise in some
applications. In its current form, solar power generation is not effective enough to be the fundamental underpinning energy
source of an industrial society.
Wind Power ERoEI

Manufacture and maintenance of large wind turbines will be difficult without fossil fuels. Once established, an average onshore
wind turbine with a capacity of 2.53 MW (with a current maximum of 3.6MW) at an estimated ERoEI of 18:1. Wind power is not
possible everywhere and is relatively limited to where it can geographically be sited.
Hydro power ERoEI

This energy resource shows promise to be useful in the future. References ranged from 40-100:1. It is not clear what industrial
support this solution would require. It is very limited to where it can geographically be sited. As such, this is a limited boutique
style solution.
Biofuels ERoEI
These fuels have their place in society and are useful in some applications. Their ERoEI of 1-3:1 make them impractical as an
underpinning energy source of an industrial society. This does not account for the impact biofuel manufacture has on agricultural
food supply. Growing feed stock for biofuels when there is a compelling case for a perceived future global food shortage and
global sanitized drinking water shortage (Johnson 2013) would be difficult to justify.
There are two ERoEI thresholds below which the modern western society will struggle to function at:
3. ERoEI 11:1 The minimum to maintain complex technology and information based structures like the internet,
credit banking finance transfer system, just in time supply grid, integrated electronics manufacture, regional continuous
grid supplied smooth sinusoidal wave quality electrical power supply, tertiary level hospitals, etc.
4. ERoEI 7:1 The minimum to maintain the bare necessities of public utility services like potable drinking water
supply, sewerage sanitation, localised intermittent supply poor quality rough wave electrical power supply, intermittent
goods supply grid with 6 month lag times, etc.
Current Western society is comparatively fragile compared to historical societies. Once current society falls below one of these
thresholds for a relatively short time (estimated 3 - 6 months), and/or does not receive aid from an external source, transformation
and evolution of that society will be desired/required/forced.
236
Net energy as (%) of total energy expended Coal
Conventional Oil & Gas
Wind Power
Shale Oil (Fracking)
Nuclear
Tar Sands Oil
Solar Power
Corn based ethanol
Biodiesel
(ERoEI)
Figure D17. Estimated ERoEI ratios for energy resources on the Net Energy Cliff chart
When oil extraction first started and oil gushers were observed, ERoEI for oil was an extraordinary 500:1
In the 1900-1930 era, ERoEI for oil was still 100:1
In 1970, ERoEI for oil was approximately 30:1
Currently useful to society as an energy resource

Coal ERoEI 50-80:1
Conventional Oil & Gas ERoEI 11-25:1
Wind Power ERoEI 18:1
Hydro Power ERoEI 40-100:1
Solar power Concentrating Collector heating ERoEI 12:1
Not useful to society as an energy resource in their current form

Shale Gas (CSG fracking) ERoEI 6.5:1
Shale Oil ERoEI 5:1
Tar Sands Oil ERoEI 1.8-4.5:1
Solar power PV based, off grid ERoEI -0.9-3:1
Corn based Ethanol ERoEI 0.8-1.6:1
Biodiesel ERoEI 1.3:1
Biogas ERoEI 1.3:1
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Appendix E Quantity of Energy at Point of Application for Energy Resources
Energy use and power generation comes of multiple sources. Appendix B (Description of Different Energy
Resources) and Appendix C (The Use and Application of Energy Resources in Europe) give a more complete
description of what energy resource are and how they are used in Europe.
Figure E1 shows the quantities of the different kinds of energy consumed in Europe (A repeat of Figure 2
from the main body of the report). As can be observed, the bulk of energy consumed in Europe is sourced
from oil, gas and coal.
Figure E1: Energy consumption of Europe EU- 28 nation states 1990-2015

Figure E2. Peak Net Energy Production

(Source: Tverberg 2014 OurFiniteWorld.com)
Estimate of future energy production by author. Historical data based on BP adjusted to IEA groupings. Renewables in this chart
includes hydroelectric, biofuels, and material such as dung gathered for fuel, in addition to renewables such as wind and solar. (It
is based on an IEA inclusive definition.)
(Analyst: Gail Tverberg)
238
Oil, gas and coal are finite non-renewable natural resources. There will come a point when they become
depleted and are required to be phased out as a useful energy source to an industrial society. Appendix G
(Depletion and Peak Production of Finite Non-Renewable Natural Resources) discuss this more completely.
Figure E2 shows the net energy supply based on existing demand and existing reserves (with projection for
future rates of discovery). Oil is projected to peak production first, followed by peak gas production,
followed by coal production.
The purpose of this Appendix is to quantify the energy density content of oil, gas and coal, and then examines
what would be required if the energy service provided by these fossil fuels was source supplied by other
energy generation methods.
Oil is energetically very dense and has no real replacement in terms of potential capability. Table E1 shows
the energetic density of oil, gas and coal. It also shows the global supply of each of these resources for the
year of 2016. It is to be remembered that oil is a liquid, natural gas is in a gaseous form and coal is a solid.
As such, standard S.I. units will be different. Those resource quantities were then converted to Watt hours,
as in the quantity of power supplied in terms of Watt hours.
Table E1. Energy density and supply in 2016

(Source: Lide 1991 & BP Energy Outlook 2017)
Energy Natural Resource Energy Density Global supply for year 2016 (units) Energy Supplied in 2016 (units)
Oil 6.117 (GJ/bbl) 3.54E+10(bbl) 6.01E+10(MWh)
Natural Gas 37 (MJ/m3) 3.55E+12 (m3) 3.65E+10(MWh)
Coal 24 (GJ/tonne) 3656.4(mtoe) 4.25E+10(MWh)
Table E2 shows the number of installed power stations of the most common power generation methods
used in 2016 around the World. The total installed capacity and average taken from the raw data listing of
name plate designed installed power was calculated from the documented source. Thus an average power
generation installed capacity was estimated based on what was available and function in 2016. This average
installed power was then used to estimate the power output delivered to the power grid for one calendar
year (365 days). The number of hours in a year is 8760 hr (24 hours in a day x 365 days in a year).
Table E2. Power generation stations and capacity by type

(Source: BP statistical review of world energy 2017 underpinning data, Global Energy Observatory)
Energy Natural
Power Delivered to Point of Power Delivered to Point Average Station Installed Annual Output of
Power Generation Method Resource Application in 2016 of Application in 2016 Power Capacity Average Station
(Mtoe) (MW) (MW) (MWh)
Oil 4418.2 51,383,666,000
Gas fired station Gas 3204.1 37,263,683,000 433 3,793,080
Coal fired station Coal 3732 43,403,160,000 741 6,491,160
Nuclear station Uranium 592.1 6,886,123,000 2,031 17,791,560
Hydro station Water movement 910.3 10,586,789,000 225 1,971,000
Solar thermal station Sunlight heat 1.6 18,414,942 77 674,520
Solar photovoltaic station Sunlight 73.8 858,487,058 78 683,280
Wind power plants Station Wind 217.1 2,523,710,000 37 324,120
Geothermal + Biofuel Natural Heat 127.1 1,477,010,000
Total 13276.3 1.54401E+11
Using tables E1 and E2, it is now possible to consider what is required from other power sources when oil,
gas and coal are phased out of service.
239
Scenario 1: Oil peaks production and is phased out
Power and energy supply is taken from other sources gas, coal, nuclear and renewable sources. In the year
2016, oil supplied 6.013 x 1010 MWh to society. So this quantity of energy is now sourced from other power
generation methods. Table E3 shows what is required to replace just 1 year of oil supply, and an estimate
of installed power as a percentage of existing installed capacity of the target replacement source.
Table E3. Replacement energy supplied to society by resource oil in the year 2016 by other power generation
resources
Number of new installed Required installed power to replace Number of new installed
Energy Natural stations working all year 1 year of oil energy as a (%) of 1 stations working each year for
Power Generation Method
Resource to replace 1 year (2016) of year of existing installed capacity of 50 years to replace 1 year
oil energy replacement source (2016) of oil energy
Gas fired station Gas 15,855 571% 317
Natural gas is the obvious energy resource to consider as a replacement for oil. Gas in applications can do
similar things to oil. Methods to run internal combustion engines can be refitted to run with a gas fuel exists
now as a mature technology. However, gas is much less effective in terms of energy density than oil. To
replace just 1 year (12 months) of oil supply, using 2016 as an example, it would require 15,855 new gas fired
power stations (average installed power capacity) over and above existing installed gas fired power capacity
(and increase of 571%). This means that 12 months after delivering this oil based energy of 6.013 x 1010
MWh to society, the leger is reset and a further 15,855 new gas fired power stations would need to be
commissioned and producing power.
Alternatively, to replace 12 months of oil supply at the 2016 supply rate, 317 gas fired power stations could
operate every day for 50 years. To be repeated every 12 months (increasing due to population growth and
required economic growth).
Table E3 shows the same analysis for other power sources like coal, nuclear and renewable energy. As can
be observed the prognosis is all other remaining energy sources are not practical to replace oil.
Scenario 2: Gas peaks production and is phased out (oil has already been phased out)
In the year 2016, natural gas supplied 3.65 x 1010 MWh to society. So this quantity of energy is now sourced
from other power generation methods. Table E4 shows what is required to replace just 1 year of gas supply,
and an estimate of installed power as a percentage of existing installed capacity of the target replacement
source.
Table E4. Replacement energy supplied to society by resource gas in the year 2016 by other power generation
resources
Number of new
installed stations Required installed power to replace Number of new installed
Energy Natural
Power Generation Method working all year to 1 year of gas energy as a (%) of 1 stations working each year
Resource
replace 1 year (2016) of year of existing installed capacity of for 50 years to replace 1 year
gas energy replacement source (2016) of gas energy

240
Coal is the logical replacement for natural gas in terms of power generation. To replace just 1 year (12
months) of natural gas supply, using 2016 as an example, it would require 5,623 new coal fired power
stations (average installed power capacity) over and above existing installed coal fired power capacity (an
increase of 572%).
Alternatively, to replace 12 months of gas supply at the 2016 supply rate, 112 coal fired power stations could
operate every day for 50 years.
Table E5 show the same analysis to replace both oil and gas at the same time (both would have then been
phased out)
Table E5. Replacement energy supplied to society by resource oil & gas in the year 2016 by other power generation
resources
Number of new installed Required installed power to Number of new installed
Power Generation Method Energy Natural Resource stations working all year replace 1 year of oil+gas energy as stations working each year for
to replace 1 year (2016) of a (%) of 1 year of existing installed 50 years to replace 1 year
oil + gas energy capacity of replacement source (2016) of oil + gas energy

To replace just 1 year (12 months) of oil and gas fossil fuel supply, using 2016 as an example, it would require
14,888 new coal fired power stations (average installed power capacity) over and above existing installed
coal fired power capacity (and increase of 6.01389E+12%, which is a ridiculous and impractical number to
consider).
Alternatively, to replace 12 months of oil & gas supply at the 2016 supply rate, 298 coal fired power stations
could operate every day for 50 years. To be repeated every 12 months (increasing due to population growth
and required economic growth).
As can be observed the prognosis is all other remaining energy sources are not practical to replace natural
gas.
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Scenario 3: Coal peaks production and is phased out (oil and gas has already been phased out)
In the year 2016, coal supplied 4.25 x 1010 MWh to society. So this quantity of energy is now sourced from
other power generation methods. Table E6 shows what is required to replace just 1 year of coal supply, and
an estimate of installed power as a percentage of existing installed capacity of the target replacement
source.
Table E6. Replacement energy supplied to society by resource coal in the year 2016 by other power generation
resources
Number of new installed Required installed power to Number of new installed
Power Generation Method Energy Natural Resource stations working all year replace 1 year of coal energy as a stations working each year for
to replace 1 year (2016) of (%) of 1 year of existing installed 50 years to replace 1 year
coal energy capacity of replacement source (2016) of coal energy

Nuclear power is the logical replacement for coal in terms of power generation. To replace just 1 year (12
months) of coal supply, using 2016 as an example, it would require 2,390 new nuclear power stations
(average installed power capacity) over and above existing installed nuclear power capacity (and increase of
27%).
Alternatively, to replace 12 months of coal supply at the 2016 supply rate, 48 nuclear power stations could
operate every day for 50 years.
Table E7 show the same analysis to replace oil, gas and coal at the same time (all three fossil fuels would
have then been phased out).
Table E7. Replacement energy supplied to society by resource oil, gas & coal in the year 2016 by other power generation
resources
Number of new installed Required installed power to replace 1 Number of new installed stations
Power Generation Method Energy Natural Resource stations working all year to year of oil+gas+coal energy as a (%) of working each year for 50 years to
replace 1 year (2016) of 1 year of existing installed capacity of replace 1 year (2016) of
oil+gas+coal energy replacement source oil+gas+coal energy

Hydro station Water movement 70,605 9663865320246% 1,412
To replace just 1 year (12 months) of oil, gas and coal fossil fuel supply, using 2016 as an example, it would
require 7,822 new nuclear power stations (average installed power capacity) over and above existing
installed nuclear power capacity (and increase of 6.01389E+12%, which is a ridiculous and impractical
number to consider).
Alternatively, to replace 12 months of oil, gas and coal supply at the 2016 supply rate, 156 nuclear power
stations could operate every day for 50 years. To be repeated every 12 months (increasing due to population
growth and required economic growth).
As can be observed the prognosis is all other remaining energy sources are not practical to replace fossil
fuels.
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Alternative renewable energies lack many of the undesirable characteristics of fossil fuels, including direct
productions of carbon dioxide and other pollutants, but also lack many of the highly desirable traits of
non-renewable fossil fuels. Specifically, renewable energy sources:
are not sufficiently energy dense,

tend to be intermittent,
lack transportability,
most have relatively low EROI values (especially when corrections are made for intermittency), and
currently, lack the infrastructure that is required to meet current societal demands.
Short term too expensive for what they deliver

Medium term unable to deliver the needed quantity of electrical power to point of application
Long term ERoEI ratios too low to be useful to society as a fundamental energy source
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Appendix F - Depletion of Oil Resources and Peak Oil
Production of oil correlates strongly with all indices associated with the real economy (manufacture,
production of goods and services). Everything in our modern society is oil-dependent from food
production and distribution, to textiles and manufacturing, to the transportation of all goods and people.
The concept of peak oil has been discussed by many analyst groups of all kinds.
Energy allows society to physical useful work. Energy consumption correlates directly with the real economy.
Future projections of global energy demand are usually developed on past behaviour, with no understanding
of finite limits or depleting resources. Generally, reserves have been projected on by past production and
demand has been defined by population growth and economic GDP.
The IEA developed a prediction scenario (IEA 2011) to predict how the demand for oil would be met (Figure
F1). By 2035, nearly two thirds, or 39.4 mbd, of current conventional crude oil production would have to be
replaced with new production. Note the grey section Crude oil Yet-to-find and Found-but-yet-to-be-
developed. This has been termed as the wedge of hope by many analysts. It is clear that there is not
enough new oil discoveries being made to meet future demand. Now that oil price has declined, there is
significantly less capital investment on new development of extraction on existing deposits. This shows that
the oil production peak is not that far off.
Figure F1. World oil production forecast, 2011-2035 (IEA New Polices Scenario 2012)
Since first oil crisis of 1973, global energy consumption has doubled. Figure F2 shows oil production and
consumption by region. Oil production increased by 163% in this period. There is no apparent pattern that
suggests conservation or even efficiency by the global society that consumes this resource.
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Figure F2. Global production and consumption of oil by region, 1965-2011
Where will these fossil fuels come from? There has been great enthusiasm recently for a renaissance in the
production of oil and natural gas, particularly for the United States. Starting with calls in the 2008
presidential election to drill, baby, drill!, politicians and industry leaders alike now hail one hundred years
of gas and anticipate the U.S. regaining its crown as the world's foremost oil producer. Much of this
optimism is based on the application of technologies like hydraulic fracturing (fracking) and horizontal
drilling to previously inaccessible shale reservoirs, and the development of unconventional sources such as
tar sands and oil shale (Hughes 2011 & 2013).
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F1 Political and Big Business Knowledge of Peak Oil
The following are the outcomes of studies done by establishment authority parts of nation state
governments (not an exhaustive list).
1 United States Military

