In “A Thousand Barrels a Second” Peter Tertzakian recently presented data to explain why, we are running out of cheap oil. The implications of this, however, is what I will discuss in today's presentation.

For example Tertzakian explains that without the ability to flood the markets with oil, the Saudis are resorting to flooding the market with promises. That's why Ali al-Naimi, the oil minister, at one point told his Washington audience that Saudi Arabia has embarked on a crash program to raise its capacity to 12.5 million barrels a day by 2009 and even higher in the years after that. That means however that Naimi's promise of 12.5 million additional barrels per day of oil is certainly the upper limit of what the Saudis can do over the next four years and may in fact be an exaggeration. So what does it imply for the world?

According to Tertzakian and other reputable sources, Saudi Arabia's current production capacity is approximately 10.5 million bpd. So the Saudis' crash program might add another 2 million bpd over the next four years. Meanwhile, the world­wide oil consumption has grown from 79 million barrels a day in 2002 to 82.5 in 2003 to 84.5 in 2004, and the number for 2005 was close to 86 million bpd .This means oil consumption has risen by 6 million bpd in the past three years-an average of 2 million bpd a year. If this trend continues, then the Saudis' crash program of 2 million bpd over four years-or half a million bpd per year-will hardly be adequate. In fact the best ­case scenario says, the Saudis can supply less than 25 percent of the additional oil the world needs.

Of course many of you would say that, the preferred solution to the growing oil squeeze would be to increase our supply of oil and other forms of energy. This is what saved the economy in the early 1980s. When the Iran-Iraq War ended, Middle East oil could flow freely once more. Consequently, OPEC oil production climbed by 35 percent between the early 1980s and the end of the decade. Natural gas production, thanks to the lifting of price controls, also rose sharply. It went from about 18 percent of worldwide energy production to over 21 percent in the 1980s. As well, between 1980 and 1990, nuclear power generation more than doubled. By 1990, it provided 17 percent of the nation's electricity, compared with roughly 8 percent in 1980. These developments were much more important than conservation in checking the up trend in oil prices.

Since the 1980’s however, world­wide oil exploration has suffered from declining returns for some time, despite the use of improved technology. As Tertzakian explained, a new field with a few hundred million barrels is not enough, for it would be drained in days if used exclusively.

Yes, at the end of last year there was a major find in Brazil's  Campos Basin some 50 miles into the Atlantic Ocean east of Rio de Janeiro. Meaning lucky Brazil, will probably become a net oil exporter in the next few years.

But these kind of finds evidenced by the pattern since the 1980’s, should be expected to get less and less. Plus often such new finds are located in politically and geographically inhospitable regions. Meanwhile, the average global decline rate for existing wells is somewhere between 5 - 8%, creating an annual decline about 2.5 times that of Iraq's current production as Tertzakian explained.

But let us assume that the Saudis' oil reserves are as large as they claim-which, I would suggest, is not entirely certain. It takes energy to produce energy-a lot of it. Saudi Arabia is a relatively small country with about 20 million residents. Of the roughly 10 million bpd of oil Saudi Arabia currently produces, it consumes some 2 million bpd, or 20 percent. Despite its oil riches, the country has experienced very little per capita GDP.
Elsewhere, in an article published in the March/April 2002 issue of Foreign Affairs, Edward Morse and James Richard, argued that Russia will also be a major contributor of new oil production. I quote: "In the long term, Moscow may have far more going for it than Riyadh. Yukos, Lukoil, are dynamic and growing."

However, Russia did look promising, for a time. Between 1995 and 1998 Russian oil production hovered around 6 million bpd. Then, beginning in 1999, Russian oil production began to accelerate, rising to over 11 million bpd in 2004. This huge increase represented about 70 percent of the gain in non-OPEC produc­tion during that period. So yes, between 1999 and 2004 Russia was a very big deal.

And in 2005 Russian oil production barely increased at all. In fact, Yukos has not only lost its dynamism but has ceased to exist as Russia has reverted ever closer to a totalitarian form of government. In 2003-4, Yukos stock was trading at between 300 and 500 rubles. And then the bottom fell out. The chairman of Yukos was arrested and the company was effectively taken over by the state. With the demise of Yukos, capitalism died in Russia, and very likely so did its future as a major oil producer.

