Crisis convergence

Seen in this broader scientific context, the HSBC global oil supply report provides quite stunning confirmation that for the most part, global oil production is already in post-peak. That much is incontrovertible, and derived from industry-validated data.

HSBC believes that after 2018, this is going to manifest in not simply a global supply shock, but a world in which cheap, high quality fossil fuels is increasingly hard to find.

We don’t need to accept this forecast dogmatically — the post-peak oil market, which HSBC confirms now exists, may function differently than what anyone can easily forecast.

But if HSBC’s forecast is accurate, here’s what it might mean. One possible scenario is that by 2018 or shortly thereafter, the world will face a similar convergence of global crises that occurred a decade earlier.

In this scenario, oil price hikes would have a recessionary affect that destabilises the global debt bubble, which for some years has been higher than pre-2008 crash levels, now at a record $152 trillion.

In 2008, oil price shocks played a key role in creating pre-crisis economic conditions for consumers in which rising living costs helped trigger debt-defaults in housing markets, which rapidly spiralled out of control.

In or shortly after 2018, economic and energy crisis convergence would drive global food prices up, re-generating the contours of the triple crunch we saw ravage the world from 2008 to 2011, the debilitating impacts of which we have yet to recover from.

2018 is likely to be crunch year for another reason. 1 January 2018 is the date when a host of new regulations are set to come in force, which will “constrain lending ability and prompt banks to only advance money to the best borrowers, which could accelerate bankruptcies worldwide,” according to Bloomberg. Other rules to come in play will require banks to stop using their own international risk assessment measures for derivatives trading.

Ironically, the introduction of similar well-intentioned regulation in January 2008 (through Basel II) laid the groundwork to rupture the global financial architecture, making it vulnerable to that year’s banking collapse.

In fact, two years earlier in July 2006, Dr David Martin, an expert on global finance, presciently forecast that Basel II would interact with the debt bubble to convert a collapse of the housing bubble into a global financial conflagaration.

Just a month after that prescient warning, I was told by a former senior Pentagon official with wide-ranging high-level access to the US military, intelligence and financial establishment that a global banking collapse was imminent, and would likely occur in 2008.

My source insisted that the event was bound up with the peak of global conventional oil production about two years earlier (which according to the UK’s former chief government scientist Sir David King did indeed occur around 2005, even though unconventional oil and gas production has offset the conventional decline so far).

Having first outlined my warning of a 2008 global banking collapse in August 2006, I re-articulated the warning in November 2007, citing Dr. Martin’s forecast and my own wider systems analysis at a lecture at Imperial College, London. In that lecture, I specifically predicted that a housing-triggered banking crisis would be sparked in the context of the new era of expensive fossil fuels.

I called it then, and I’m calling it now.

Some time after January 2018, we are seeing the probability of a new crisis convergence in global energy, economic and food systems, similar to what occurred in 2008.

In the end, I might be wrong. The crash might not happen in exactly 2018. It might happen later. Or it might be triggered by something else, something unexpected, that the model outlined here doesn’t capture.

The point of a forecast is not to be right — but to imagine a potential scenario based on the data available that one can reasonably prepare for; and to adjust the model accordingly in light of new data.

Whether or not a crash takes place in precisely the way suggested here, what’s clear from the new research is that the economy is hugely vulnerable to a financial crisis for reasons that conventional economists don’t talk about — reasons relating to the energy system on which the economy is fundamentally dependent.

Today, we are all supposed to quietly believe that the economy is in ‘recovery’, when in fact it is merely transitioning through a fundamental global systemic phase-shift in which the unsustainability of prevailing industrial structures are being increasingly laid bare.

The truth is that the cycles of protracted economic crisis are symptomatic of a deeper global systemic process.

One way we can brace ourselves for the next crash is to recognise it broadly for what it is: a symptom of global system failure, and therefore of the inevitable transition to a post-carbon, post-capitalist future.

The future we are stepping into simply doesn’t work the way we are accustomed to.

The old, industrial era rules for the dying age of energy and technological super-abundance must be re-written for a new era beyond fossil fuels, beyond endless growth at any environmental cost, beyond debt-driven finance.

This year, we can prepare for the post-2018 resurgence of crisis convergence by planting seeds — however small — for that future in our own lives, and with those around us, from our families, to our communities and wider societies.

Dr. Nafeez Mosaddeq Ahmed’s new book, Failing States, Collapsing Systems: BioPhysical Triggers of Political Violence (Springer, 2017) is a scientific study of how climate, energy, food and economic crises are driving state failures around the world.

Nafeez is a Visiting Research Fellow at the Global Sustainability Institute at Anglia Ruskin University’s Faculty of Science and Technology. He is also an award-winning 15-year investigative journalist and creator of INSURGE intelligence, a crowdfunded public interest investigative journalism project.

This INSURGE intelligence story was enabled by crowdfunding: Please support independent journalism for the global commons for as little as a $1/month via www.patreon.com/nafeez.

This article was updated on 16 January 2017