The United States Joint Forces Command regularly (about every two years) issues its perspective on future
trends, shocks, contexts and implications for the national security field. (Munroe 2010)
Amid the multitude of security threats, energy has moved rapidly to the forefront, and it is the oil supply issue which is the
focus of this review. The main oil supply vulnerabilities which were cited in 2008 are reiterated, thus indicating that there
has been no amelioration. It restates that oil and coal will continue to drive the energy train until 2030, though it warns
that in order to do so, the world would need to add roughly the equivalent of Saudi Arabias current production every
seven years.
By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach
nearly 10 MBD (p. 29). This warning is consistent with others which have been issued during the past 18 months (eg. the
repeated verbal statements made by IEA chief economist Fatih Birol, the 2008 WEO, Paul Stevens of Chatham House,
ITPOES, etc.)
2 German Government, Military

A study by a military think tank (Future Analysis department of the Bundeswehr Transformation Center for
the German Military) has analyzed how "peak oil" might change the global economy (Schultz 2010). The
internal draft document shows for the first time how carefully the German government has considered a
potential energy crisis.
The team of authors, led by Lieutenant Colonel Thomas Will, uses sometimes-dramatic language to depict the
consequences of an irreversible depletion of raw materials. It warns of shifts in the global balance of power, of the
formation of new relationships based on interdependency, of a decline in importance of the western industrial nations, of
the "total collapse of the markets" and of serious political and economic crises.
The report has been confirmed as authentic, but, apparently, it isn't finished (in 2010) or approved for public sharing yet,
and it is doubtful that the German military or German government will release it without cutting and editing some of the
dramatic statements and predictions.
5 British Government
British Department of Energy, in concert with the Bank of England and the British Department of Defense,
has ordered similar-and equally secret-studies on its impact (Rubin 2010). The Department of Energy and
Climate Change (DECC) is also refusing to hand over policy documents about "peak oil" under the Freedom
of Information (FoI) Act requests from journalists (Guardian 2010).
6 British Private Industry

On 10 February 2010 at the Royal Society, six UK companies Arup, Foster + Partners, Scottish and Southern
Energy, Solarcentury, Stagecoach Group and Virgin joined together to launch the second report of the UK
Industry Task-Force on Peak Oil and Energy Security (ITPOES) (Whitehorn 2010). The Task-Force warns that
the UK must not be caught out by the oil crunch in the same way it was with the credit crunch and states
that policies to address Peak Oil must be a priority for the new government. One opinion concludes that the
global peak production rate for oil is likely to occur within the next decade (maybe within 5 years). The net
flow rate data shows that increases in extraction will be slowing down in 2011-13 and dropping thereafter.
Given the long lead-times involved in developing the necessary infrastructure, this trend is unlikely to be
reversed within the next 5 years. There are now serious concerns that the free flow of relatively low cost
oil, which has underpinned OECD countries economic growth since 1945, may not be sustainable for very
much longer. It will be shown in this section that low-cost (under $25/b) oil supplies effectively ended in
early 2005 and are unlikely to return.
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o The industry is not discovering more giant fields at a sufficient rate.
o There are concerns about the levels of reserves quoted by the OPEC countries (which are critical to the confidence
levels associated with future production capacity).
o There are indications that underinvestment in the oil industry over the past decade has led to infrastructure and
under-skilling problems that will make it particularly difficult to increase production capacity rapidly in the short-
term.
5 International Energy Agency

Consistently optimistic in the past about future energy supplies, the IEA undertook its own field-by-field
survey of oil reserves in 2008 and has become increasingly concerned about oil supplies. This year the agency
explicitly discussed peak oil for the first time and proclaimed that conventional crude most likely peaked in
2006 (Staniford 2010). It continues to believe unconventional oil from the tar sands, the Arctic and deep-
water fields along with natural gas liquids can make up for declining conventional oil and lead to increases
in world oil production for two more decades. But it warns that this is no longer a foregone conclusion
without the necessary and rather large investment required. In 2008 the chief economist of the IEA, Fatih
Birol, wrote in a guest editorial in the British newspaper The Independent that we should leave oil before it
leaves us.
6 US Dept. of Energy
The report (written for the US Dept. of Energys National Energy Technology Laboratory (DOE, NETL)),
published in February 2005, is more commonly known as the "Hirsch Report." This extraordinary document
examines the time frame and implications of Peak Oil, and looks at what preparations need to be undertaken
at a national level to mitigate its impacts.
The Hirsch Report notes that over the past century the US economy has been shaped by the availability of
low-cost oil and that Peak Oil will present the US with economic losses that will be measured in the trillions
of dollars. According to the report, peaking oil production will be abrupt, providing little time to evolve.
Consequently, the repercussions will be revolutionary. And without massive mitigation, the report warns,
the problem will be pervasive and long-term. Such mitigation efforts will require abundant preparation and
substantial time, the report warns. Waiting until production peaks would leave the world with a liquid fuel
deficit for 20 years. Initiating a crash program 10 years before peaking leaves a liquid fuels shortfall of a
decade. However, initiating a crash program 20 years before peaking could avoid a world liquid fuels
shortfall.
However, despite being commissioned by the DOE, the Hirsch Report was buried by the department because
it believed the American public could not deal with the idea that its way of life might be threatened. The
DOE simply determined that the public couldn't handle the report because it was just too painful.
So peak oil is a known quantity that has been studied by the governments, military, banking and private
industry sectors of Britain, Germany and the United States. Consider then, how many times have these
nation states been in a military conflict, regime change support (official or unofficial) or diplomatic sanction
against or in a foreign country with large oil reserves in the last 20 years alone.
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F2 Oil Production
Figure F3 shows World Liquids production (conventional crude oil, unconventional tight oil, tar sands oil,
conventional natural gas and unconventional gas).
Unconventional Liquids
(Tight Oil/Gas, Tar Sands Products)
Conventional Liquids Peak

Conventional Liquids
Jan 2011
(Oil & Gas Products)
86.2 mbpd
Figure F3. World Liquids Production (conventional & unconventional)

(Source: EIA, Drilling info, Statistics Canada & Labyrinth Consulting Services, Inc.)
As can be observed, global conventional liquids production plateaued in early 2005. Unconventional liquids
(tight oil, shale gas, etc.) started to make up the gap in global oil demand (oil supply and demand separated
between 2005 and 2009, Figure 20 in main report). Conventional liquids peaked in 2011. Increases in oil
production since have all come from unconventional sources like Tight Oil (fracked oil shale, tar sands, etc.).
A peak in total oil production was observed in 2015. Whether this is the real date for total peak oil cannot
be determined until it is four to five years in the past (approximately 2019). Other predictions have peak
oil at around 2019-2020.
Over the last decade, world primary energy consumption grew at an average annual rate of 1.8 percent. Its
important to note, that in per-capita terms the rate of energy growth has significantly slowed since the
1980s, increasing at an average annual rate of 0.4% since that time, compared to 1.2% in the century prior
(Jancovici 2011).
The situation for oil is particularly critical, especially given that it is by far the worlds major source of liquid
fuel, powering 95% of all transport. At this time, approximately 6080% of conventional oil fields are in
terminal decline (Fustier et al. 2016). It is estimated that to maintain current supply rates of oil by 2040 the
world would need to find four Saudi Arabia Ghawar elephant fields (the largest to date single producing oil
field) worth of additional oil just to maintain current rates of supply. If the projected demand in 2040 is to
be met, eight Saudi Arabia Ghawar elephant fields would need to be found and operating by that date.
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F3 Oil Resource Discovery
Figure F4 shows historical oil discovery. Most oil was discovered in the 1960s with a persistent decline since
a peak in 1962. The huge Ghawar field was discovered in Saudi Arabia in 1949. For every barrel of oil that
is now discovered, four to five barrels of oil are consumed. This is a declining trend.
Samotlor
(Siberia)
Cantarell
Ghawar (Mexico)
(Saudi Arabia)
Prudhoe Kashagan
(Alaska) (Kazakhstan)
North Sea
(Scotland)
Figure F4. Conventional oil discovery 1949-2015

(Source: US Energy Information Agency EIA, North Dakota Drilling and Production Statistics, Railroad Commission of
Texas & Statistics Canada)
And yet, as the same report showed, new oil discoveries have been in long term declinelately reaching
record lows notwithstanding record investments between 20012014. New discoveries are invariably
smaller fields with more rapid peak and decline rates.
The stated oil reserves are not a bankable number though. OPEC made an agreement to allow members
to produce only a proportion of their stated reserves each year in a bid to make these resources last as long
as possible. Since then, at one time or another, each of the OPEC members have announced massive oil
finds, which in turn allows them to produce more oil and still stay within the OPEC rules. For each of these
countries however, the data to support these claims are kept as state secrets and a matter of national
security. As such, the data to support these claims is inaccessible.
Figure F5 has a series of kinks in the chart that would suggest these claims are fraudulent and the real
reserves are somewhat smaller in size.
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Figure F5. Declared oil reserves of OPEC 19802005
(Source: OPEC Annual Statistical Bulletin)
F4 Status of Existing Oil Reserves
It is estimated that 81% of world liquids production is already in decline (excluding future redevelopments)
(Fustier et al. 2016). The HSBC study (Fustier et al. 2016) quoted a projected probable range for average
decline rate on post-peak production is 5-7%, equivalent to around 3-4.5mbd of lost production every year
from 2016 forward. Small oilfields typically decline twice as fast as large fields.
Figure F6. Post peak oil production decline rates

(Source: HSBC Global Research, Fustier et al. 2016)
For some time now Saudi Arabia has dominated the oil market. They were able to supply more high quality
oil than any other producer for decades. So much so that when the US dollar was coupled with oil by pricing
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all oil contracts in $USD, forming the Petrodollar. In return Saudi Arabia has aggressively protected its true
capacities as a state secret (Emerson 1985).
For years now, peak oil analysts have believed that when Saudi Arabia peaks in oil production, the rest of
the world will also peak in production. In doing so, peak oil has been linked to the Saudi net position. Saudi
oil capacity has been tied to the production of their largest producing deposit, the Ghawar field.
Ghawar reserve Estimated Ghawar reserve

1960 2006
Figure F7.Unofficial estimate of Ghawar Saudi Arabian Elephant oil field (accounts for about half of Saudi output)
Figure F7 shows a study done by oil resource geologist (who requires not to be identified, and is unknown
to the author) using oil extraction and recovery data against estimated reserve as quoted in 1960. Further
projections were made based on the volume of oil actually produced by the Ghawar field. On the RHS, is the
estimated recoverable volume of oil relative to the LHS, using production data up until 1990. While this is
not considered a referenceable study (and there is no known alternative), it does make both intuitive and
logical sense.
The actual size and production capacity is a jealously guarded state secret by the government of Saudi Arabia.
What is known is that water pumping is now used in this reserve to maintain oil pressure (a signature of age
of deposit). Also, if the Saudi Arabian oil producers had vast amounts of easy oil left to sell, why would they
consider investing in deep water drilling and solar technology like they have been?
It is the authors opinion that Saudi Arabia is very close to peaking or may have actually peaked a few years
ago. It is for this reason that Saudi Arabia has undertaken a series of geopolitical ventures in the Middle East
and in global institutions like the United Nations that could have termed ranging from short sighted to
flamboyantly stupid. This would not be so unreasonable if their oil reserves were about to peak and decline
(thus the House of Saud would no longer wield such power). If the House of Saud wishes anything
structurally done geopolitically, they are required to achieve it in the next few years.
Figure F8 shows the number of Baker Hughes drill rigs brought on line and oil production in Saudi Arabia
from 2000 to 2007. During the years 2004 to 2008, the price of oil spiked from $USD50/bbl to $USD147/bbl.
In that time when profit presumably was at an all-time high, Saudi Arabia brought on line more than twice
the number of operating drill rigs to produce oil, yet oil production in that time remained stable. This implies
that extra effort was needed just to maintain oil production. Which in turn suggests that the Saudi Arabian
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supply of oil has peaked. After this time of high oil prices, the Global Financial Crisis (GFC) happened,
triggering a crash in oil demand and a cycle of global stagnation in the real economy.
Production stable 2004-2006
Oil supply became

inelastic
Figure F8. Saudi Arabia oil production and oil drilling rig count 2000 2007
(Source: Baker Hughes, EIA, JODI, IEA)
It was examples like this that prompted investors to start seriously developing unconventional sources like
tar sands in Alberta, Canada and tight oil in the United States.
F5 Shale Oil (Tight Oil)
The recent boom in US tight oila bubble fuelled by low interest rates and record oil industry debtshas
been responsible for most additional supply since the peak in conventional oil in 2005. US tight oil has been
a growth area and it is expected to see a strong recovery, but at 4.6mbd currently it represents only 5% of
global supply. US tight oil peak production is projected to be the year 2021 (See Figure F10). While this date
is an approximate estimate due to the nature of modelling life cycles of shale oil deposits, it is likely to be in
terminal decline within the next 510 years, with the possibility that it has already peaked due to contraction
of upstream capital investment.
This means that Tight Oil while a short term investment bonanza, is not a long term solution to maintaining
oil supply to meet global demand. Underneath that Tight Oil (with its low ERoEI of 6.5:1), conventional oil
still declines. Tight Oil does not invalidate peak oil, it merely postpones it for a few years.
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Figure F9. Total US tight oil production by geologic formation, 2008-2011 (million barrels per day)
Figure F10. US crude oil production million barrels per day