As exemplified by Russia when it cut off transit through Ukraine, in January this year ,also natural gas holds promises. Of course, as can be seen from following map, Russia's core national interests are to use its natural gas lines to control Central Asia by dominating its ability to get its energy supplies to market, to keep the oligarchs out of business by controlling natural gas production and transportation, and to keep Gazprom's production schemes in place despite their inefficiency.

On Jan. 4, Moscow and Kiev settled the matter by agreeing to a compromise five-year contract. Under terms of that deal, natural gas from the Central Asian states of Turkmenistan, Uzbekistan and Kazakhstan will be transported through Russia, making up a mix that would supply Ukraine at a rate of $95 per 1,000 cubic meters. Any Russian gas fed into that mix will be sold at Gazprom's full rate of $230.

From a strictly commercial standpoint, all now seems right with the world. The Central Asians, who previously were able to sell natural gas only to the heavily subsidized Russian market, now have gained a significant export market for their supplies; the Ukrainians have substituted a mere doubling in prices for what would have been a fourfold increase; and the Europeans have their natural gas supplies reestablished.

But that is not the really interesting -- much less important -- part of what has just occurred. When the crisis first erupted, it centered on Russia's desire to reassert influence directly in Ukraine; but as the game has played out, it has come to center on Russia's ability to use Europe as a lever.

From the beginning, the natural gas spat has been about much more than a few (billion) dollars in annual energy sales. This squabble is over the orientation of Ukraine between West and East, and ultimately over the ability of Russia to regenerate its geopolitical fortunes.

Ukraine's “Orange Revolution” was a seminal event in the Russian mind -- a jarring development that ranks second only to the dissolution of the Soviet Union in December 1991. Russians view the Soviet collapse as the day they lost their empire, and they fear that history may mark the Orange Revolution as the day that Russia degraded past the point of no return.

Viewed from any angle, Ukraine is critical to the long-term defense and survival of the Russian state. This is not about ethnic kin, although eastern Ukraine does host the largest Russian community in the world outside of Russia. Even before the Soviet era, Ukraine was integrated into the industrial and agricultural heartland of Russia; today, it not only is the transit point for Russian natural gas to Europe, but actually is a connecting point for nearly all the country's meaningful infrastructure between East and West -- whether of the pipe, road, power or rail variety.

Politically and militarily, a Russia denied Ukraine cannot easily project power into the Northern Caucasus. Nor could Moscow reliably exert control over Belarus, since that country's primary water transport route, the Dnieper, flows south to Ukraine, and it is nearly as well linked into Poland and the Baltics as it is to Russia proper. That geographic reality means that, should anything happen to the government of pro-Russian President Alexander Lukashenko, Minsk's geopolitical orientation could quite easily shift to match Ukraine's.

And of course, taking the long view, it is easy to see why the Russians are so nervous. Ukraine pushes deep into the former Soviet territory, with borders a mere 300 miles from either Volgograd or Moscow, and the Ukrainian port of Sevastopol on the Black Sea has long been Russia's only deep, warm-water port. There are no European armies prepared to march east now, nor are there likely to be anytime soon, but throughout history -- apart from the Soviet period -- Europe has profited from Russian weakness. Without meaningful influence over Ukraine, Russia has no reliable links to Europe, no reliable control over Belarus, a pinched supply line to the Caucasus -- where an insurgency rages -- no navy to speak of and, most importantly for a country with no natural borders, significantly less strategic depth.

Simply put, with Ukraine in its orbit, Russia maintains strategic coherence and a chance of eventually reattaining superpower status. Without Ukraine, Russia's status as a regional power grows tenuous, and the issue of Russia's outright disintegration leaves the realm of the ridiculous and enters the realm of the possible.

This is not about money; it is about control and survival.

Ukraine's position in the natural gas dispute has been to take advantage of the fundamental duality in Russian foreign policy. On one hand, the Russian leadership fully realizes just how critical Ukraine is to its national interests. But on the other hand, Russia must have at least relatively warm relations with the Europeans -- if for no reason other than to keep its options open.

