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THE RULES
Is It Wet Yet?


File: 010af943e908f73⋯.png (150.18 KB,683x873,683:873,346060.png)

d6cbe4 No.313238

Substantial Chance Of A Major Financial Collapse Follows The End Of Offshored Industrialization

Moving industrialization offshore can look like a good idea at first. But as fossil fuel energy supplies deplete, this strategy works less well. Countries doing the mining and manufacturing may be less interested in trading. Also, the broken supply lines of 2020 and 2021 showed that transferring major industries offshore could lead to empty shelves in stores, plus unhappy customers.

Industry is based on the use of fossil fuels. Electricity also plays a role, but it is more like the icing on the cake than the basis of industrial production. Industry is polluting in many ways, so it was an “easy sell” to move industry offshore. But now the United States is realizing that it needs to re-industrialize. At the same time, we are being told about the need to transition the entire economy to electricity to prevent climate change.

A transition to all electricity is not feasible without fossil fuel ironically. Instead, we seem to be headed for increased geo-political conflict and the possibility of a financial crash seems greater.

Economists and energy analysts have tended to assume that fossil fuel prices would rise to very high levels, allowing extraction of huge amounts of difficult-to-extract fossil fuels. For example, the International Energy Agency (IEA) in the past has shown forecasts of future oil production assuming that inflation-adjusted oil prices will rise to $300 per barrel.

Instead of rising to a very high level, fossil fuel prices tend to spike because there is a two-way contest between the price the consumers can afford and the price the sellers need to keep reinvesting in new fields to keep fossil fuel supplies increasing. Prices oscillate back and forth, with neither buyers nor sellers finding themselves very happy with the situation. The current price of the benchmark, Brent oil, is $81.

When world oil prices started to spike in the 1973-1974 period, the US started to move its industrial production offshore. The very low inflation-adjusted prices that prevailed up until 1972 no longer held. Manufacturing costs climbed higher. Consumers wanted smaller, more fuel-efficient vehicles, and such cars were already being manufactured both in Europe and in Japan. Importing these cars made sense.

More recently, coal prices have begun to spike. Before China joined the World Trade Organization (WTO) in 2001, coal prices tended to be below $50 per ton. At that price, coal was a very inexpensive fuel for making steel and concrete, and for many other industrial uses.

After China joined the WTO, China’s coal consumption soared, allowing it to industrialize. At present, coal prices are part-way back down, perhaps partly because higher interest rates are dampening world demand for coal.

Natural gas prices also soared in 2022, at the same time as coal prices. Both coal and natural gas are fuels that are burned to produce electricity. When the coal supply is constrained, utilities will try to purchase more electricity produced by burning natural gas. However, it is difficult to store much natural gas for future use. Thus, a shortage of internationally traded coal can simultaneously lead to a shortage of internationally traded natural gas.

Having oil, coal, and natural gas prices spiking at the same time leads to inflation and to many unhappy citizens.

[1/4]

https://ourfiniteworld.com/2024/05/21/reaching-the-end-of-offshored-industrialization/

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Disclaimer: this post and the subject matter and contents thereof - text, media, or otherwise - do not necessarily reflect the views of the 8kun administration.

d6cbe4 No.313239

>>313238

[2/4]

Having oil, coal, and natural gas prices spiking at the same time leads to inflation and to many unhappy citizens.

The 1997 Kyoto Protocol encouraged the trend toward moving industry to lower-cost countries.

At that time, an international treaty stating that the participating countries would limit their own CO2 emissions attracted a lot of attention. An easy way to limit CO2 emissions was by moving industry overseas. Even though the US did not sign the treaty until later, the treaty gave the US a reason to move industry overseas.

There were many reasons to move industry overseas besides spiking oil prices and concern over CO2 levels. With such a change, customers in the US (and European countries making a similar change) gained access to lower-cost goods and services. With the money the customers could save, they were able to buy more discretionary goods and services, which helped to ramp up local economies.

Furthermore, business-owners in the United States could sense the opportunity to grow to be truly international in size if they moved much of their industry overseas.

In a matter of a few years, the economy changed to provide fewer high-paying factory jobs in the United States. Increasingly, those without advanced education found it difficult to provide an adequate living for their families. The high incomes were disproportionately going to highly educated workers and the owners of capital goods.