Oil demand is still growing by ~1mbd every year, and no central scenarios that are publically accessible see
oil demand peaking before 2040. The global supply mix relies increasingly on small fields, where the typical
new oilfield size has fallen from 500-1,000mb 40 years ago to only 75mb in just this decade. New discoveries
are limited. In the year 2015, the exploration success rate hit a record low of 5%, and the average discovery
size was 24mbbls. Improved production & drilling efficiency can stem declines, but only for so long as the
North Sea example shows (Fustier et al. 2016).
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The projected volume of US Tight Oil shown in Figures F9 & F10 is highly uncertain and may be based on
fraudulent data. Approximately 80% of the tight oil shale reserves in the US are in the Monterey formation.
On March 21st 2014, the EIA conducted an audit of this deposit and found that most of the oil in this
formation was not extractable with current technology (in 2014). This in turn required a 96% volume
downgrade of Monterey shale oil reserves (4/5 of US reserves). The Monterey Tight Oil reserve is now
quoted at 600 million barrels down from 15.4 billion barrels (McAllister 2014). The appropriately audited
projected long term production against required infrastructure, capital and logistics show oil shale is not
viable. This was seen by investment analysts as the death blow to the US fracking industry.
F6 Oil Industry Investment
To date, oil industry analysts have used a traditional demand constrained prediction model, where the only
limits to oil supply are available CAPEX capital to start new projects (Figure F11).
Figure F11. The traditional fossil fuel supply and demand forecasting model (demand constrained)
Virtually all forecasters (investment banks, oil companies, and industry analysts, the US and other nation
state governments) use demand-constrained models like in Figure F11 (Kopits 2014 a & b). Supply growth
is a function of non-OPEC supply and OPEC supply. One of the purposes of OPEC is to stabilize prices with
increased production or production cuts. Figure F12 shows the difficulties demand constraint models have
had over the last 10-15 years.
Figure F12. International Oil Companies (IOC) crude oil upstream Capital Investment CAPEX and oil production
(Source: Douglas Westwood Analyst Stephen Kopits)
Figures F13 to F14 show a very important temporal marker. CAPEX investment in constructing new projects
steadily increased from 2000 to 2014. Between 2000 and 2012, $USD 212 billion was invested, yet only 1.4%
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increase in oil production was returned (this includes US tight oil plays). Capex productivity has fallen by a
factor of five since 2000, with an observed decline trend now approaching 5% per year. From 2014 to 2016,
there was a 24% decrease in investment each year, which is an indication that the investment community
has lost confidence in oil.
Figure F13. International Oil Companies (IOC) crude oil upstream Capital Investment CAPEX
(Source: EIA (crude production), IEA WEO 2003, 2010 and 2016 (CAPEX))
Figure F14. Oil exploration and production (E&P) CAPEX per barrel
(Source: IEA, Barclays Research and Kopits 2014b)
Costs in CAPEX and OPEX for the oil industry are now rising quickly in an unprecedented fashion. In the year
2000, there was a change in CAGR (compound annual growth rate) for oil production costs (upstream +
downstream) (Figure 8). This change suggests an evolution form a demand constrained system to a supply
constrained system. Profits have stagnated because production costs have risen (and still do so) faster than
revenues returned. Exploration and production CAPEX has been rising by a consistent 11% per year since
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2000. As a direct consequence, a number of projects have consequently been deferred, cancelled or
returned for re-evaluation.
This implies that the business model supporting the oil industry is about to evolve from a demand
constrained profile (Figure F8) to a supply constrained profile (Figure F15).
Figure F15. The unconventional fossil fuel supply and demand forecasting model (supply constrained)
The supply constrained forecasting model applies a binding constraint paradigm of economic growth.
When oil supply growth is insufficient, reducing GDP growth. This has yet to be accepted by the oil industry,
as Figure F14 shows, the oil industry may have been operating like this since the year 2000.
F7 Rising Cost of Oil Production
As oil deposits get harder to access in deeper water and require more processing steps to produce a saleable
product, the cost of extraction and production goes up.
Figure F16. Reaching limits eventually leads to sharp cost of production increases
Figure F17 shows the global liquid supply cost curve in context of the kind of oil deposit. Figure F18 shows
Oil price required by oil companies to be free cash flow neutral after CAPEX and dividends, in context of
the oil producing company. Both of these figures show that the cost curve is sliding into the region of the
red ellipse in Figure 16. It is about at this point where peak oil production is projected to happen (with the
understanding that a number of complex factors collectively influence exactly when this is).
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Figure F17. Global liquid supply cost curve
(Source: Rystad Energy Research and Analysis 2009)
Figure F18. Oil price required by oil companies to be free cash flow neutral after CAPEX and dividends
(Source: Goldman Sachs and Kopits 2014b)
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Figure 19. Cost of oil and gas exploration is increasing (IOC majors)
(Source: Evaluateenergy.com)
Combining the concepts shown in Figures F16 to F19 shows the needed oil price to be cost neutral price-
performance projected against actual oil price (Kopits 2014b). As can be seen most of the oil industry now
needs an oil price above $100 (USD) to be economically viable. If the price was to drop below $100 (USD) a
barrel, then most operations would become unstainable in the medium term and would be shut down. Low
prices could be sustained for a short time by cutting back on exploration and cancelling future investments
to maintain revenue cash flow (much like what is being done now by the major IOC producers)
Figure F20. Conflict between oil price needed to be cost natural actual and market price
(Source: Kopits, S., (2014b) Oil and Economic Growth, A Supply-Constrained View)
Oil price is the catalyst for a number observed changes. Figure F21 shows current oil price. The vertical grey
columns are economic downturns.
258
2008
GFC
EIA 96%
1979
downgrade of
2nd Oil Shock
Monterey
1st Gulf Tight Oil
War
Start of
QE1
1973 2nd Gulf

1st Oil Shock War
Dotcom
Bubble
Record low of
Baltic Dry Index
(Jan 2016)
Figure F21. Crude Oil Prices - 70 Year Historical Chart

(Source: Interactive charts of West Texas Intermediate (WTI or NYMEX) crude oil prices per barrel back to 1946. The
price of oil shown is adjusted for inflation using the headline CPI and is shown by default on a logarithmic scale. The
current price of WTI crude oil as of August 03, 2017 is $49.20 per barrel.)
Each of the peaks and troughs shown in Figure F21 are seen as temporal markers of a number of financial
and geopolitical events. This shows how oil is influenced and can in turn influence a wide variety of structural
aspects of the industrial grid. In terms of geopolitics, oil price is a lagging indicator (1973 oil shock, 1979 oil
crisis). In terms of economic down turns, oil is a leading indicator (Dotcom Bubble, GFC).
Geopolitical
actions/perceptions
Oil Price,
Supply & Demand
Financial & Economic
Downturns & Recoveries
Figure F22. Interactions between geopolitics, oil price and economic downturns
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F8 Peak Oil
Oil is a finite natural non-renewable resource. The planet Earth is a finite system. At some point, rates of
resource discovery and oil extraction rates will peak and decline. Data collected over the last several decades
show that peak oil is now an observation not a theory. The concept of Peak Oil is best described by the
analysts from the blog websites The Oil Drum (http://www.theoildrum.com/) and Peak Oil Message
Boards (http://peakoil.com/geology/92343 ). The next few paragraphs have been taken from this website.
Demand constrained Supply constrained

prediction model prediction model
Introduction
Peak Oil is the moment in time when, on a global scale, the maximum rate of oil production is reached. The
moment after which oil production, by nature, must decline forever. Since Earth is a closed system, next to
this production (supply) event, there must be an equal demand event: Peak Oil Consumption. Since there
are no substantial above ground deposits, Peak Oil Production and Peak Oil Consumption must coincide. The
world consists of a lot of different countries, some of which are already far beyond peak oil production. That
leads to the assumption the world as a whole reaches peak oil production. On the demand side, it is worth
looking, because different countries have different economies, different degrees of development, and so on,
if, while some countries still experience significant growth in oil consumption, some countries are already
well beyond Peak Oil Consumption by now.
Production vs Consumption
The production history of crude oil is well documented. It is clear some countries have reached peak oil
production long time ago. Still world oil production could still grow, because some countries make up for the
countries that are losing production.
The Bell-Shaped Curve

Finite resources tend to be exploited as fast as possible, resulting in an ever increasing production
(mining is the more correct term), until a limit is reached, after which production declines. The result is the
bell-shaped curve M. K. Hubbert showed the world in A.D. 1956:
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Figure F23. M. K. Hubberts oil field bell shaped production curve.
(Hubbert 1956 & 1962)
Hubbert argued that production of oil from a single field would follow a bell shaped curve. He also argued
that a region of oil producing fields would follow a similar pattern, combining into an agregate bell curve.
Figure F24. Idealised, bell shaped production profile for an entire region
(Source: Campbell and Laherrre 1998)
Hubbert also promoted the idea that there would be a peak in oil discovery and after a lag time of an
estimated 40 years, a peak in oil production from extraction.
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Figure F25. Idealise Hubbert curves for discovery and production
(Hubbert 1956 & 1962)
With the benefit of 20/20 hindsight, it is now known how these predictive theories have faired against
history. It is now well understood how the rate of production an oil field now follows, as offshore production
often looks more like Figure F26 while conventional on shore early oil fields look like Figure F23 with the
conventional bell curve.
Figure F26. Stylised oil field production curve, descirbing the various stages of maturity
(Source: Davies 2001)
What is also now understood is that as time has progressed, the quality of energy has deteriorated in in
pratcial terms. The ERoEI ratio for energy sources in general but in particular for oil has sharply reduced
(Appendix D). As the high quaility light sweet crude has been extracted first and the heavy sour crude is
what is left, the bell curve in Figure F20 in context of an actual outcome becomes the Net Hubbert Bell Curve
in Figure F27, which was calculated using the following equation.
(ERoEI 1)
Net Energy = Gross Energy x
ERoEI
262
Figure F27. The Net Hubbert Bell Curve
(Source: The Oil Drum)
(Analyst David Murphy)
The Net Hubbert Curve is calcluted based on the concept that the best and easy to work resources will be
consumed by society first, leaving the more difficult resources to be processed last. This has been shown to
be approprite empircally. Currently of oil being processed is light sweet crude (low sulphur content and
higher ERoEI) and of oil processed is graded as heavy sour crude (high sulphur content and lower ERoEI).
Humans like most other biological organisms use the highest quality, richest and easiest to
obtain resources first. - Chris Martenson 2008, updated in Martenson 2014
Declining ERoEI also means that the amount of discretionary energy available to society is far less than that
predicted by a Hubbert curve (Figure F23). The Hubbert curve represents the total gross quantity of energy
available, and, as it is calculated, there are equal quantities of energy available on the left and right side of
the peak. This, however, is only true in the context of energy content of oil as ir resides in the ground. The
net energy available (i.e. discretionary energy, or energy that is aviable to do useful work) is less. In terms of
a practical outcome, declining ERoEI means that there will be much less net energy extracted post-peak than
pre-peak on the Hubbert curve.
Unlike the original Hubbert curve that shows equal quantities of gross energy resources on the left and right
side, the Net Hubbert Curve is skewed so that most resources are on the left. For example, according to the
original Hubbert curve, 50% of the energy resource is remaining when production levels reach the peak, but
this is quite different for the Net Hubbert curve. Due to declining ERoEI, by the time peak production is
reached, 73% of the net energy available is already used.
Hubbert predicted in 1956 that:

US oil extraction would peak production in 1970
Global oil extraction would peak production in 2000, at 13 billion barrels per year
World production of oil is now of the order of 32 billion barrels of oil per year. Hubbert would have been
unaware of the techonology of deep water drilling as it had not been invented yet in 1956. That being stated
Hubbert got the peak of production correct for the United States (Figure F28) and the rate of oil resoruce
discovery is shown in Figure F29. As can be noted, U.S. peak production was in 1970 and the peak of oil
resource discovery was 40 years earlier in 1930, as Hubbert predicted in 1956.
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Figure F28. US Crude Oil Production
Figure F29. U.S. oil discoveries 1900-2008

(Source: Jean Laherrere, Gail Tverberg & The Oil Drum)
The prediction that global oil production would peak in the year 2000 has not been correct. Figure F3 shows
that conventional crude oil plateaued in 2005. For some time this was believed to be peak oil for
conventional crude oil, to the point where the International Energy Agency (IEA) issued a statement
admitting the this to be the case (Staniford 2010). Then in 2011, a new record for crude oil production was
set (still on the same basic plateau since 2005). So peak conventional crude oil, and peak conventional liquids
(oil+gas) happened in 2011. Figure F3 also shows a total oil production peak in 2015, but it is not clear
whether this is actually peak oil (and will not be clear for another 4-5 years).
264
However, the 1973 First Oil Shock and the 1979 Second Oil Shock dramatically impacted oil price and then
oil production, pushing peak oil back a few years. Also, the impact of deep water drill technology and
unconventional oil extraction methods have pushed the peak back, but only by 20 years or so.
Figure F30 shows the countries that have passed peak oil production. Figure F28 shows the oil discovery
rates and quantities. Peak oil discovery was in 1962, so accounting for the 40 year time lag that Hubbert
proposed, and for the delays from the two first oil shocks, and the impact of then unknown technology, a
peak oil production rate of 2002 is a relatively precise prediction. If total peak oil date of 2015 does prove
to be correct, then Hubbert was only out by 15 years.
Figure F30. Oil producing countries past their peak

(Source: Ludwig-Bolkow Systemtechnik GmbH 2007 HIS 2006; PEMEX, petrobas ; NPD, DTI, ENS(Dk), NEB, RRC, US-
EIA, January 2007 Forecast: LBST estimate, 25 January 2007)
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Figure F31. Global oil resource discovery
(Source: Al-Husseini 2006)
The stated oil reserves are not a bankable number though. OPEC made an agreement to allow members
266
Appendix G Depletion and Project Reserves of Gas, Coal, Uranium and
Phosphorous Resources
The purpose of this appendix is to show the consumption and reserves of natural gas, coal, uranium and
phosphorous.
G1 Natural Gas
Natural gas follows a very similar profile to oil, but while oil supply is just starting to come into peak
production, gas supply is projected to easily meet demand for another 5-6 years before having troubles
meeting market demand. Figure G1 shows global natural gas production and consumption. In this time
period, production increased 227%.
Figure G1. World natural gas production and consumption, 1965 2011
Figure G2 shows the market price for natural gas.
267
2000
(Dotcom Bubble) 2005 2008
(GFC)
2nd Gulf
War
EIA 96%
downgrade of
Monterey Record low of
Tight Oil Baltic Dry Index
(Jan 2016)
Start of
QE1
Figure G2. Natural Gas Prices - 20 Year Historical Chart

(Source: Interactive chart illustrating the history of Henry Hub natural gas prices (The prices shown are in U.S. dollars.
The current price of natural gas as of July 31, 2017 is $2.87.)
The world gets almost one quarter of its energy from natural gas. The consumption of natural gas has nearly
doubled in the last 30 years. The most important energy agencies in the world are forecasting increases in
natural gas demand in the next 20 years. The largest increments in future gas demand are expected to come
from developing countries. Figure G3 shows the gas resource discovery by decade. Note the peak in the
1970 decade.
Figure G3. Natural gas discoveries by decade

(Source: BP Statistical Review of World Energy June 2008)
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Exxon Mobil Vice President, H. Longwell places the peak of global gas discovery around 1970 and has
observed a sharp decline in natural gas discovery rates since then (Longwell 2002). The rate of discovery has
fallen below the rate of consumption in 1980 (Goodstein 2004). The gap has been widening ever since.
Declining gas discovery rates foreshadow future production decline rates because gas production can only
follow gas discoveries.
Figure G4. Natural gas resource classification.

