There are many factors critical for the functioning of the global system, and the world has been approaching non-negotiable limits in several of them – energy, finance, fresh water, fertile soil etc – but what is happening now is acting as a tremendous accelerant. The result will be the equivalent of the global economy hitting a brick wall at 200 miles an hour. The key factor is energy in the form of oil – the life blood of the economy – which is now very heavily impacted by the war in the Gulf. Energy, or the lack thereof, will be the driver of every other impact, because energy is the capacity to do work.
A critical factor with regard to energy is energy returned over energy invested (EROEI). In the early days of the oil industry, one could expect a hundred units of energy for every one used in the process, for an EROEI of a hundred. Now even for the best energy sources the value is a small fraction of that, and alternative sources are typically lower still. The ability to create, or even maintain socioeconomic complexity is a function of surplus energy available to society, and at a low EROEI that surplus (above and beyond what has to be reinvested in energy production) is small and shrinking. Every society’s level of complexity rests on a minimum EROEI, and our society was flirting with that lower limit before the crisis in the Gulf erupted. Now the production level, which had been flat to falling since production peaked in 2018, has been cut drastically and all at once. Oil, LNG and refined products are all affected, and this will destroy a wide variety of global supply chains in unpredictable ways, given the insane level of supply chain complexity that defies accurate modelling.
A deal to end the war any time soon is very unlikely, as all parties are intransigent. Iran has established critical leverage that it isn’t going to give up voluntarily, and it can’t be forced to either, given how well defended the area is. Israel is determined to keep the war going until Iran is completely destroyed, and it will undermine any attempt at peace with false flag attacks if necessary. It can drag the US back to war to defend it at any time, considering the Israel-first attitude of virtually the entire Congress. The US is agreement incapable, because the administration is utterly corrupt, about as ill-informed as possible, and completely incompetent. Trump is a pathological liar whose words are merely to manipulate markets for the benefit of his friends. He repudiates every supposed deal he makes on a whim, and so can never be trusted. His ‘negotiators’ are ill-informed grifters who are also arch zionists and can also never be trusted. The US cannot, however, return to war more than very temporarily, due to their lack of armaments. It has used up a majority if its missiles and interceptors in Iran and Ukraine. The bloated and corrupt military industrial complex lacks the surge capacity to produce more in the relevant timeframe, and what it does produce is over-priced, not particularly effective, and often obsolete before it comes off the production line. This means the war will eventually end due to lack of capacity rather than a deal, and the postwar period will be chaotic.
What is predictable is that a serious famine is coming, not just due to the lack of energy for farming and distribution. But also due to the lack of fertiliser, which is also heavily impacted by the war. Approximately half of the nitrogen in living bodies comes from the artificial fixation of nitrogen through the Haber-Bosch process, using natural gas. Doing this allowed humanity to remove the nitrogen limit, which had been the limiting factor under Liebig’s law of the minimum. The result was the Green Revolution of the 1960s that led to a doubling of the human population in just a few decades. That process will now go into reverse, with catastrophic consequences for the food supply and the size of human population. The extremely rapid rate of change leaves no time for adaptation. A billion people could starve by the end of the year.
In addition to the looming energy crisis, the global financial system is at the end of a major debt cycle, meaning that some kind of reset is inevitable. The reset that the global elite have in mind is entirely digital. They want programmable money in order to be able to control the population precisely, and at the level of the individual, because they know what an uncontrolled population will otherwise do to them. There are many dependencies involved in doing this, energy and fresh water being major ones. Internet is another, and Iran has said it will take control of the undersea cables running through the strait of Hormuz. If conflict resumes, it could destroy them.
Enormous data centres are being constructed, and they will consume as much energy, and cooling water, as large cities. Considering that many are being built in arid regions and where electricity is already expensive, operation may not be possible for long even if the local population is entirely deprived of what they need to survive there. Owners are attempting to install on-site generation, but this takes time, capital, and fuel availability. The data centres are so unpopular that owners are already concerned that people might take matters into their own hands and destroy them with drones, so they want the buildings defended militarily. The entire AI industry is in a financial bubble of epic proportions, and even designating it as a matter of national security and trying to bail it out may not work.
The planned digital programmable money could take the form of a central bank digital currency (CBDC) comtrolled by the Bank for International Settlements (BIS) or could be introduced as private sector stablecoins. Much if the world has chosen the former route and the US has chosen the latter. The two factions are now in competition for dominance over global finance. The US is attempting to pitch its stablecoins to the global population at the retail level, which would render currencies other than the dollar irrelevant, and would create a situation where the global population would be supporting America’s gargantuan national debt. However, both approaches depend on not merely maintaining socioeconomic complexity, but increasing it substantially, and the ability to do so depends on the availability of sufficient energy at a high enough EROEI. This dependency will ultimately not be met, meaning that these plans will fail at some point. As many people as possible need to remain independent enough of the planned digital gulag to accelerate its failure, but remaining independent will likely come with a hefty price in terms of exclusion from society. The further the plans get before failure, the harder it will be to remain independent.
The unpredictable factors are the timing of the failure, and the extent of the damage that will have occurred in the attempt. If the war ended tomorrow, and the process of restoring global energy flows resumed immediately, the damage in many places would still be catastrophic. Restoring flows is no simple matter. Queues out of the Gulf must be cleared and shut in production restarted, both of which are time comsuming processes. Neither production nor transport may ever return to their previous levels, as fields will have been damaged and ongoing risk perception will raise the costs of doing business in the Gulf substantially. As global flows are very unlikely to be restored at any level any time soon, the damage to global supply chains will continue, and the human cost will increase exponentially.
Given that one of the goals of the global elites is population reduction, they will be successful on this one parameter, but at huge cost to themselves as well as to everyone else. They fail to understand that their own prosperity is completely dependent on the layers of the societal pyramid beneath them, from which they cream off the surpluses that have made them wealthy. It takes energy to push something ‘uphill’ against its concentration gradient, and wealth is no exception. The result will be a collapse of modern living standards for all, destitution for many, and a failure to survive at all for many more. Elites will be rightly blamed for this, and are going to find their continued existence uncomfortable and probably short. Chaos will reign for a while, until some form of order can be restored, but that will depend on rebuilding trust. As trust determines organisational scale, and trust rebuilds very slowly, order at scale will take a long time to resurrect. People need to be as resilient as possible, and absolutely must get their expectations in line with what reality can hope to deliver. The necessary adaptation must come from the bottom up, as all top down initiatives are very likely to be ill-informed and counter-productive. We are the ones we’ve been waiting for.