China, with its growing industrialization, could outcompete whole industries, such as furniture-making and garment-making, leaving US workers to find lower-paid jobs in the service sector. Similar outcomes unfolded in the EU and Japan, as industrialization started moving to different parts of the world.

The indirect impact of the 1997 Kyoto Protocol was to move CO2 emissions slightly away from the Advanced Nations. Overall, CO2 emissions rose.

Disclaimer: this post and the subject matter and contents thereof - text, media, or otherwise - do not necessarily reflect the views of the 8kun administration.

d6cbe4 No.313240

>>313239

[3/4]

The indirect impact of the 1997 Kyoto Protocol was to move CO2 emissions slightly away from the Advanced Nations. Overall, CO2 emissions rose.

Anyone who expected that the 1997 Kyoto Protocol would reduce world CO2 emissions should have been disappointed.

Thanks to the direct use of fossil fuels, the world can have paved roads, bridges made of steel, and electricity transmission lines. It can have concrete. It can have pharmaceutical products, herbicides, and insecticides. Many of these benefits come from the chemical properties of fossil fuels. Electricity, by itself, could never provide these products since it has been stripped of the chemical benefits of fossil fuels. Electricity is also difficult to store.

With the benefit of fossil fuels, the world can also have high-quality steel, with precisely the composition desired by those making it. With only electricity, it is possible to use electric arc furnaces to recycle used steel, but such steel is limited both in quantity and quality. US production of steel amounts to 5% of world supply (primarily using electric arc furnaces), while China’s production (mostly using coal) amounts to 50% of world supply.

Today, with the US’s limited steel-making capability, the US needs to import most of its steel, including steel pipes from China to drill its oil wells. We cannot see how dependent we have become on other countries for our basic steel needs.

China and India have both based their recent growth primarily on rising coal consumption. This is what has kept world CO2 emissions high. The US is now exporting coal to these countries.

Citizens of Advanced Economies are easily confused about the importance of fossil fuel use because they have never been taught about the subject and because their worldview is distorted by the narrow view they see from within their homes and offices.

The thing that most people do not realize is that industrial use and transportation use are extremely large sectors of the economy, and these sectors are very low consumers of electricity. The thing that most people do not realize is that industrial use and transportation use are extremely large sectors of the economy, and these sectors are very low consumers of electricity.

If we are short of inexpensive-to-extract fossil fuels, relative to today’s large population, we certainly could use some new inexpensive source of stable electricity supply. Even then, this would not solve all our energy problems – we would still need a substantial amount of fossil fuel supplies to grow our food and keep our roads repaired. The feasibility of moving away from fossil fuels without killing off a very major portion of the world’s population seems to be virtually zero.

Politicians, educators, and the news media would all like a narrative that can explain the need for moving away from fossil fuels, rather than admit that “our easy to extract fossil fuel supply is running out.”

Disclaimer: this post and the subject matter and contents thereof - text, media, or otherwise - do not necessarily reflect the views of the 8kun administration.

d6cbe4 No.313241

>>313240

[4/4]

In my opinion, today’s world is a little like the “Roaring 20s” that came shortly before a major stock market crash in 1929 and the Great Depression of the 1930s. After the Great Depression, the world entered World War II. There is huge wage and wealth disparity, energy supplies per capita are stretched.

Today, NATO and Russia are fighting a proxy war in Ukraine. Russia is a major fossil fuel producer; it would like to be paid more for the energy products it sells. Russia could perhaps get better prices by selling oil and other energy products to Asian customers instead of its current customer mix. At the same time, the US claims primary leadership (hegemony) in the world but, in fact, it needs to import many goods from overseas. It even needs supply lines from around the world for weapons being sent to Ukraine. The Ukraine conflict is not going well for the US.

I do not know how this will work out. I am hoping that there will not be a World War III, in the same way that there was a World War II. All countries are terribly dependent on each other, even though there are not enough fossil fuels to go around.

I think that there is a substantial chance of a major financial collapse in the next few years. The level of debt is very high now. A major recession, with lots of collapsing debt, seems to be a strong possibility.

https://ourfiniteworld.com/2024/05/21/reaching-the-end-of-offshored-industrialization/

Disclaimer: this post and the subject matter and contents thereof - text, media, or otherwise - do not necessarily reflect the views of the 8kun administration.



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