(Source: Potential Gas Committee 2011)
Figures G5-G14 are all charts of natural gas supply form various regions around the world. Figure G5 is the
estimated global net position of natural gas supply to meet projected demand. Peak Gas is predicted to be
around 2020 with potential to be pushed out to 2025 if technology efficiencies are applied.
Figure G5. Global natural gas reserves EWG scenario

Systemtechnik)
269
Figure G6. OECD Europe supply from natural gas reserves EWG scenario
Systemtechnik)
Table G1: Conventional gas reserves and estimate of shale gas resources in Europe
270
Figure G7. Gas production in Russia with field by field analysis of Gazprom fields
(Source: Stern 2006, Boguslavska 2015, http://www.gazprom.com/ )
Figure G8. Natural gas production in Eurasia

Systemtechnik)
271
Figure G9. Natural gas production in Middle East EWG scenario
Systemtechnik)
Figure G10. Natural gas production in Africa EWG scenario

Systemtechnik)
272
Figure G11. Natural gas production in OECD Pacific EWG scenario
Systemtechnik)
Figure G12. Natural gas production in China EWG scenario

Systemtechnik)
273
Figure G13. Natural gas production in Latin America EWG scenario
Systemtechnik)
Figure G14. Natural gas production in East Asia EWG scenario

Systemtechnik)
274
G2 Coal
Coal is often quoted as being infinite in quantity with no end in sight. Coal geologists would often tell the
author that there is no issue with coal supply as there is billions of tonnes in the ground, they have seen
them. Coal is a bulk commodity industry. The volumes handled are extraordinary in size. The numbers tell
a very different prognosis.
As world coal production almost doubled between 1987 and 2011, the decline of reserves results in an ever
larger reduction of the reserve-to-production ratio (R/P). At year-end 2011 reported world coal reserves
were enough to supply coal for 112 years. Three years earlier the R/P-ratio still was at 118 years.
Figure G15. Historical reporting of world coal reserves (WEC 2010)

(Source: Hk et al. 2010)
Figure G16. Historical reporting of world coal reserves (WEC 2010)

Systemtechnik)
275
Table G2. Most important coal countries in 2011
Of the global coal production only about 15 percent were traded internationally in 2011. The countries
owning the biggest reserves have only a limited export potential. In 2011 China and India together imported
297 million tonnes, i.e. 70 percent more than the imports of Japan in 2010 when Japan was still the biggest
importer worldwide. Only 10 years ago China was exporting 70 million tonnes. This rapid change in
international coal trade resulted in a doubling of the global import/export market since 2001. The additional
volumes were mainly supplied by Indonesia, which expanded its coal production. Yet it is foreseeable that
Indonesia will peak within the next five years and exports will subsequently decline. Since exports from South
Africa are down from 2005 and are stagnating the future gap in export capacity will have to be closed by
increased exports from FSU countries, Columbia and Australia. Coal demand in China and India will continue
to grow. Possibly in the near future this will lead to shortages and rising prices on the world market. Such a
development is much more likely than the assumption that in ten years time coal will be abundant and
cheap.
Figure G17. World hard coal production 1960-2100 by region

Systemtechnik)
276
Even if the world's coal reserves are twice as large as reported this does not postpone the peak in production
more than two decades. The biggest six producers would still dominate future production, given their
dominance in coal supply. China, India and Australia will be the driving forces behind global coal production.
Figure G18. World coal production by coal rank

Systemtechnik)
Figure G19. Regional disaggregation of coal imports to and exports from China
(Source: (Zittel 2013) Fossil and Nuclear Fuels and Verein der Kohlenimporteure 2012)
It is highly unlikely that coal will be cheap and abundant a decade from now (2027 would be past the
projected coal peak or very close to it). Only a superficial equation of reserves and resources can lead to
such a conclusion. And even an uncritical use of reported reserves in modelling future supply will be grossly
misleading.
Like every finite fossil energy resource, global coal supply is going to peak. In many coal producing countries
the peak is already history. Even though the data we have are far from being satisfactory, a reasonably
reliable picture of the future can be drawn. We will see some further growth in global coal production
followed by a peak in the not so distant future. However, there is definitely no scope for substituting oil and
gas in the long run by coal. There will be no regression to coal as the long-term primary fossil energy source.
The peak of all fossil fuels is already in sight.
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G3 Uranium and Nuclear Power
The next few pages have drawn heavily upon the excellent report by the Energy Watch Group:
Zittel, W. et al, (March 2013) Fossil and Nuclear Fuels the supply outlook Energy Watch Group,
Ludwig-Bolkow Systemtechnik
Worldwide 208 operational reactors allocate a total net electric capacity of 422.5 GW. In recent years the
construction start of nuclear power plants has gained momentum.
Figure G20. Nuclear reactors currently (2012) under construction at world level
(not including reactors with a construction starting prior to 2000)
(Source: Zittel et al. 2013)
Since 2006, the construction of reactors with an additional capacity of 48 GW started. In 2012, a total of 62
GW were under construction including 10 GW of electric capacity with a construction start prior to 2000.
Some of those reactors have been under construction since the 1980s. If and when this 10 GW reactor
capacity will ever go online is still very uncertain.
Figure G21. Development of the installed net electrical capacity if no new NPP construction starts
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The blue line in Figure G21 shows the development of the net electrical power capacity until today. The
green bars (right axis) indicate the net capacity currently being constructed (for the year in which the capacity
will come online). If the start-up date for the commercial operation is not known, five years between
construction start and completion have been assumed. The red bars (right axis) show the reactor capacity
that will have to be shut down each year if an average operation lifetime of 40 years is assumed. The broken
orange line shows the future development of the installed net capacity based on the above assumptions.
Not including constructions in China and Korea the available capacity will decline as shown by the red broken
line.
Figure G22. Required construction starts of new power plants to meet NEA forecast of nuclear capacity and to
sustain current level (Source: (Zittel 2013), Ludwig-Bolkow Systemtechnik,
International Atomic Energy Agency (PRIS), Sept 2012)
The Nuclear Energy Agency (NEA) forecasts an installed nuclear net capacity of at least 540 GW (low case
scenario) for 2035. In a high case scenario the estimates for 2035 are as high as 746 GW. NEA states that due
to the Fukushima Daiichi accident those projections are subject to even greater uncertainty than usual.
Despite the accident in Japan the low case projection is 29 GW higher than the projection made in 2009. The
high case projection from 2009 has been at 782 GW. Figure G22 shows the cumulated additional capacity
required to sustain the current net capacity (blue bars) and the additional capacity required to meet the NEA
forecast (low scenario) (purple bars).
To sustain the current net capacity of 422 GW about 250 GW (equalling a little under 60% of current global
capacity) have to be added until 2035. To meet the NEA 2011 low case scenario over 400 GW new net
capacity is required until 2035. The additional required capacity can be supplied either with newly
constructed reactors, and/or the prolongation of the life-span of operating reactors, and/or the reactivation
of existing reactors currently having the status longterm shutdown. The capacity that can be supplied from
long-term shutdown reactors is minimal and amounts to only 3 GW (five reactors, shutdown since 1995 and
1997). If the average reactor lifespan is extended from the assumed 40 years to an average of 50 years, the
need to construct new reactors is reduced by 95 GW until 2035. With an extended reactor lifespan of 50
years a total of about 150 GW have to be constructed until 2035 to keep the nuclear electricity production
at current level. Assuming a construction time of 5 years, on average the construction of 8 GW per year (50
years reactor lifetime) respectively 14 GW/a (40 years reactor lifetime) has to commence every year
between 2012 and 2030 in order to sustain the current production level. To meet the NEA 2011 low case
279
scenario, on average every year a capacity of between 17 GW/yr (50 years reactor lifetime) and 22 GW/yr
(40 years reactor lifetime) has to be added.
In the 2009 NEA report on uranium Resources, Production and Demand an additional cost category for
both RAR (Reasonably Assured Resources) and IR (Inferred Resources) was added. The new category defines
resources recoverable at costs between 130 $/kgU 260 $/kgU. Including the category added in 2009, the
identified resources in the latest NEA 2011 report add up to a total of 7,097 kt uranium. That amounts to an
increase of 50 percent compared to the report of 2005 (all cost categories). When only counting resources
recoverable at <130 $/kgU, the increase between 2005 and 2011 is 12 percent.
Figure G23 shows the development of resources in each cost category. The green bars represent reasonable
assured and the blue bars inferred resources.
Figure G23. Reasonably assured and inferred resources in 2005, 2009, and 2011 split in different cost categories
Figure G24. Reasonably assured and inferred resources and cumulative uranium production of the most productive
countries (Source: (Zittel 2013) Fossil and Nuclear Fuels the supply outlook
280
Figure G25. World uranium production by country and reactor fuel demand since 1945-2012
The NEA 2011 forecast on nuclear power capacity (540 GW in the low case, 746 GW in the high case) leads
to a uranium fuel demand between 95 and 130 ktU/yr in 2035. Assuming a linear capacity growth, a total of
2,000 to 2,500 kt uranium are needed until 2035 to power all reactors. The reasonable assured resources
with extraction costs below 80 $/kgU are not sufficient to meet this demand. If the uranium supply is
extended to the cost category <130 $/kgU RAR, this would be barely enough to meet the fuel demand in the
NEA low case scenario for the next 15 20 years.
Figure G26 shows the fuel demand for both NEA 2011 forecasts. The dark green area indicates the possible
future uranium production from Reasonable Assured Resources with extraction costs below 80 $/kgU. The
light green area indicates additional uranium (+ 1,441 kt RAR) that can be produced at cost of 80 to 130
$/kgU. The blue area shows the maximal amount of additional fuel (+ 3,641 ktU) that can be produced at
costs below 260$/kgU while also including Inferred Resources.
281
Figure G26. Historic and possible future development of uranium production and demand
Figure G27 is based on Reasonably Assured Resources < 130 USD/kg. Expansion plans are included as far as
possible. For instance, the largest mine Olympic Dam (Australia) is assumed to extend its production from
present 3,8 kt/yr to more than 12 kt/yr until 2020 this would be tripling of production rate within 7 years.
Further production increases are assumed over the next decades. Ultimately, in 2080 the RAR < 130 USD/kg
would be depleted. This scenario shows that by far the largest part of resources is located in one mine. As
the production rate of this mine cannot be expanded to any value, the above sketched picture by adapting
all resources to a bell shaped production profile is unrealistic and overstates the possible production rates.
At current political restrictions, it seems even more realistic to cut any large expansion plan for Olympic Dam
due to political resistance.
But even allowing these production increases reveals that probably uranium production from primary
sources will not be enough to feed an increasing number of reactors as calculated in the high or low scenario
by the National Atomic Energy Administration (NEA/IAEA 2011). Based on the above said it is even possible
that before 2020 supply restrictions might happen, when planned mine developments are in delay.
282
Figure G27. Historical uranium production and projection until 2100 with mine-by-mine production profiles based on
Reasonably Assured Resources <130USD/kg
Figure G28 shows the corresponding uranium supply projection when Reasonably Assured Resources < 260
USD/kg and even Inferred Resources <260 UDS/kg are included. This shifts the possible production level by
almost 20,000 tonnes/yr to 100,000 tonnes/yr, which in the optimistic case might be kept almost constant
until 2050. However, the supply of an aggressive expansion of nuclear power plant capacity as shown by
NEA cannot be fed over the operation time of the reactors which need to be build.
Figure G28. Historical uranium production and projection until 2100 with mine-by-mine production profiles based on
Reasonably Assured Resources <260USD/kg and Inferred Resources <260 USD/kg
283
G4 Phosphorous
Peak Phosphorous is a concept that is relatively new but very important as industrial agriculture depends on
it. This it is to be included in the basket of vital non-renewable finite natural resources that current society
depend upon.
Figure G29. Historical sources of phosphorus fertilizer

(Source: Cordell et al. 2009)
The next few paragraphs have been taken from the excellent article:
Mohr, S., and Evans, G., (2013) NEW PROJECTION OF PEAK PHOSPHORUS Resilience Web Blog,
originally published by Philica
http://www.resilience.org/stories/2013-09-05/new-projection-of-peak-phosphorus/
Phosphorus and its compounds are used in fertilisers, animal feed, detergents, and metal treatment
operations (Steen, 1998). More than 80 percent (Steen, 1998; Cordell et al., 2009; Van Vuuren et al., 2010)
of the phosphorus produced is utilised in fertilisers to assist in crop production, resulting in increased yields
of up to 50 percent (Stewart et al., 2005). Without the use of fertilisers it would be difficult to provide
sufficient food for an expanding world population, which is projected to grow from around 0.9 billion in 1850
(Kremer, 1993) to 9 billion in 2050 (U.N., 2008). Corresponding to the increase in population has been an
annual increase in phosphorus production, from less than 1 Mt (P)/y in 1850 to 22 Mt (P)/y in 2012. Currently,
the current cumulative production of phosphorus, mined from phosphate rock and guano, is estimated to
be approximately 954 Mt (P). Phosphorus is a finite resource and cannot be substituted for agricultural uses
(USGS var.). Hence it is essential that the resource be managed in order to avoid, or mitigate at least, any
future supply limitation. To do this, reliable estimates of future demand and realistic projections of
production rates are required based on the amount of phosphorus that remains.
For predicting future supply the ultimately recoverable resource (URR) is commonly used and is equal to the
combined sum of all historic and future production. Estimates of URR values for phosphorus currently range
from 1,000 to 36,700 Mt (P) (Cordell et al., 2009; Dry and Anderson, 2007; Ward, 2008; Van Vuuren et al.,
2010). Such a broad range in URR estimates highlights the uncertainty in the quantity of phosphorus-bearing
material actually available. Future production projections also have a wide variation as they are dependent
on both the amount of the recoverable resources still remaining as well as external drivers, such as droughts,
wars, famines, etc, that influence annual production.
284
In this article, Mohr and Evans collate phosphate rock production statistics for all countries and apply GeRS-
DeMo (Geologic Resource Supply-Demand Model) to estimate future production for three distinct scenarios.
The Low scenario used Hubbert Linearization to determine the Ultimately Recoverable Resources (URR). The
High scenario combined the highest resources estimates and a 60% recovery factor with historical
production. Finally the Best Estimate scenario reflected the authors best estimate as to the correct URR
values. The URR estimates used were: 2010, 4181 and 9197 Mt (P) for the Low, Best Estimate and High
scenarios respectively.
The demand-production interaction resource model of Mohr (2010) which previous has been used to model
fossil fuels was used to create a country-by-country projection phosphorus production. The model has two
distinct modes of operation, Static in which supply and demand do not influence each other, and Dynamic
were supply and demand do interact with each other. By applying this model, phosphorus production was
projected to peak in 2020/21, 2027 and 2118 for the Low, Best Estimate and High scenarios, as shown in
Figures G30 to G36.
Figure G30. (a1) Static: Low

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Figure G32. (a2) Static: Best Estimate
Figure G33. (a3) Static: High

286
Figure G34. (b1) Dynamic: Low
Figure G35. (b2) Dynamic: Best Estimate

287
Figure G36. (b3) Dynamic: High
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Appendix H Structural Vulnerability of the Financial System & the Printing
Money Strategy
The structure of the current monetary system is very different to what society thinks it is. This is stated as
the system is very fragile, virtual in form and very vulnerable. Yet society, or to the point the people we trust
to administer this system on our behalf, treat it as if it is indestructible, infinite in scope, and the very
foundation of reality.
The great unwinding of the financial sector showed that the smartest
mathematical minds on the planet, backed by some of the deepest pockets,
had not built a sleek engine of permanent prosperity but a clown car of
trades, swaps and double dares that, inevitably fell to bits. Raj Patel 2009
H1 What is Money?
We agree that money has value. It is a social contract. There was a time when money value was backed by
its inherent physical value (gold and silver bullion). Now it is confidence.
If money is viewed simply as a tool used to facilitate transactions, only those media that are readily accepted
in exchange for goods, services, and other assets need to be considered. Many things - from stones to
baseball cards - have served this monetary function through the ages. Today, in the United States, money
used in transactions is mainly of three kinds - currency (paper money and coins in the pockets and purses of
the public); demand deposits (non-interest bearing checking accounts in banks); and other checkable
deposits, such as negotiable order of withdrawal (NOW) accounts, at all depository institutions, including
commercial and savings banks, savings and loan associations, and credit unions. Travellers checks also are
included in the definition of transactions money. Since $1 in currency and $1 in checkable deposits are freely
convertible into each other and both can be used directly for expenditures, they are money in equal degree.
However, only the cash and balances held by the nonbank public are counted in the money supply. Deposits
of the U.S. Treasury, depository institutions, foreign banks and official institutions, as well as vault cash in
depository institutions are excluded.
This transactions concept of money is the one designated as M1 in the Federal Reserve's money stock
statistics. Broader concepts of money (M2 and M3) include M1 as well as certain other financial assets (such
as savings and time deposits at depository institutions and shares in money market mutual funds) which are
relatively liquid but believed to represent principally investments to their holders rather than media of
exchange. While funds can be shifted fairly easily between transaction balances and these other liquid
assets, the money-creation process takes place principally through transaction accounts. In the remainder
of this booklet, "money" means M1.
There are different measures of money supply (Figure H1). Not all of them are widely used and the exact
classifications depend on the country. M0 and M1, also called narrow money, normally include coins and
notes in circulation and other money equivalents that are easily convertible into cash. M2 includes M1 plus
short-term time deposits in banks and 24-hour money market funds. M3 includes M2 plus longer-term time
deposits and money market funds with more than 24-hour maturity. The exact definitions of the three
measures depend on the country. M4 includes M3 plus other deposits. The term broad money is used to
describe M2, M3 or M4, depending on the local practice.
289
Figure H1. The different forms of money
A century ago money was much more resilient and problems could be resolved locally. A crash in one part
of the world did not devastate the rest of the planet. Today things are different. Today, all systems are so
hopelessly entwined, while simultaneously are very fragile, that a relatively small problem could very quickly
unravel the whole system back to its intrinsic value nothing.
Historically the dominant currency of the day defined the rest of the economic market. The current world is
dominated by the US dollar, with its foundation in the worlds need for oil and the unacknowledged global
empire of the United States. A large scale war, and/or civil insurrection and/or a severe economic downturn
are temporal markers for the transition between empires. A case can be made that there are distinct
parallels between what is happening to the American system and the Roman Empire. The same discussion
makes the point that the era of American dominance is coming to an end.
United States (Dollar) 78 Years so far (1939- ???)

