First of all, we are now past the peak in conventional global oil production (roughly 2006-2008 depending upon how it's defined) -- a key inflection point which will define our lives going forward. The US and Canada pretend to have dodged this bullet through the substitution of shale oil and tar sands, but it turns out that the engine of industry doesn't run so well on these energy sources. They're both exceptionally poor in terms of energy returns and have exceptionally high costs of production. It's kind of like living in Flint, discovering your water is full of lead, and deciding to water your garden with Evian instead of tap water. The problem seems to be solved until you max out your credit limit.
Both watering your garden with Evian and running an industrial economy on unconventional oil are technically feasible, but our finances can only handle it for so long. Perhaps more importantly, it's economically feasible only because large investment banks desperate for positive returns were willing to risk it despite the fact that it's a bad investment.
Are the banks stupid? Not at all! They know full well that any failures will be "socialized", just as they were with the housing bubble they built with liar-loans. They know full well that all of us will be on the hook for bailing out their "too big to fail" fannies. How will we pay? With "austerity" measures and further crumbling infrastructure. It will reach the point where we essentially get nothing in return for the taxes we pay.
Relatively few countries are willing to go through the trouble of fracking or tar sand extraction, and those who have are only dabbling in it rather than going whole-hog as we've done here. I'm quite convinced that our taxpayer-backed banks are the reason. This is why the US and Canada are the only real shining stars of energy production in the last decade. It's a facade that won't last, and one which is in fact already crumbling. Global oil production -- inclusive of all our unconventional nonsense -- is once again in decline. It's permanent and will accelerate in the years to come.
Energy and finance are inextricably linked. If you heard stories from your grandparents about how they grew up, chances are that you heard tales of "making do" with much less than we expect nowadays. That's precisely because we produced less energy than we do today. Energy *is* wealth, and a decline in energy production leads to a decline in wealth.
A case in point is a friend of ours, a now retired participant in the massive Teamster's Central States Pension Fund. Having already cut his promised benefit by about 40%, they recently proposed cutting the remaining benefit by 60% for all participants. The fund managers submitted this proposal to the US Treasury for approval, which rejected it on the grounds that it simply wasn't enough of a cut to save the pension.
This fund is far from the only pension in serious trouble, and I'd suspect is quite representative of most funds. As our energy supplies deplete and grow ever more expensive to produce, the economy stops growing. The system of debt and interest -- the very foundation of all retirement investments -- simply cannot be sustained in a zero growth economy. Thus, I don't expect retirement to remain a possibility for most of us. For reasons I'll explain below, this shouldn't be a problem for most people my age or younger.
Even "secure" savings held in banks are highly suspect. Banks are highly leveraged (especially so in Europe), and are themselves dependent upon economic growth (and debt this growth enables) for their very existence. In anticipation of problems to come, US laws were changed to allow for the "temporary" confiscation of savings in what is referred to as a bail in. This has already occurred with some European banks, but I don't expect it to remain on that side of the Atlantic.
Why aren't we in a depression right now?
I would argue that we are in fact in a depression, though that's not really the right word for it. The word "depression" implies a temporary condition from which we'll soon recover. Our condition is permanent and degenerative. The peak oil inflection point flipped the global economy from the growth phase to a contraction phase.
This condition has been ameliorated to some extent by central bank policies of quantitative easing, or essentially the printing of more money. Under pre-peak conditions, this would have lead to hyper inflation, but that is not the case anymore. Economic contraction leads to deflation, which is equally damaging. Quantitative easing policies have eased this trend, but now that banks have reached zero (or even negative) interest rates, we're at the end of the rope. I expect to see deflation take hold over the next few years in a big way. Prices of most things will drop, but they will become increasingly unaffordable as money grows ever more scarce.
Suffice it to say that we'll soon be telling our grandchildren stories of a wealthy past far exceeding their wildest dreams.
Environment
If energy and finance were the only things that mattered, I would expect our future to be a tolerable decline, perhaps with the end of this century looking something more like the early 1800s (based upon the energy production being roughly equal) in terms of relative wealth or the lack thereof. While it seems safe to assume that we could still be poor but retain some of today's technology, I'm not so sure about that. I think that the many systems upon which today's technology depend (such as the electric grid) will simply fail, leaving technology that resembles that of the pre-industrial era.
The downhill side of the energy depletion curve is steeper than the uphill side, the result of a phenomena referred to as the Seneca cliff. Decline is never as gradual nor as pleasant as economic ascent, as attempts to maintain decaying infrastructure left over from previous periods of greater wealth put a significant drag on economic activity. I would expect wars to be quite common as countries fight for remaining resources, though the wars should decrease in scale as the energy required for large-scale global warfare would become impossible to secure.
Climate change is the star of the show here, and it's far more than the commonly portrayed increase in temperatures, rising sea levels, or the extinction of polar bears. Climate change is the means by which we are currently committing societal harakiri, though I can't say for certain which of the many side-effects will be the coup de grace.
Most people seem to assume a linear progression with climate change; something that will give us plenty of warning before things get really bad. Unfortunately for all involved, the changes are definitely not linear, and are increasing exponentially as a result of feedback loops.
For an example of the exponential change we need to accustom ourselves to, let's suppose I put a handful of duckweed plants in a pond. Duckweed grows quickly, and can nearly double itself in a day. Assuming that it takes 30 days for the duckweed to entirely cover the surface of the pond, when will be the duckweed cover half of the pond surface -- the point at which people are likely to say we have a problem? On day 29. Similarly for us, major events such as the "blue sea event" of an ice-free arctic (likely to occur this year), herald the fact that we are nearing the end of a viable biosphere.
The leading contender at the moment appears to be ocean stratification (which was very much in play during the recent El-Nino in the north Pacific) growing to the point where hydrogen-sulfide emitting bacteria dominate the anoxic sub-surface waters and emit this toxic gas in large quantities. It has played a role in many previous extinctions.
Professor Guy Mcpherson has documented dozens of positive feedback loops that are greatly multiplying the effects of our carbon emissions. He suggests we may all be extinct as early as 2020, and has fairly convincing evidence to back it up. I certainly hope he's wrong, but my own views have moved reluctantly in the direction of his over the last several years. My somewhat less educated guess gives us perhaps 20 years. There are probably some negative feedback loops which may ameliorate the effects of Guy's positive feedbacks, but none appear likely to overcome them.
Governments are increasingly discussing the necessity of geo-engineering. All the suggestions I've seen have serious negative side effects, are enormously expensive, and by no means guarantee a fix. They would likely be unaffordable in an era of economic expansion, much less the era of contraction we're tipping into. Most focus on addressing temperature but not CO2, and would buy us a little time at best.
So what's the value in this knowledge? Is this "useless intelligence" of the sort that drives people to depression and a feeling of disempowerment? I don't think so. While we're still here, we have the ability to improve our chances of survival, or at the very least we have the chance to delay what may now be inevitable. Either way, it should influence the decisions that define how we live our lives each day. If you're sacrificing aspects of your life today in hopes of reaping rewards 20 or 30 years from now, you may want to reconsider. Likewise, for those of us whose current lifestyle is pushing down hard on the climate change gas-pedal (a given here in the US), it's imperative that we reconsider what we've come to think of as "normal".
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