In extremis: The world at the edge of a cliff

Geopolitical risk took center stage last week when Russia announced it would annex the Ukrainian territory it has seized—after holding "referendums," of course, in those areas. Any attack on what would now become Russian territory would be met by all means necessary including nuclear weapons. Presaging this development, I wrote the following in a piece from March entitled, "World War III is here, but it's not what we expected":

[I]f Russia ultimately feels backed into a corner, the Russian leadership may see no alternative but to draw its main competitors into a wider war with the hope of instilling enough fear of a nuclear confrontation that both sides relent and a political settlement and security guarantees follow that include an agreement to end all economic warfare.

It is in just such circumstances that both sides may miscalculate or may misconstrue the words of the other and choose to escalate the conflict in a way that will make prophets out of all the screenwriters and novelists who depicted World War III as the end of civilization.

It seems "such circumstances" have arrived and both sides are choosing escalation. I am not predicting "the end of civilization." But I'm more worried than I was a week ago.

Europe's real-time experiment in energy contraction

European society is currently undergoing a real-time experiment in energy contraction. Sanctions imposed on Russia in the wake of the Russia-Ukraine conflict have led to a dramatic reduction in imports of Russian oil and natural gas. The Europeans are still receiving some Russian oil via pipeline though that flow was reduced last month. The reasons for the decline in natural gas deliveries from Russia—deliveries not prevented by Western sanctions—are disputed with each side accusing the other of being the cause.

Those of us who have been warning about the coming energy stringency believed that it would result from the rising cost of extracting hydrocarbons—and the inability to bring new production online faster than production is declining from existing wells. In Europe, we are getting an early preview of what such a future looks like when a society is unprepared for a sudden decline in the availability of oil and natural gas.

The loss of Russian natural gas imports is shaping up to be nothing less than catastrophic for Europe. Just two years ago the price of gas at the Dutch Title Transfer Facility, Europe's most liquid natural gas market, was hovering around €11 per megawatt hour. At the close last Friday the price was almost 17 times higher at just under €188. At one point in late August the price spiked to €349. In the decade prior to the outbreak of the pandemic, the highest price ever seen for the TTF was a little over €29.

Why we worship waste

The ability to waste resources without the need to be concerned for one's well-being or future has always been a sign of wealth and power.

Thorstein Veblen coined the phrase "conspicuous consumption" in his famous 1899 treatise The Theory of the Leisure Class. The point, of course, for the wealthy is to be conspicuous so as to attract the attention, praise and deference of their fellow citizens. Veblen explained that wealthy people also often communicate their power to others by having a group of attendants around them who do little or nothing. He dubbed this "vicarious leisure." Since there are only 24 hours in a day, one person, however wealthy and powerful, can only enjoy so much leisure. Vicarious leisure made possible by the excess wealth of an individual is an unmistakable sign that a person is important.

The seemingly relentless drive of commercial enterprises to reduce waste and economize may appear to run counter to this. But that drive is only meant to produce more wealth for what Veblen calls the leisure class by which he means the power elite of society.

Taking a holiday break - no post this week

I'm taking a holiday break this week and expect to post again on Sunday, September 11.