WWI, Great Depression & WWII
British Empire (Pound) 105 Years (1815-1920)
French Revolution & Napoleonic Wars
France (Franc) 95 Years (1720-1815)
Dutch East India Company Decline, Anglo-Dutch Wars
Netherlands (Guilder) 60 Years (1640-1720) Dutch Occupation, Catalan Revolt, Fall of the
Iberian Union, Thirty Years War
Spain (Real de a Ocho) 110 Years (1530-1640)
Portuguese succession crisis, Iberian Union
Portugal (Real) 80 Years (1450-1530)
The Black Plague & Misguided Geopolitics
Venetian Empire (Ducat) 190 Years (1260-1450)
1250
Year
Figure H2. The reign of empires and their currencies
To understand the vulnerability of the current financial system, it is required to understand the history of
the American banking system and how it came to dominate the rest of the planet.
290
H2 History of the US Financial system and the US Federal Reserve Bank
In the early 1900s the American financial system was quite strong and prosperous. Industry was booming
with the very start of the discovery of oil and the development of technology to use it. The future was most
promising, backed by seeming endless natural resources.
In 1907, there was a severe economic downturn. A financial crisis that took place over a three-week period
starting in mid-October, when the New York Stock Exchange fell almost 50% from its peak the previous year.
This was called the Panic of 1907. The panic was triggered by the failed attempt in October 1907 to corner
the market on stock of the United Copper Company. JP Morgan stepped in as a lender of last resort. The
banking sector and the voting public called for some form of reform to the banking system.
Figure H3. Public outcry in 1913 demanding banking system reform after the 1907 Panic
In 1913, the Federal Reserve Bank was formed to act as a Central Bank. This institution had the authority to
lend money into existence, set federal interest rates and set require banking financial reserves. The
formation of the Federal Reserve Bank happened behind closed doors, in secrecy and by people who would
personally benefit the most (Griffin 2010). Today this would be considered illegal. In doing so, the Federal
Reserve could step in and prevent financial panics (stock market crashes) from happening.
291
Table H1. Timeline of central banking in the United States
Dates System
17821791 Bank of North America (de facto, under the Confederation Congress)
17911811 First Bank of the United States
18111816 No central bank
18161836 Second Bank of the United States
18371862 Free Banking Era
18461921 Independent Treasury System
18631913 National Banks
1913present Federal Reserve System
Sources: "History of the Federal Reserve". Federal reserve education.org.
Chapter 1. Early Experiments in Central Banking. Historical Beginnings.The Federal Reserve. 1999.
Instead of preventing panics, the Federal Reserve provided the mechanism and facilitated a massive
speculative bubble of stocks, which when the bubble burst, created The Great Depression. The US money
supply contracted by almost a third in volume, and the US administration approached the point where it was
required to declare itself insolvent.
Figure H4. Widespread unemployment, poverty and displaced people Great Depression USA 1933
Figure H5. Widespread poverty, breakdown of utility services and displaced people Great Depression USA 1932
292
Figure H6. People evicted from their homes as a consequence default and then of loan foreclosure, assembled tent
cities 1930 The Great Depression USA
In 1933, US President Roosevelt ordered the confiscation of all gold holdings from all sectors, including the
privately held assets of citizens (US government enacted Executive Order 6102 - "forbidding the Hoarding of
Gold Coin, Gold Bullion, and Gold Certificates within the continental United States"). Gold assets were to be
turned over the Federal Reserve Bank in exchange for US dollars and in some cases gold certificates. At this
time the US dollar was backed by the gold standard.
Figure H7. US government enacted Executive Order 6102, to confiscate privately held gold
293
Assets gained by the US Federal Reserve in this action was estimated at $11 billion dollars. So the Federal
Reserve gained absolute control of the entire gold reserves of the most powerful (economically, politically
and militarily) nation state on earth, in exchange for $11 billion dollars it created out of thin air. This is an
excellent example to show how nation state governments will change the rules and even break the law to
achieve its goals in times of stress.
In 1944, there was a gathering of the worlds most powerful economic nations (who incidentally had almost
won World War II) meet to form the Bretton-Woods Agreement, where all of their currencies were at some
level tied to the gold standard. In recognition that the US represented more than half the world economy
and controlled most of the gold, the US dollar was made the de facto world reserve currency. All other
currencies were pegged to the US dollar. This ushered in an era of economic prosperity relatively free of
risk.
Figure H8. Number of countries having a banking crisis in each year since 1800.
(Source: Reinhart and Rogoff 2009)
The system was flawed however. There was no prevention to limit the Federal Reserve creating more dollars
to expand the US money supply (to fund an ever imbalanced US budget). Its soon became clear that the
more US dollars in circulation to the same volume of gold, that the US dollars were devaluing. French
President Charles de Gaulle demanded that French US dollar holdings be converted back to gold bullion and
returned to France. The gold reserves of the US Federal Reserve Bank were depleting and became very low.
In 1971, US President Nixon ended the Bretton-Woods system agreement and decoupled the US dollar from
the gold standard. Since then there have been several serious attempts by US Congress to audit the Federal
Reserve, all of which have failed. To date the US Federal Reserve Bank (a privately owned consortium) has
absolute power of the largest economy in the world, and has never been audited, or held accountable for its
mistakes.
With the removal of the last restraint of the gold standard requirements, the Federal Reserve could print as
much money as it liked. As US dollars are loaned into existence through debt (Gonczy 1992), US debt
ballooned exponentially. The US M1 money supply consistently grew each year.
With the benefit of 20/20 hindsight, it has become clear that the United States has used it geopolitical
position to further its interests to increase its footprint in the global market. The Anglo-American banking
elite were able to secretly establish and maintain their global power, riding off the success of World War II
(Quigley 1966, Perkins 2005).
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This empire, unlike any other in the history of the world, has been built primarily
through economic manipulation, through cheating, through fraud, through seducing
people into our way of life, through the economic hit men. I was very much a part of
that. John Perkins
So we make this big loan, most of it comes back to the United States, the country is
left with the debt plus lots of interest, and they basically become our servants, our
slaves. It's an empire. There's no two ways about it. It's a huge empire. It's been
extremely successful. John Perkins
Basically, what Economic Hit Men are trained to do is to build up the American empire.
To create situations where as many resources as possible flow into this country, to our
corporations, and our government, and in fact we've been very successful.
John Perkins
This winning streak of prosperity was not sustainable though. In 2008, the Global Financial Crisis was
triggered. Commentators at the time blamed a real estate bubble in the US domestic market. It would be
more appropriate to say that that was the weakest link, thus the first to break, but the cause was something
else.
Figure H9. Mainstream view of the chain reaction what caused the GFC
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Figure H10. Underlying issues that contributed to the GFC
(Source: WallStats.com)
A case can be made to hypothesize that the GFC was a blowout from an ongoing set of issues that are
discussed in this report. In 2005, the oil market became inelastic in supply/demand and between 2005 and
2008 supply and demand separated. The price of oil spiked in a speculation bubble. As has been shown in
other parts of this report, oil is a fundamental underpinning for the real economy and physical work done.
The cost of doing things exceeded what the market could sustain, available debt and credit was applied, and
the bubble burst under strain in 2008. What commenced was an unprecedented speed of contraction. In
late 2009, this contraction was arrested by the start of Quantitative Easing (printing money, Section H4),
which was backed by increasing the US Nation Debt.
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$16.5 Trillion
USD debt
(2014)
Start QE1
(2008)
$10.48 Trillion USD debt
Oil market became

inelastic as crude oil
production plateaued
(2005)
Gold Standard
Decoupled from $USD
(1971)
Figure H11. Total US Federal Debt, in trillions of dollars.

(Source: Source: usdebtclock.org)
In 2016, the U.S. debt reached levels never before seen in American history. Of this debt, $5.4 trillion was
held by the government, including the Social Security trust fund, while a staggering $14.2 trillion was debt
held by the public. On the 7th of August 2017, US national debt was $19.97 trillion dollars, more than an
extra $3.4 trillion USD than Figure, which was added over just 5 years.
It took a little more than 200 years for the US economy to accrue $1 trillion USD in debt (from 1776 to 1981).
It took just 4 years to take on the second trillion in debt. Between 2008 and 2012, the US took on $1.33
trillion dollars a year. This pattern is unlikely to slow down as its an exponential function, which is something
297
our current society does not seem to comprehend the meaning of (Bartlett 1996). What will the US economy
look like when $1 trillion dollars USD in debt takes only 3 to 4 months to accrue? Or 3-4 weeks? This can
now only end in hyperinflation, as has many historical examples show (See Section H6 and H7). Figure H12
show the current state of affairs in terms of US national debt. Figure H13 shows the historical US National
debt profile as a fraction of GDP. Prior to 1971, the US economy was heavily dominated by the real economy,
thus had an intrinsic value to tie the debt to. In 2017, the fiat economy dominates and underpins the debt.
Figure H12. United States national debt profile

(Source: usdebtclock.org)
Figure H13. Historical US Debt (in terms of % of GDP)

(Source: Congressional Budget Office)
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GFC
Figure H14. Federal Reserve total assets, treasuries, and mortgages

(Source: (Yellen 2017) 103rd Annual Report 2016 Federal Reserve)
Figure H15. U.S. Merchandise Trade Balance (1895-2015)

(Source: US Census Bureau, Department of Foreign Trade, Measuring Worth)
The growth of the financial sector as a (%) of GDP in the USA has been driven by growth in shadow banking
activities rather than increasing private credit. In doing so, the operation of how this vital financial sector is
conducted, is not administered and subject to the checks and balances of the law. This highlights the nature
of how money flows around the world using tax havens, which put corporations beyond the reach of the law
(Shaxson 2012). This creates a system where a few corporations are favoured and protected with a direct
connection to central banks, while all other business groups are drained of resources and value.
299
Figure H16. Proportion of the shadow banking in the US financial sector
(Source: R. Sahay et al. 2015 Rethinking Financial Deepening, IMF)
H3 Monetary Creation and the Fractional Reserve Banking System
How debt is used to create money out of nothing in the private sector is through the process called
fractional reserve banking. This process happens behind the scenes at banks around the world in every
economy managed by a central bank. This is the practice whereby a bank accepts deposits, makes loans or
investments, and holds reserves equal to a fraction of its deposit liabilities. Reserves are held as currency in
the bank, or as balances in the bank's accounts at the central bank. Fractional-reserve banking is the current
form of banking practiced in most countries worldwide. Currently a reserve of 10% is required by the Federal
Reserve Bank, for a bank to keep, which means they can lend out 90% of their deposits and charge interest
in doing so.
The practice of fractional reserve banking dates back to the 14 th century in some areas of Europe. It was
always associated with paper note currency and on a relatively small scale before it ceased. For example, in
Britain, the Bank Credit Act of 1844 was introduced to ban the private issuance of bank notes - after which
the Bank of England became the only issuer of paper money. In this centralised form, the practice will have
only existed in the USA after the Federal Reserve Bank System was established in 1913 and operational in
2016.
However, older paper currency (e.g. the civil war "greenback") will have also used fractional reserve banking.
Incidentally, today's debt-based, largely electronic currency is not a fractional reserve system, as there is no
longer any reserve. In today's system, private banks simply loan new money into existence, then the central
banks print (electronically) whatever amount of central bank reserves are required to keep the system
operating (i.e. the reverse of how fractional reserve banking used to operate). Technically this means that
the current US Federal Reserve Bank System is insolvent (the system owes more debt than it is valued at, or
has physical assets to act as collateral).
Figure H16 shows the full extent of money that can be expanded upon from a single deposit, as the new
deposits created by loans at each stage are added to those created at all earlier stages and those supplied
by the initial reserve-creating action.
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Figure H17. Fractional reserve banking money created from a single deposit
(Source: Gonczy 1992)
There are a number of references that describe how this system works. A publication put out by the Federal
Reserve for education purposes is Modern Money Mechanics (Gonczy 1992). In 2009, the New York Federal
Reserve Bank released an informal description of what money is to society, and how the fractional reserve
practice is a valid one (trust us), in the form of a comic (Steinberg and Nodel 2009), complete with a glossary
of terms. The most accessible and understandable is perhaps Chapter 7 Money Creation, from:
Martenson, C. (2014) The Crash Course Multi media presentation

https://www.youtube.com/watch?v=T7up38Jyv0w&list=PLRgTUN1zz_ofJoMx1rB6Z0EA1OwAGDRd
R
The reader is urged to cross check this for themselves. Describing this seems irrational and fraudulent. One
wonders how this was ever allowed to happen.
The key to understanding this is knowing the difference between an asset and a liability from a given
perspective. Knowing for example when an asset becomes a liability for the borrower (a deposit becomes
bank issued home loan), or when a liability becomes and asset for the lender (a previous debt can now be
leveraged into a new loan for a new client, adding value to the banks balance sheet). The following Figures
H18 to H29 describe in step by step fashion how this actually happens. To start this example, a bank opens
with no deposits and no reserves.
301
Person 1 deposits $1,000 into this bank.
Person 1 deposits
$1000 in bank
At this point there is $1,000

Bank Opens in the banking system
($0 Reserves)
The bank holds $0.00 in
reserve
Figure H18. The bank opens, Person 1 deposits $1,000 in it
The bank now has $1,000. According to Federal Reserve Banking law, it must keep 10% as a fractional
reserve, which is $100. The bank can now lend out $900, which it does. The bank lends Person 2 the $900.
Person 1 deposits
$1000 in bank
Bank Opens
($0 Reserves)
Bank loans $900

to Person 2
Leveraging off the
$1,000 deposit
Figure H19. The bank keeps 10% as a fractional reserve and loans $900 (90%) to Person 2
Person 2 uses this money in the market and spends it by engaging in Business A.
Person 1 deposits
$1000 in bank
Bank Opens
($0 Reserves)
Bank loans $900 Person 2 spends the

to Person 2 $900 at Business A
Leveraging off the
$1,000 deposit
Figure H20. Person 2 spends the $900 by engaging Business A
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Business A needs to deposit this earned money into a bank as an acceptable method of risk mitigation and
security. For the purpose of this example, it will be assumed that this is the same bank that accepts all
deposits and issues all loans. In macro scale terms the banking sector aggregate of all banks can be modelled
this way. In term of money creation, this is how deposits are leveraged off, and this is the net outcome. At
this point, the banking system has $1,900 on its books, which it is required to keep $100 in reserve.
Person 1 deposits
$1000 in bank
Bank Opens
($0 Reserves)
Bank loans $900 Person 2 spends the Business A deposits

to Person 2 $900 at Business A $900 in a bank
Leveraging off the
$1,000 deposit 4.

in the banking system
The bank hold $100 in

reserve
Figure H21. Business A deposits $900 into the bank
With the $900 the bank has just received, it must keep 10% held in reserve which is $90. The bank loans the
remaining $810 to Person 3.
Person 1 deposits
$1000 in bank
Bank Opens
($0 Reserves)

