Oil and hyperinflation...

Peak Oil will be the most important inflationary force for years to come. The reason being that it waters 95% of global transport.

black gold

Oil has been the main source of energy for many decades. Its pre-eminence has gone hand in hand with the immense technical advances of the 20th and 21st centuries. It made it possible to multiply industrial production by 50 between 1900 and 2000.

Currently, oil still accounts for nearly 30% of the global energy mix. This is due to its unique combination of attributes: energy density, versatility and ease of transport.

We owe oil all or part of absolutely everything we consume. Food, high-tech, clothing, machinery, furniture, medicine, fertilizer, cars, roads, wind turbines…

For what ? Because production has moved to the four corners of the world. Each country now plays the partition for which it has an advantage. One will export rockets and satellites, another cocoa, yet another petroleum.

And the fact that this globalization would never have taken place without the global merchant navy whose propellers do not turn by themselves. They are powered by turbines that run on oil. Heavy fuel oil to be precise.

More than 80% of international trade would not take place without the 57,000 ships of the world merchant navy.

Unfortunately, we passed the conventional oil peak (cheap oil to come out of the ground) in 2007. We may even have passed the all-oil peak in November 2018. Which means that we will have less and less oil.

Projections based on the best data on global oil reserves suggest that we will have half as much oil available within a quarter of a century.

Consequently, maritime traffic will decrease. As well as the quantity of a multitude of imported products which will cost more.

What can you replace oil with to propel these steel monsters capable of each transporting up to 400,000 tonnes of oil, ore, cereals or containers?

Sailing Navy?…

Jean-Marc Jancovici has made calculations of orders of magnitude to imagine what energy could replace oil to allow these giants of the seas to move.

“Gas (in LNG form)? It’s a fossil fuel, like oil […] »he wrote on his Linkedin page.

Indeed, gas reserves (in oil equivalent) are 1150 billion barrels. That is less than the world’s oil reserves (1730 billion barrels).

[Soit dit en passant, le monde consomme actuellement 100 millions de barils de pétrole par jour…]

Same end of inadmissibility for biofuels:

“Biofuels compete with food, materials, biodiversity (deforestation), wood energy and liquid fuels for planes, cars and trucks. And in a world with an increasingly hostile climate (decreasing agricultural yields), there won’t be enough for everyone. »

What about hydrogen?

“7% of the world’s oil, or just over 300 million tonnes per year, is used today by merchant navy ships. The energy content of this heavy fuel oil represents just under 4,000 TWh (4,000 billion kWh).

However, making hydrogen by electrolysis (from non-carbonated electricity) then ammonia (or another synthetic fuel) has an overall yield that ranges between 30% and 50%. In other words, “Amoniacing” the entire world fleet would require something between 8,000 to 12,000 TWh of electricity, or 30% to 40% of planetary electrons. Uh…”

Deglobalization = Inflation

There remains the possibility of producing electricity directly on the boats via a nuclear reactor. This is what is done for aircraft carriers, submarines or icebreakers (which are much smaller than tankers).

But what is the probability that we will rebuild tens of thousands of sea monsters each operating with its own nuclear power plant in 25 years? And that we are training millions of nuclear engineers at the same time? Very fine.

A sharp decline in oil production will therefore be accompanied by de-globalization. This will inevitably result in supply disruptions which will ultimately cause inflation.

Some would say that this “hypothetical” scenario is remote. Unfortunately, global freight transport figures reveal that this paradigm shift is already underway:

volume transported by the world merchant navy
World commercial exchanges carried out thanks to the merchant navy (in tons)

Of course, global trade will not stop in a bang. The effect of rising extraction costs and falling oil production is diffuse. It manifests itself in increasingly high inflation.

The debts we incur globally ($305 trillion) are largely energy-related.

[Notre article : Pourquoi tant de dette]

It is no coincidence that the growth of global debt has accelerated sharply at the same time as the price of a barrel:

Countries that control international currencies (NATO…) print shamelessly to buy raw materials. Exchanging paper for tangible goods is the hallmark of Western imperialism.

Until when ? Until countries like Saudi Arabia followed in Russia’s footsteps by asking for yuan rather than dollars. This will result in the United States defaulting on its debt, a falling dollar, and monster inflation.

Clearly, we can expect increasingly frequent episodes of strong inflation.

Fiat Ponzi + Oil Scarcity = Hyperinflation

The basic global economic problem is very simple to understand. To function, we must produce more next year than this year, forever.

This is the pitfall of the fiat system. Every penny in circulation comes from interest-bearing debt. This monetary system is by definition a ponzi. We must constantly increase the debt for it to be accountable.

So the physical impossibility of increasing and transporting production as fast as the debt will result in annual inflation increasingly approaching double digits.

Thus, the standard of living depends on productivity (output per person). A productivity which itself depends on machines (production + transport) running on oil. There is no secret.

The increase in production is no longer sufficient to compensate for the increase in the fiat ponzi money supply. More or less latent hyperinflation is the only way out of our inextricable energy situation.

This does not mean the end of the world, but as always, those who put their savings in the right place will do well.

In a declining inflationary world, fiat currency and stock market stocks do not look promising. Not to mention debt securities (life insurance, etc.) that must be avoided like the plague.

Real estate doesn’t seem like a very good idea either. The reason being that a budget cut by rising energy and food prices considerably reduces borrowing capacity. Not to mention the telecommuting that will make it possible to transform offices into homes.

A store of absolute value like bitcoin seems the most rational bet at the same time as the most accessible to the masses who are asking more and more questions about their race tickets.

If you’ve made it this far, you’ll probably enjoy this article: Why so much inflation.

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