For Your Consideration.

A piece not by some journo but actually by a professional geologist and oil extraction expert, Arthur Berman, who, in his latest piece, makes two crucial observations which fall well in line with a number of theses about US elites I, together with number of others, continue to make for years. 

Most people, policy makers and economists are energy blind and cannot, therefore, fully grasp the gravity or the consequences of what is happening.

Bingo! I can add, I wrote two books on that (yes, I will continue to repeat it to drive point home), they are also military blind, geopolitics blind and real economy blind. Then, Berman commits a sacrilege by stating that:

                            Energy is the Economy 

And if that wasn't enough to spook all kinds of market analysts who think that stock prices are real economy and that bread grows on trees and iPhones are pinnacle of the technology, Berman delivers a knockout punch:

Gross domestic product (GDP) is proportional to oil consumption (Figure 4). That’s because oil is the economy. Every aspect of production and use of goods and services requires burning fossil energy. There are approximately 4.5 years of human labor in a barrel of oil (N. J. Hagens, personal communication and The Oil Drum). No other energy source comes close to that level of energy density.

I can add even more, do not forget electric energy, it matters together with oil. And, as we know, the electric energy can be produced without oil, such as hydro and nuclear. So, while statement on proportionality is correct, oil is one OF, not the only, metrics of energy consumption in relation to GDP. Here is, my friends, just one (out of very many) metric from World Bank (from 2011 no less) which shows an "adjusted" relations of GDPs when consumption of energy is considered (in this case per capita):

Speaks volumes, doesn't it? Especially when one considers this truism that Energy IS Economy. Of course for 2020 this updated overall (gross, not per capita) consumption data speaks volumes:

Which gives an idea of the REAL relation of REAL economies globally per their actual sizes. It also gives the insight into ACTUAL stakes of the geopolitical realignment by singling out the elite group of leading industrial and military powers who are reshuffling themselves. It also gives a good insight into why Germany or France are not global but regional players and why they will not be able to form serious military-economic-political block of global import alone. So really simple, so... realistic. Anyhow, consider this piece by Berman for your reading.     

Small Bypass.

Since the issue of actual size of economies was raised in previous post, I might as well remind everybody that production and consumption of energy is one of those very real metrics which testifies to the size of actual economy. Since it is not easy, at least for me, to find latest free data on energy consumption and production, we may as well use Wiki here with data for 2014. Obviously it is still not precise metric but it, nonetheless, is very indicative one. Here is some data in British Thermal Units (BTU).

United States: produces 82 quadrillion BTUs, consumes 98.3;

Russia: produces 55.3 quadrillion, consumes  30.7;

China: produces 91.97 quadrillion, consumes 119.5;

Germany: produces 4.44, consumes 13.1;

India: produces 15,52, consumes 24.3;

Saudi Arabia: produces 27.6, consumes 10.3. 

So, one can make some very approximate (number of times or folds) economies roughly correlate (or have ratio) with, of course, adjustments for climate (e.g. air conditioning is very expensive in hot countries, while heating varies dramatically with climate zone), industry's energy efficiency (some nations still use old traditional melting technology in steel industry etc.). But generally, if you take a look at US energy consumption dynamics here, you will notice a peculiar thing--industrial consumption remains basically unchanged in the last 4+ years. Nations that realistically grow they do increasingly consume energy in their manufacturing sectors--it is an axiom, even when adjusted for modern energy-saving technologies--not the case here. Do the spread, say, from 2007 to 2018 (there is a function for that) and see for yourself. 

So, here is a rough estimate, if we count PPP of Russia and Germany the same (they are virtually the same--roughly 4,1 trillion) and adjust them for energy consumption it becomes clear that (very-very roughly) US and Russian consumption relate as 98 to 31 which is roughly 3.3 to 1, which, accounting for the US being slightly more than two times larger in terms of population than Russia, one gets Russia's PPP GDP of 4.1 Trillion multiplied by 3.3 = 13.53 trillion which gets us in the very rough vicinity of US real GDP. This number is what the US actually produces and it is funny how this very rough ratio of something 3.0-3.5-4.0 pops up periodically in the costs of many weapon systems. Forestalling the argument of US, indeed, having higher wages it has to be also stated that life in Russia, in the same time, is much much cheaper. So, here is a fast, one of very many, adjuster, which doesn't fit Western economic "science" but which allows to get a slightly sharper picture of the world. More precise picture? Well, read my Why Math Models Fail posts and, hopefully, new book when it comes out.