Leveraging off the
4.
$1,000 deposit
Bank loans $810

to Person 3
Leveraging off the 5.
6.
$900 deposit
$90
$81
$810
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Person 3 uses this money by engaging Business B. Business B now has $810 in earnings.
Person 1 deposits
$1000 in bank
Bank Opens
($0 Reserves)

Leveraging off the
4.
$1,000 deposit

to Person 3 $810 at Business B
6. 6.
$900 deposit
$90
$81
$810
Figure H23. Person 3 spends the $900 by engaging Business B
Business B then deposits the $810 in the bank. At this point the banking system now has $2,710, of which it
is required to hold just $190 as a reserve.
Person 1 deposits
$1000 in bank
Bank Opens
($0 Reserves)

Leveraging off the
4.
$1,000 deposit
Bank loans $810 Person 3 spends the Business B deposits

to Person 3 $810 at Business B $810 in a bank
6. 6. 7.
4.
8.
$900 deposit
in the banking system
$90
$81 $810
The bank hold $190 in
$810 reserve
Figure H24. Business B deposits $810 into the bank
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With the $810 the bank has just received, it must keep 10% held in reserve which is $81. The bank loans the
remaining $729 to Person 4.
Person 1 deposits
$1000 in bank
Bank Opens
($0 Reserves)

Leveraging off the
4.
$1,000 deposit

6. 6. 7.
4.
8.
$900 deposit
$90
$81
$810
$810
Bank loans $729

to Person 4
Leveraging off the
5.
6.
8.
$810 deposit
$72.90
$90
$81
$729
$810
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Person 4 uses this money by engaging Business C. Business C now has $729 in earnings.
Person 1 deposits
$1000 in bank
Bank Opens
($0 Reserves)

Leveraging off the
4.
$1,000 deposit

6. 6. 7.
4.
8.
$900 deposit
$90
$81
$810
$810

to Person 4 $729 at Business C
Leveraging off the
5.
6.
8. 9.
6.
$810 deposit
$72.90
$90
$81
$729
$810
Figure H26. Person 4 spends the $729 by engaging Business C
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Business C then deposits the $729 in the bank. At this point the banking system now has $3,439, of which it
is required to hold just $343.90 as a reserve.
Person 1 deposits
$1000 in bank
Bank Opens
($0 Reserves)

Leveraging off the
4.
$1,000 deposit

6. 6. 7.
4.
8.
$900 deposit
$90
$81
$810
$810
Bank loans $729 Person 4 spends the Business C deposits

to Person 4 $729 at Business C $729 in a bank
Leveraging off the
5.
6.
8. 9.
6. 10.
$810 deposit
$72.90
$90
$81 in the banking system
$810
$729
The bank holds $343.90 in
$729
$810
reserve
Figure H27. Business C deposits $729 into the bank
This process can continue until there is no more money left to lend out and maintain the 10% fractional
reserve. This is shown in Table H1, where Figure H is the deposit entry $729 (in blue). Taking this process
to its logical conclusion, the starting deposit of $1,000 (in red) was able to be loaned out many times, creating
just under $10,000 of assets on the bank system balance sheet. To do this legally, the bank has to retain
only $999.98.
This does not include interest. The banking system is allowed to charge interest on these loans. If for
example, each of the loans shown in Table H2 were at an annual interest rate of 3%, compounded monthly,
the sum total once all the loans had run their course would be $13,493.21, or an additional $3,493.21 on top
of the existing $10,000 of deposits/loans. This is how money is loaned into existence by the private banking
sector. This means that there is not enough existing money to pay the full debt, thus more is created with
more debt.
307
Figure H28. Banks make money through application of interest accrued on loans
If there was no more monetary growth, then there would not be enough money in the economy for all of
the people (and companies, etc.) to pay back all of the loans that have been taken out. It's not a matter of
needing to do more work, or sell more stuff, there is simply not enough money in existence to pay back all
of the debt that is in existence.
Table H2. Revenue generated in fractional reserve banking from $1,000.00
Required 10% Total Accrued after 10 years at Money Accrued from just Required 10% Total Accrued after 10 years at Money Accrued from just
Deposit Deposit
Reserve 3% pa, compounded monthly Interest Reserve 3% pa, compounded monthly Interest
$1,000.00 $100.00 $1,349.35 $349.35 $4.64 $0.46 $6.26 $1.62
$900.00 $90.00 $1,214.42 $314.42 $4.17 $0.42 $5.63 $1.46
$810.00 $81.00 $1,092.98 $282.98 $3.76 $0.38 $5.07 $1.31
$729.00 $72.90 $983.68 $254.68 $3.38 $0.34 $4.56 $1.18
$656.10 $65.61 $885.31 $229.21 $3.04 $0.30 $4.11 $1.06
$590.49 $59.05 $796.78 $206.29 $2.74 $0.27 $3.70 $0.96
$531.44 $53.14 $717.10 $185.66 $2.47 $0.25 $3.33 $0.86
$478.30 $47.83 $645.39 $167.09 $2.22 $0.22 $2.99 $0.78
$430.47 $43.05 $580.85 $150.39 $2.00 $0.20 $2.69 $0.70
$387.42 $38.74 $522.77 $135.35 $1.80 $0.18 $2.42 $0.63
$348.68 $34.87 $470.49 $121.81 $1.62 $0.16 $2.18 $0.57
$313.81 $31.38 $423.44 $109.63 $1.46 $0.15 $1.96 $0.51
$282.43 $28.24 $381.10 $98.67 $1.31 $0.13 $1.77 $0.46
$254.19 $25.42 $342.99 $88.80 $1.18 $0.12 $1.59 $0.41
$228.77 $22.88 $308.69 $79.92
$1.06 $0.11 $1.43 $0.37
$205.89 $20.59 $277.82 $71.93
$0.96 $0.10 $1.29 $0.33
$185.30 $18.53 $250.04 $64.74
$0.86 $0.09 $1.16 $0.30
$166.77 $16.68 $225.03 $58.26
$0.77 $0.08 $1.04 $0.27
$150.09 $15.01 $202.53 $52.44
$0.70 $0.07 $0.94 $0.24
$135.09 $13.51 $182.28 $47.19
$0.63 $0.06 $0.85 $0.22
$121.58 $12.16 $164.05 $42.47
$0.56 $0.06 $0.76 $0.20
$109.42 $10.94 $147.64 $38.23
$0.51 $0.05 $0.68 $0.18
$98.48 $9.85 $132.88 $34.40
$0.46 $0.05 $0.62 $0.16
$88.63 $8.86 $119.59 $30.96
$79.77 $7.98 $107.63 $27.87
$0.41 $0.04 $0.55 $0.14
$71.79 $7.18 $96.87 $25.08 $0.37 $0.04 $0.50 $0.13
$64.61 $6.46 $87.18 $22.57 $0.33 $0.03 $0.45 $0.12
$58.15 $5.81 $78.46 $20.31 $0.30 $0.03 $0.40 $0.10
$52.33 $5.23 $70.62 $18.28 $0.27 $0.03 $0.36 $0.09
$47.10 $4.71 $63.56 $16.46 $0.24 $0.02 $0.33 $0.08
$42.39 $4.24 $57.20 $14.81 $0.22 $0.02 $0.29 $0.08
$38.15 $3.82 $51.48 $13.33 $0.20 $0.02 $0.27 $0.07
$34.34 $3.43 $46.33 $12.00 $0.18 $0.02 $0.24 $0.06
$30.90 $3.09 $41.70 $10.80 $0.16 $0.02 $0.21 $0.06
$27.81 $2.78 $37.53 $9.72 $0.14 $0.01 $0.19 $0.05
$25.03 $2.50 $33.78 $8.74 $0.13 $0.01 $0.17 $0.05
$22.53 $2.25 $30.40 $7.87 $0.12 $0.01 $0.16 $0.04
$20.28 $2.03 $27.36 $7.08 $0.10 $0.01 $0.14 $0.04
$18.25 $1.82 $24.62 $6.38 $0.09 $0.01 $0.13 $0.03
$16.42 $1.64 $22.16 $5.74 $0.08 $0.01 $0.11 $0.03
$14.78 $1.48 $19.94 $5.16 $0.08 $0.01 $0.10 $0.03
$13.30 $1.33 $17.95 $4.65 $0.07 $0.01 $0.09 $0.02
$11.97 $1.20 $16.16 $4.18 $0.06 $0.01 $0.08 $0.02
$10.78 $1.08 $14.54 $3.76 $0.06 $0.01 $0.07 $0.02
$9.70 $0.97 $13.09 $3.39 $0.05 $0.00 $0.07 $0.02
$8.73 $0.87 $11.78 $3.05 $0.04 $0.00 $0.06 $0.02
$7.86 $0.79 $10.60 $2.74 $0.04 $0.00 $0.05 $0.01
$7.07 $0.71 $9.54 $2.47 $0.04 $0.00 $0.05 $0.01
$6.36 $0.64 $8.59 $2.22 $0.03 $0.00 $0.04 $0.01
$5.73 $0.57 $7.73 $2.00 $0.03 $0.00 $0.04 $0.01
$5.15 $0.52 $6.95 $1.80 $0.03 $0.00 $0.04 $0.01
Total Required Total Revenue from just intrest

Total Deposits Total Revenue
Reserves @3% pa componded monthy
$9,999.76 $999.98 $13,493.21 $3,493.45
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What is most relevant, is to get a loan in the current banking system, a deposit of money (not leveraged but
earned) is required as collateral backing. Should the borrower default on their debt responsibilities, the bank
can often foreclose on the debt and claim ownership of the asset the loan was to purchase (for example the
house could be claimed by the bank through loan foreclosure if the borrower defaults on repayments). While
this is a legally binding agreement within the bounds of the law, in this system, a physical asset can legally
be taken if/when a loan of money that never existed in the first place is not paid in full (with interest).
This is a very interesting and dangerous precedent where a physical asset is created from nothing. The
danger here is the social banking contract could be revoked by society if/when it becomes public knowledge
that the afore mentioned banking sector had an antagonistic role in creating speculative bubbles like the
GFC. Especially when the GFC, which resulted in thousands of families defaulting on their loans, and the
banks foreclosing, while taking ownership of the houses in question as collateral, was then subject to
government backed bailouts (the same peoples tax dollars).
Returning to the fractional reserve banking system example, Figure H shows the net position of the stake
holders.
Bank owes Person 1 Person 2 owes the bank

$1,000 $1,214.42
($900+$314.42 interest)
The bank owes $3,439.00 to depositors
The bank is owed $4,640.43 over time

Bank owes Business A
$900
Person 3 owes the bank

$1,092.98
($810+$282.98 interest)
Bank owes Business B

$810
The bank holds
$343.90 in
reserve
Person 4 owes the bank

Bank owes Business C $983.68
$729 ($729+$254.68 interest)
Figure H29. The net position of all stakeholders in the fractional reserve banking example
If all depositors demanded their money to be returned all at once (demanding to be paid $3,439), the bank
would be unable to comply and would become insolvent (as it has only $343.90 in the vault). This is called
a bank run. If the debts owed to the bank were defaulted on or the rates of repayments became lower than
a withdrawal request, then the bank would become insolvent. This is a simple example. The real
circumstance in the banking industry is quite predatory.
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Figure H30. The net position of the current monetary system is a hoax
H4 Monetary Creation, Debt Creation
Money is also directly created by central banks around the world. The Federal Reserve Bank is an example
of how this happens. This section describes the process used. References to cross validate the seeming
bizarre concepts shown here, see (Rickards 2014) and/or (Reinhart & Rogoff 2009), or (Hodgson Brown
2011). An interview of Nicole Foss very effectively describes how these issues interact with society in
general (Foss 2015). To make these seemingly opaque concepts more assessable a number of
documentaries and presentations have been made, for example the second Zeitgeist film (Joseph 2008) and
in particular The Crash Course, chapters 7 to 13 (Martenson 2014) describe how this works quite well.
Figure H31. The printing of money
Historically, paper money has been rendered worthless in a little over 3,800 paper currencies and some
metal based currencies, through mismanagement. When reading this section, consider that the US Federal
Reserve Bank has never been audited and has fiercely resisted being audited (Durden 2017 and Thomas
2017), and also believes it is above the law and beyond the authority of US Congress (Greenspan 2008).
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Step 1 - US Congress votes to increase money supply to balance its budget.
Figure H32. US Congress
Step 2 - Congress cannot actually do this so it sends a directive to the US Treasury.
Figure H33. US Treasury
Step 3 The US Treasury prints up a series of Bond Certificates or Treasury Bonds. The US treasury generally
has limited money on hand and usually operates with a few weeks of money supply unless otherwise needed.
The Treasury Bond has a face value (for example $100) and an interest rate that will pay the bond holder.
Figure H34. A US Treasury Bond Certificate
311
Step 4 These Treasury Bonds are sold in an auction. Usually bought by central banks and large private
banks around the world. This is a way for foreign nation states to have US money in their own treasury
reserve. It is believed that most of these bonds are now purchased by the Federal Reserve Bank
anonymously.
Figure H35. US Treasury Bond auction example
Step 5 The money used to purchase these Treasury Bonds is transferred into the US Treasury vaults.
Step 6 The money gets distributed through a variety of government departments and programs. Defense
spending, social security, agriculture subsides, foreign diplomatic ventures, etc.
Step 7 The Federal Reserve can then buy those Treasury Bonds from a bank on the open market. The
Federal Reserve cannot buy Bonds directly from the Treasury (Krause 1999). The Federal Reserve Act
specifies that the Federal Reserve may buy and sell Treasury securities only in the "open market." The
Federal Reserve meets this statutory requirement by conducting its purchases and sales of securities chiefly
312
through transactions with a group of major financial firms so-called primary dealers that have an established
trading relationship with the Federal Reserve Bank of New York (FRBNY). These transactions are commonly
referred to as open market operations and are the main tool through which the Federal Reserve adjusts its
holdings of securities.
Figure H36. US Federal Reserve Bank
Step 7 is where the money is created. When the Federal Reserve Bank writes a check or does a money
transfer, it does not do so by drawing money from a large account or withdraw physical money form a vault.
The Federal Reserve Bank just creates the money out of nothing by editing an electronic data base, then
loans it to the American tax payer, with interest. This is now termed Quantitative Easing.
From the Federal Reserves Own publications: "When you or I write a check there must be sufficient
funds in out account to cover the check, but when the Federal Reserve writes a check there is
no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is
creating money." -- Putting it simply, Boston Federal Reserve Bank
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10 year loans leveraged off a single $1000 deposit
$16,000
An extra $3,493 needs to be sourced
$14,000 from somewhere to pay the interest $13,493.21
on top of the principal loans
$12,000
$9,999.76
$10,000
$8,000
$6,000
$4,000
$2,000
$1,000.00
$0
Original starting $ reserve Money loaned out by bank Money owed to the bank
(principal debt+interest)
Figure H37. Money supply expansion to pay interest off a debt (Example from Table H2)
The amount of debt in the system will always exceed the amount of money. Thus the wholes system must
grow, to service the interest repayments. Perpetual expansion is a requirement of the system. Not a legal
requirement or a desire to support a business model, but a systemic requirement. Without expansion of
money supply, past debts cannot be serviced, which to a default on debt. As the whole system is based on
the nebulous concept of public confidence, as opposed to hard assets, one default would lead to a chain
reaction of debt defaults. Once something like a banking panic, or bank run, it could very quickly lead to a
systemic financial crisis, then sovereign debt default. As the whole monetary system is a virtual agreement
social contract, this would very quickly destroy the whole finance and currency apparatus. All institutions
and political forces are geared to prevent this from happening.
H5 Quantitative Easing and the Printing of Money
In 2008, the GFC happened. Since then central banks around the world have been engaging in Quantitative
Easing, which is a modern label to describe the process described in Section H4. This is dangerous as it
deteriorates the integrity of the monetary system. The volumes of money being created through QE is
historically unprecedented. When this happens, only 3% of this money is physically printed and inserted
into circulation. The remaining 97% is created by the Federal Reserve (and all other central banks) on an
electronic ledger, by tapping a few keys on a computer.
In 2013, the US Federal Reserve Bank was printing $85 billion USD a month (Finger 2013), which has to be
done or else the US administration could not pay its civil service administration costs. The US population of
325 million people has 50.5% receiving some kind of social security benefit, from the US government (with
$107 trillion dollars in unfunded liabilities), having only a 47.1% participation rate in the workforce, of which
15.3% are employed by the government (which now owes $19.97 trillion dollars in debt, which is a 103.1%
Debt/GDP ratio) (Williams 2017 Shadowstats and usdebtclock.org). The net position of the United Sates is
untenable. The only option to keep it functioning, is to continue to print money and hope that the tax payer
will consent to taking on more debt at an exponential rate.
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Figure H38. The Federal Reserve Bank Balance Sheet
(Source: Federal Reserve Board, TD Economics, Shadowstats)
While the US economy dominates the global economy, it is not the only economy engaging in these
strategies. Central banks around the world together (including the US Federal Reserve) are now printing
$200 billion US dollars equivalent a month (Phoenix Capital 2017). This means that currently, every 5 months
another 1 trillion $USD is added to the global debt profile, while humanity at large is not engaging in any
unusually large projects. This is the road to Zimbabwe (see Section H6 and H7).
Figure H& shows the Federal Reserve Bank balance sheet. As can be observed, what was started in 2008 has
been continued, dwarfing all historical precedents. Prior to 2008, the Federal Reserve balance sheet had
$880 billon USD ($ 0.88 trillion USD). In 2017, it is a little under $4.5 trillion dollars USD. To be clear, that
extra $3.62 trillion dollars debt was literally mouse clicked into existence, 97% of which only exists as
numbers in an electronic ledger. This money is not associated with any large asset or physical outcome.
To put these volumes in historical context, Figure H39 shows the volume of money printed in the 206 years
prior to 2008 in the United States and what large project they were associated with, compared to what was
printed in the first 12 months of QE1.
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Historical cost of
major US projects
Reference
Volume
First 12 months of QE1

Figure H39. QE scale of printing of money 12 months after the start of QE1
To put this in context, the money created (printed) shown in Figure H39, is represented in Figure H40 inside
the dotted red ellipse (US only). Since then, larger amounts of money has been created, by the US Federal
Reserve, the Japanese Central Bank and most of all by the European Central Bank. We genuinely are living
through the largest financial experiment ever attempted.
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Figure H40. Global Quantitative easing from 2008 2017
(Source: Quartz analysis)
Figure H41 shows the US Base Money supply since 1918 (the US Federal Reserve started operation in 1916).
Figure H41. US monetary supply since 1918

(Source: Incrementum Research, and (Yellen 2017))
If such a large amount of money was to flood the market, hyperinflation would result. So the question
becomes, where did this money go? Figure H42 shows the Federal Reserve excess revenue chart.
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Figure H42. Excess reserves in the U.S., 1960-2013
(Source: 2013 research.stlouisfed.org Excess reserves in the U.S., 1930-January 1, 2009 source: w:Federal Reserve
System, St. Louis Fed research graph: Excess Reserves of Depository Institutions (EXCRESNS), Monthly, Not Seasonally
Adjusted public domain)
So it can be shown that the US Federal Reserve has been printing money through the Quantitative Easing
program, then retaining the bulk of it ($2.5 trillion USD) as excess reserves, thus muting the hyperinflation
outcomes (for now). With the remaining 1.75 trillion dollars, the Federal Reserve has been buying blue chip
stocks and foreclosed mortgages resulting from defaulted loans. The largest landlord in the United States is
the Federal Reserve Bank.
The effects are remarkable however. In 2008 a severe economic downturn started (The Global Financial
Crisis - GFC), which as has been shown in this Appendix H, had the capacity to fundamentally destroy the
entire monetary system and came within a few hours of permanently paralysing the banking credit system
(Mathiason 2008 and Kingsley 2012). Since then however, the stock market has become addicted to QE to
function. Figure H43 shows the S&P 500 index and the US Federal Reserve Balance Sheet.
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Figure H43. S&P 500 index and the US Federal Reserve Balance Sheet
(Source: STA Wealth Management https://www.stawealth.com/ )
If the QE program was to be stopped or even tapered, the stock markets in the US and around the world
would be devastated. This has been a remarkable deal for those favoured institutions in the US (and Europe).
For the US government (and European Government) demand for government debt has been maintained at
a high rate, in conjunction with low interest rates. The larger private banks (Bank of America, JP Morgan,
Citibank, Deutsche Bank, etc.) have been able to make unprecedented profits at no risk, have been bailed
out by public money, and have been given preferential treatment in terms of accountability (legal and social)
all while being given insider information from central banks. Central banks like the Federal Reserve Bank
enjoyed higher Treasury Bond prices in conjunction with higher stock market prices, and higher housing
prices.
But printing money can only go so far. It is not possible to sustain this. It is not possible to print up prosperity.
Money is an agreement and a social contract where the banking system is trusted by society to administer
wealth on their behalf (the same could be said for the law).
Money though is not real wealth but a claim on real wealth. These systems can work but if some of the
stakeholders in authority debase the rules of administration, the whole system deteriorates very quickly to
its intrinsic value. In a fiat paper monetary system, that intrinsic value is not something physical but instead
public confidence. If the trust of the public is destroyed by their own government breaking the law (where
very few benefit and large numbers of people have their livelihood destroyed), then that monetary
apparatus will be systematically destroyed. One of the outcomes of this is hyperinflation. This has had many
historical precedents.
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H6 Consequences: Inflation, Hyperinflation, Deflation and Stagflation
A known and historically understood outcome of printing money in inflation. Inflation most simply is a
growth in the money supply without an additional backing by product. At this time, under fiat currencies,
it's normally redefined as and measured by price levels using the Consumer Price Index (CPI). Colloquially,
inflation is seen as simply the rising of prices for the same goods over time. Actually what is happening is
the money or currency is losing purchasing power, or losing value.
Inflation is caused by too much money in relation to the things we want to buy.
Inflation is everywhere and is always a monetary phenomenon.
Milton Friedman
Figure H44. US Annual Consumer Price Index (Source: measuringworth.com)

The loss of purchasing power for a currency is felt directly by society and the people who live in it. The basic
cost of living becomes more expensive. Table H3 show how the cost of living has changed in the United
States from 1924 to 2014. Figure H45 and H46 graphically show how some things have proportionally gotten
more expensive than others. The average annual personal income did rise in those 90 years, but the cost of
buying a house had proportionally risen more.
Table H3. Cost of living in the United States from 1924 to 2014 (Source: US Census Bureau)
Living 1924 1938 1943 1958 1962 1971 1978 1999 2014 Inflation 1924 -2014
Purchase Cost House $7,720.00 $3,900.00 $3,600.00 $11,975.00 $12,550.00 $25,200.00 $54,749.00 $131,710.00 $271,000.00 3510%
Average Annual Income (per year) $2,196.00 $1,731.00 $2,041.00 $4,650.00 $5,556.00 $10,622.00 $16,975.00 $40,816.00 $52,000.00 2368%
Purcahse Cost of New Car $265.00 $860.00 $900.00 $2,155.00 $2,924.00 $3,560.00 $5,405.00 $21,022.00 $31,000.00 11698%
Average Rent (per month) $18.00 $27.00 $40.00 $95.00 $110.00 $150.00 $260.00 $645.00 $855.00 4750%
Tuition to Harvard University (per year) $250.00 $420.00 $420.00 $1,000.00 $1,520.00 $2,600.00 $4,450.00 $31,132.00 $55,000.00 22000%
Movie Ticket (each) $0.15 $0.25 $0.35 $1.00 $1.00 $1.50 $2.00 $5.06 $8.17 5447%
Gasoline (per gallon) $0.11 $0.10 $0.15 $0.24 $0.27 $0.40 $0.63 $1.22 $3.80 3455%
United States Postage Stamp (each) $0.02 $0.03 $0.03 $0.04 $0.04 $0.08 $0.15 $0.33 $0.46 2300%
Food
Granulated Sugar (per pound) $0.07 $0.06 $0.08 $0.09 $0.09 $0.12 $0.16 $0.25 $0.29 435%
Vitamin D Milk (per gallon) $0.54 $0.50 $0.62 $1.01 $1.04 $1.17 $1.72 $2.91 $3.43 635%
Ground Coffee (per pound) $0.20 $0.39 $0.46 $0.93 $0.85 $0.98 $2.25 $3.41 $3.99 1995%
Bacon (per pound) $0.25 $0.32 $0.45 $0.62 $0.69 $0.80 $1.20 $2.59 $3.85 1540%
Eggs (per dozen) $0.13 $0.18 $0.21 $0.28 $0.32 $0.45 $0.48 $0.89 $2.68 2062%
Fresh Ground Hamburger (per pound) $0.13 $0.13 $0.30 $0.57 $0.40 $0.62 $0.87 $1.45 $6.70 5154%
Fresh Baked Bread (per loaf) $0.09 $0.09 $0.10 $0.19 $0.21 $0.25 $0.42 $1.49 $2.55 2833%
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Average US Income and Purchase Cost of Buying a New Car
$60,000.00
$50,000.00
Average Annual Income
$40,000.00 Purcahse Cost of New Car
$30,000.00
$20,000.00
$10,000.00
$0.00
1924 1938 1943 1958 1962 1971 1978 1999 2014
Figure H45. Average US Income and Purchase Cost of Buying a New Car
Average US Income and Purchase Cost of Buying a House

$300,000.00
$250,000.00
Purchase Cost House
$200,000.00
Average Annual Income
$150,000.00
$100,000.00
$50,000.00
$0.00
1924 1938 1943 1958 1962 1971 1978 1999 2014
Figure H46. Average US Income and Purchase Cost of Buying a House
Bouts of inflation have been historically associated with war. As has been shown, governments
administering a paper currency will change the rules when stressed and break the law. Governments simply
print money because they can, and often are not held accountable after the fact. This has been such a
consistent observation, than it could be stated that all wars are inflationary. It also could be stated that
government deficit spending is inflationary. While money was fixed to a gold standard, prices would return
to pre-war levels when the war ended.
At the end of World War II, however, prices did not return to pre-war levels. The US dollar was now a fiat
currency and the Federal Reserve could print money at will. Also, instead of dismantling the war apparatus,
the Pentagon was constructed and the war machine was kept running. Over time, the war machine came to
infiltrate all aspects of American society and eventually came to be a fundamental structure of the economic
foundation. The Cold War proved to be just as inflationary as a conventional shooting war.
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Figure H47. Inflation associated with war
The cost of living can only remain stable if there is a stable relationship between the amount of circulating
money and the quantity per capita of goods and services society wants and needs. In a world of constantly
eroding value for money, it is difficult for society to navigate in terms wealth creation. Society has to work
increasingly harder just to maintain existing gains. Fifty years ago, a family only needed one income to live,
prosper and save for a house. Currently, it requires two incomes just to live hand to mouth let alone save
for a house. Also, increasingly risky (and bizarre) investment strategies have to be implemented in an
attempt to grow savings/assets to outpace money and debt creation.
So the following statements can now be given (Martenson 2014):
1 The end of the US currency gold standard in 1971 led to an explosion of government borrowing
2 Money and debt have grown faster than the real economy
3 Inflation is the fully predictable outcome of 1 & 2.
Inflation is a deliberate act of policy that benefits the few (to the cost of almost everyone else) and steals
from the future.
Historically, persistent inflation is a relatively new development. Most people living today would consider
inflation as normal as this is all that they have known. Inflation is a normal outcome and should be planned
for. When Central Banks print money, those that benefit most are those closest to the source of creation
(large private banks, military contractors, and large corporations). This leads to a hidden but accepted form
of corruption called seiniorage. This in turn has led to an unprecedented level of wealth disparity. It was
from similar forces and stresses that created the French Revolution.
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Oxfam did a study to examine the wealth inequality that has been building globally for decades (Hardoon et
al. 2016). From the Oxfam report:
The gap between rich and poor is reaching new extremes. Credit Suisse recently revealed that the
richest 1% have now accumulated more wealth than the rest of the world put together. Meanwhile,
the wealth owned by the bottom half of humanity has fallen by a trillion dollars in the past five years.
This is just the latest evidence that today we live in a world with levels of inequality we may not have
seen for over a century. The Oxfam report looked at how this has happened, and why, as well as
setting out shocking new evidence of an inequality crisis that is out of control.
H7 Recent Examples of Inflation and Historical Examples of Hyperinflation

Inflation and hyperinflation are known and understood. The current circumstance the global finance system
finds itself it is not a new phenomenon. Figures H48 to H50 show the decline in purchasing power for the
Anglosphere (the United States dollar, the Great Britain pound, the Australian dollar and the Canadian
dollar). The Anglosphere (the United States in particular) has dominated the world for the last few centuries.
The last 100 years has been dominated by the United States fiscal system. Today, the US dollar dominates
the rest of the planet. Its health and robustness is of practical interest to the global markets.
Figure H48. Purchasing power of the US dollar 1913-2013, Calculation based on CPI, August 1913 = 100%. Data as of
August 2013. (Source: Merk Investments, Bureau of Labour Statistics)
In the US golden era of prosperity (1950s and 1960s), for every dollar of debt created, a ratio of $1 to $2.41
was in effect. That is, for every $1 printed, $2.41 in economic growth was generated. In 1970, just before
President Nixon decoupled the gold standard to the US dollar, the ratio was $1 to $0.41. For every dollar of
debt created, $0.41 of economic growth was generated. In 2014, that ratio had fallen to $1 to $0.03. For
every dollar of debt created, $0.03 or 3 cents of economic growth was generated. This is not sustainable or
even useful in the short term.
For the last 40 years, US government debt creation has been approximately twice the rated economic growth
(Rickards 2014). This spirally volume of debt since the 1970s has been unprecedented till then. What has
facilitated this to continue working is the Saudi Arabian commitment to price all of their oil contracts in
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$USD. For the last 20 years, the increase in debt can be related to the higher cost of energy. As the cost of
energy went up, there was a need to increase the volume of debt to the system to maintain growth.
Figure H49. Purchasing power of the Great Britain Pound, Calculation based on CPI, August 1971 = 100%.
(Source: OECD statistics, http://www.oecd.org/std/prices-ppp/purchasingpowerparitiespppsdata.htm )
Figure H50. Purchasing power of the Australian dollar, Calculation based on CPI, August 1971 = 100%.
(Source: OECD statistics, http://www.oecd.org/std/prices-ppp/purchasingpowerparitiespppsdata.htm )
As can be seen all Anglosphere currencies are in steep decline in terms of purchasing power. All fiat
currencies tend to follow this pattern eventually. As all are devaluing at the same time, it is appropriate to
compare currencies against a universal and external quantity of value. Historically currencies have been
either backed by gold bullion, or have actually been gold bullion. This concept transcends a difference on
culture, empires and is valid across historical scales of time. Figure H51 shows the larger currencies of today
valued in gold over time (the Euro data line is the German Deutsche Mark prior to 1999). The loss of
purchasing power of these currencies has been staggering. Current society is blissfully unware of this as
there is no reference point in living memory (The Great Depression is remembered, but not in these terms.)
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Figure H51. Currency value in terms of gold bullion over the last century
(Source: World Gold Council, Bullion Management Group Inc.)
Figure H52 shows the decline and devaluing of all major currencies in terms of gold price. Current society
has not really noticed this due to the fact all currencies are devaluing together.
Figure H52. Major currencies as valued by gold price, (as of August 31, 2010)
(Source: Bullion Management Group Inc. 2010)
Figure H53 and H54 illustrate two examples of the falling confidence and accelerating loss of purchasing
power of the now purely fiat currencies. Figure H53 is the U.S. dollar index compared to gold. The U.S. dollar
used to be a measure of gold or silver, but is now created out of thin air by a government and a central banks
computer by the billions to pay for all the stuff that the politicians promised the voters to get elected.
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Figure H53. The US Dollar Index in gold terms
(Source: GGR Investor Intelligence Report)
Figure H54The Euro Index in gold terms

(Source: GGR Investor Intelligence Report)
History has much to teach us. Instead we would like to think that its lessons couldnt possibly be repeated,
especially to us. How all this happens is now well understood. The current global fiat currency systems all
demonstrate signatures that indicate that they are in a hyperinflation cycle. As can be observed, there is a
strong correlation between the incidence of national hyperinflation and global geopolitical events.
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The follow list are examples (not exhaustive) of hyperinflation, which should studied to understand what is
happening now and how inevitable certain things are.
Ancient Rome
The fall of the Roman Empire
Diocletian and his edicts 218A.D. 268A.D.
France
John Law 1719
French Revolution 1789-1795
United States of America

American war of independence 1776-1787
U.S. Civil War - Confederate States of America 1861-1865
World War I Maximum Monthly Price Increase

Germany 1920-1923 3.25 million percent
Russia 1921-1924 213 percent
Austria 1921-1922 134 percent
Poland 1922-1924 275 percent
Hungary 1922-1924 98 percent
World War II Maximum Monthly Price Increase

Greece 1943-1944 8.55 billion percent
Hungary 1945-1946 4.19 quintillion percent
East Asia
Japan 1945-1952
Shanghai 1949-1950
Latin America (see Klein 2005 for a good summary)

Argentina 1985 -1996 Austral Plan
Argentina 1998-2002
Brazil 1980-1994
Chile 1970-1973 Allende's inflation
Bolivia 1980-1994 Bolivian hyperinflation
Peru 1985-1989Alan Garcia's inflation
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Eastern and South-eastern Europe
Poland 1983-2004
Russia 1989-1994
Ukraine 1992-2005
Ukraine 2014- present
Yugoslavia 1993-94
Middle East
Iraq 1987-1995
The CIA-Induced Inflation in the Kurdish Area of Iraq,2003-2008
Africa
Zaire 1976-1993
Zimbabwe March 2007 Nov 2008
Figure H55. Countries with hyperinflation, from 1967 to 2011
Figure H56. The Zimbabwe 100 trillion dollar note, was worth about 30 euros when it was created
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H8 Derivatives
One of the vectors to channel quantitative easing has been the purchase of derivatives and credit default
swaps (CDS). In the year 2000, U.S. Congresss deregulated financial derivatives with the Commodity Futures
Modernization Act (CFMA). This removed all restraint, over sight and reality form the financial system. As
has been shown, vast sums of money have been printed out of nothing. By purchasing derivatives, that
money from nothing, buys nothing. That is until the derivative is sold on or cashed in. Figure H56 shows the
blowout of the derivatives market after the year 2000. By the time the GFC happened in 2008, the market
exposure to derivatives dwarfed any capacity to pay out all debt associated with derivatives.
Figure H57. OTC Derivative Market blowout
A derivative is a bet on what something might be worth in the future. The formal definition of a derivate
asset:
A derivative is a financial instrument which derives its value from the value of underlying entities such
as an asset, index, or interest rate. "A derivative is a financial contract whose value is derived from
the performance of underlying market factors, such as interest rates, currency exchange rates, and
commodity, credit, and equity prices. Derivative transactions include an assortment of financial
contracts, including structured debt obligations and deposits, swaps, futures, options, caps, floors,
collars, forwards, and various combinations thereof.
In practice, it is a contract between two parties that specifies conditions (especially the dates,
resulting values and definitions of the underlying variables, the parties' contractual obligations, and
the notional amount) under which payments are to be made between the parties. The most common
underlying assets include: commodities, stocks, bonds, interest rates and currencies.
The definition and even the understanding of what a derivative is not widely understood, beyond it is an
investment tool that allows vast amounts of money to be made. Figure H58 shows the basic different kinds
of derivatives.
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Figure H58. Different kinds of derivatives
Derivatives are not a new phenomenon. There is evidence of their use in antiquity. In the Western world,
the first exchange for trading derivatives appeared to be the Royal Exchange in London, which permitted
forward contracting. The celebrated Dutch Tulip bulb mania, which you can read about in Extraordinary
Popular Delusions and the Madness of Crowds by Charles Mackay, published 1841 but still in print, was
characterized by forward contracting on tulip bulbs around 1637. The first "futures" contracts are generally
traced to the Yodoya rice market in Osaka, Japan around 1650. These were evidently standardized contracts,
which made them much like today's futures, although it is not known if the contracts were marked to market
daily and/or had credit guarantees.
Probably the next major event, and the most significant as far as the history of U. S. futures markets, was
the creation of the Chicago Board of Trade in 1848. Due to its prime location on Lake Michigan, Chicago was
developing as a major centre for the storage, sale, and distribution of Midwestern grain. Due to the
seasonality of grain, however, Chicago's storage facilities were unable to accommodate the enormous
increase in supply that occurred following the harvest. Similarly, its facilities were underutilized in the spring.
Chicago spot prices rose and fell drastically. A group of grain traders created the "to-arrive" contract, which
permitted farmers to lock in the price and deliver the grain later. This allowed the farmer to store the grain
either on the farm or at a storage facility nearby and deliver it to Chicago months later. These to-arrive
contracts proved useful as a device for hedging and speculating on price changes. Farmers and traders soon
realized that the sale and delivery of the grain itself was not nearly as important as the ability to transfer the
price risk associated with the grain. The grain could always be sold and delivered anywhere else at any time.
These contracts were eventually standardized around 1865, and in 1925 the first futures clearinghouse was
formed. From that point on, futures contracts were pretty much of the form we know them today.
When credit markets froze up in the fall of 2008, many economists pronounced the crisis both inexplicable
and unforeseeable. Thats because they were economists, not lawyers (Stout 2009). Lawyers who specialize
in financial regulation, and especially the small cadre who specialize in derivatives regulation, understood
what went wrong. Thats because the roots of the catastrophe lay not in changes in the markets, but changes
in the law. Perhaps the most important of those changes was the U.S. Congresss decision to deregulate
financial derivatives with the Commodity Futures Modernization Act (CFMA) of 2000.
It was the deregulation of financial derivatives that brought the banking system to its knees. The leading
cause of the credit crisis was widespread uncertainty over insurance giant AIGs losses speculating in credit
default swaps (CDS), a kind of derivative bet that particular issuers wont default on their bond obligations.
Because AIG was part of an enormous and poorly-understood web of CDS bets and counter-bets among the
worlds largest banks, investment funds, and insurance companies, when AIG collapsed, many of these firms
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worried they too might soon be bankrupt. Only a massive $180 billion government-funded bailout of AIG
prevented the system from imploding.
Common-law judges historically viewed derivatives speculation with suspicion. Under the rule against
difference contracts and its sister doctrine in insurance law (the requirement of insurable interest),
derivative contracts that couldnt be proved to hedge an economic interest in the underlying were deemed
nothing more than legally unenforceable wagers (Stout 2009).
This didnt mean derivatives couldnt be used to speculate. But the rule against difference contracts forced
speculators to think about how they could make sure their fellow gamblers paid their bets. The answer was
for the speculators to set up private exchanges with membership requirements, margin requirements,
netting requirements, and a host of other rules designed to make sure that, despite the legal invalidity of
speculative derivatives contracts, speculating traders would make good on their contract promises. In the
process, the exchanges kept derivatives speculation in check and under controlled conditions. Eventually,
the control was increased when government regulators like the Commodities Futures Trading Commission
(CFTC) and Securities Exchange Commission (SEC) were empowered to oversee trading on particular
exchanges. Meanwhile, off the exchanges, the rule against difference contracts kept over the counter
speculation in derivatives in check.
At least, it kept speculation in check until the rule was dismantled. The dismantling process began when the
United Kingdom passed its Financial Services Act of 1986, modernizing the UKs financial laws by
eliminating the old rule against difference contracts and making all financial derivatives, whether used for
hedging or for speculation, legally enforceable. US regulators, worried that Wall Street banks might lose out
on a lucrative new market, followed suit in the 1990s by creating ad hoc regulatory exemptions for particular
types of financial derivatives like currency forward contracts and interest rate swaps. Soon the US also
embraced wholesale deregulation with the passage of the CFMA in 2000. The CFMA not only declared
financial derivatives exempt from CFTC or SEC oversight, it also declared all financial derivatives legally
enforceable. The CFMA thus eliminated, in one fell swoop, a legal constraint on derivatives speculation that
dated back not just decades, but centuries. It was this change in the lawnot some flash of genius on Wall
Streetthat created todays $600 trillion financial derivatives market (Stout 2009).
In 2016, 25 billion derivative contracts were traded. Asia commanded 36 percent of the volume, while North
America traded 34 percent. Twenty percent of the contracts were traded in Europe. These contract were
worth $570 trillion in 2016. That's six times more than the economic output of the world. (Sources: "Global
Derivatives Volume Survey, Market Voice, March 10, 2017. "Global OTC Derivatives Market: First Half of
2016," "Exchange-Traded Futures and Options, Q2 2016," Bank for International Settlements, April 20, 2017.)
One of the biggest risks to the worlds financial health is the $1.2 quadrillion derivatives market. Its complex,
its unregulated, and it ought to be of concern to world leaders that its notional value is 20 times the size of
the world economy. But quantitative easing is now required for the survival of the global economy, and as
much as risk managers and regulators might want to limit that risk, they lack the power or knowledge to do
so.
A quadrillion (1,000 times a trillion) is now the unit of measure appropriate when examining the derivatives
market. This is of concern as global GDP is $70 to $80 trillion. If even a fraction of these derivatives were to
be cashed in at same time, the whole global economy would be declared insolvent and would default into
bankruptcy.
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Derivatives Volume and GDP (2014)
Derivatives Volume Annual Gross Domestic Product
German GDP 3.88

India GDP 2.26
Russia GDP 1.28
China GDP 11.2
Europe GDP 18.59
US GDP 17.4
Global GDP 78.87
Deutsche Bank exposure to derivatives 75

US exposure to Derivatives 538
Derivatives 1280
1 10 100 1000
Trillions of $USD equivalent
Figure H59. Derivatives volume compared to annual GDP

(Source: USDebtclock.org, Durden 2014, Cohan 2010, OECD statistics)
It is important to remember that Figure H59 is a log scale. The German economy has derivatives exposure
19.3 times the German annual GDP. If the derivatives problem was attempted to be resolved at the global
scale, the global economy has derivatives exposure 16.2 times global GDP (which means that Germany has
a higher proportion of derivatives exposure than the rest of the world). The most exposed economy is the
United States with exposure 30.9 times GDP (which is appropriate as this is a US banking device). Figure H60
shows the scope of the derivatives market compared to the rest of the global finance markets.
Figure H60. Gross market value of total outstanding over the counter derivatives (in Trillions)
(Source: Zero Hedge)
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Figure H61. Size of the derivatives market compared to the rest of the money market
(Source: Durden 2012)
There are several factors that lead to the current and extremely dangerous financial and economic crisis,
foremost amongst which is the way financial derivatives are dealt with and accounted for under international
standards, especially International Accounting Standard No.(39), in addition to other factors that either
complemented or were a natural extension of the aforementioned standards such as lack of oversight and
poor transparency. The role other factors played in the financial crisis cannot be overlooked, however they
were relatively smaller.
This crisis might be curbed but the question remains how will it end and what are the consequences? More
importantly, will it happen again? Is the pursuit of a stable financial system as announced by the leaders of
the European Union during their summit with emerging economies in LAquila, Italy on 08/07/2009 a fact?
Or simply claims and cosmetic remedies in order to show harmony as is often the case when some standards
are modified to counteract the symptoms of a problem but not to actually fix the underlying issue.
Continuing a trend that ignores values, commonalities and accepted professional ethics will have a lot of
repercussions and lead to collapse; as such the alleged unification of systems will be nothing more than a
ploy meant to conceal deliberate policies that use accounting and its standards as a means to further exploit
and manipulate the wealth of nations besides complicating accounting practices and its concomitant burden
and costs (Naser Nour 2013).
Figure H62. A derivative asset waiting to be cashed
It is only a matter of time when the derivatives in the market will be called in and converted to some other
form of wealth. When this happens, the global economy will be in truly deeper trouble usual.
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Peak Industrial Output and The Limits To Growth As A Consequence of Depleting Natural Resources and Appendices (ACME) v2

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Peak Industrial Output and The Limits To Growth As A Consequence of Depleting Natural Resources and Appendices (ACME) v2

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Peak Industrial Output and

the Limits to Growth as a

The permanent divergence of the real economy

1.0 Introduction & Synopsis Appendix A Waste Incineration in Europe

2.0 Waste generation in Europe

Appendix C - The Use and Application of Energy

5.0 Structural Changes in the

Appendix H Structural Vulnerability of the

Influencing and relevant aspects to consider

Dr. Simon Michaux

2.0 Waste generation in Europe

3.0 Energy Consumption in Europe

4.0 Stagnation of European Industrial Output and the Real Economy

5.0 Structural Changes in the Industrial Business Environment

6.0 Conventional Mining of Metals has Fundamentally Changed

7.0 Energy is the Master Resource

8.0 The Implied Change in the Industrial Paradigm

9.0 The Response of the Central Banker Administrations

11.0 Recommendations for ACME Corporation

12.0 Future Work

Appendix A: Waste Incineration in Europe

Appendix B Description of Different Energy Resources

Appendix C The Use and Application of Energy Resources in Europe

Appendix D - ERoEI Comparison of Energy Resources

Appendix E Quantity of Energy at Point of Application for Energy Resources

Appendix F - Depletion of Oil Resources and Peak Oil

Figure 1. European municipal waste generation and treatment 1995-2013

1.2 Contributing influences and relevant aspects to consider

Generation of waste in Europe

Demand and consumption of energy in Europe

Link between energy use and the real economy performance

Strategic opportunities for ACME in this prognosis

2.0 Waste generation in Europe

Figure 1. European municipal waste generation and treatment 1995-2013

3.0 Energy Consumption in Europe

Energy Consumption (EU-28 states)

600.0 Coal &Solid Fuels

Change in Energy Consumption Between 2006 to 2015

0.0% Petroleum and Products

Coal & Solid Fuels

Energy Use in Europe (EU-28) - 2006

Coal & Solid Fuels

Gases, 24.1% Petroleum and Nuclear

Nuclear, 13.7% Gases

EU-28 Dependancy on Coal, Oil & Gas

3.1 Contraction in energy demand in Europe a signature for change

Gross Energy Consumption EU-28

Population Growth EU-28

Figure 9. Population Growth in the EU-28 states of Europe

Energy per Capita - EU-28

Figure 11. US and Eurozone Industrial Production Index and MIGs

Figure 12. Raw material consumption per capita EU-28

Figure 13. US and Eurozone Industrial Production Index

What is really happening here and what else does it influence?

5.0 Structural Changes in the Industrial Business Environment

Figure 14. Europe Area EU-19

Figure 16. Global Foreign Direct Investments (FDI)

1973 2nd Gulf

Figure 20. Crude Oil Prices - 70 Year Historical Chart

Figure 21. The Baltic Dry Index

Figure 22. The Baltic Dry Index (Log Scale)

Figure 24. Caterpillar World retail Sales YOY Change

Topp et al. (2008) Australian Bureau of Statistics (2012)