Ukraine has viewed the natural gas issue as an opportunity to present the Russians with a zero-sum game. Kiev did not see the need to agree to pay European price levels because its leaders knew that Russia could not afford to cut off supplies -- that would ruin relations with Europe. Additionally, encouragement from the United States -- the most enthusiastic supporter of Ukraine's Orange Revolution -- gave the Yushchenko government a bit of an invulnerability complex, and encouraged Kiev to push the Russians consistently and painfully.

There was also a timing issue. Since the Orange Revolution, Yushchenko has been having a rocky ride, and his popularity is at an all-time low. With parliamentary elections scheduled for March, he needed an anti-Russian crisis in order to bleed support away from Yanukovich's party.

But what Yushchenko -- or, for that matter, many Europeans now congratulating themselves for their victory over Russia -- appears not to realize is that Russia has changed.

In mid-November, Russian President Vladimir Putin named Dmitry Medvedev as first deputy prime minister. Medvedev is a rather rare personality in Russian politics, in that he is a modernizer who has not become unrealistically optimistic about Russia ever looking like -- much less joining -- the West, and a nationalist who has not fallen prey to the debilitating paranoia that often characterizes Russian policy. He also happens to be Putin's protégé and the board chairman of Gazprom. The Ukraine natural gas crisis was his first Russian foreign-policy initiative.

Medvedev, like all Russians, recognizes that his country's long-term prospects without Ukraine are, at best, bleak. That means that Russia's European relations have become of secondary importance -- they are no longer an end in their own right, but rather a means to other ends.
Prior to the Jan. 1 shutoff, the Europeans had become complacent, unappreciative of the scope of their dependency upon Russia or how much they have taken a "friendly" Moscow for granted since the end -- or even before the end -- of the Cold War. Energy supplies to Europe continued throughout the Afghan war, the 1983 war scare, the Moscow Olympic boycott, the putsch against Gorbachev, the Soviet breakup, the Chechen war, the Kosovo war, and the enlargements of NATO and the EU. The Europeans grew confident that as far as energy supplies were concerned, the Russians -- while unpredictable in their rhetoric -- were rock-solid in their reliability.

Medvedev's primary goal was to redefine European perceptions of Russia. As of Dec. 31, Western Europeans perceived Russia primarily as an easily dismissed, benign former foe. But with the Gazprom cutoff -- which diminished gas supplies needed for heating in the middle of winter -- Russia proved itself not only sufficiently erratic to be taken seriously, but also capable of inflicting very real pain with a modicum of effort.

Now, did the Russians want to hurt the Europeans? Of course not. Europe, particularly "old" Europe, remains a potential partner for Moscow, and there is no reason for the Kremlin to introduce spite into an already complex relationship. But did the Russians want the Europeans to know that the Kremlin has the capacity and chutzpah to turn the screws? Absolutely. And doing so at a time of year when the wind whipping off the North Sea is anything but balmy adds that ever-incisive Russian touch.

This is not about establishing trust, but about establishing in Europe a respect for Russia's strengths and an awareness of Russia's concerns.
Which brings us back to Ukraine.

Moscow wants to capitalize on Europe's dawning realization of Russia's forcefulness and convince the Europeans this is not just about Ukraine, but also about the United States. U.S. pressure made the Orange Revolution possible. U.S. support has emboldened Kiev -- even specifically on the natural gas issue.

And now Ukraine's American-encouraged invulnerability complex has demonstrated an ability to endanger Europe's economic and personal well-being.

However, unlike the Europeans, the Americans do not import so much as a molecule of Russian natural gas. For Washington, supporting Ukraine against Russia is a low-risk, high-payoff issue; for Europe, it is the reverse. When natural gas supplies dropped on Jan. 1, many Europeans were left wondering exactly what it was that they were supposed to get out of this revolution that the Americans were so excited about.

The question for Europe now is simple: How to ensure that the Russians don't cut off the heat? The answer is equally simple: Take Russian interests in Ukraine to heart.

This is hardly the end of the matter. The way the Russians set up the final compromise deal on Jan. 4 also gives them heretofore unheard-of flexibility in pressuring Ukraine and Europe in the future.

Up to this point, Gazprom has maintained a monopoly on natural gas exports from the former Soviet states to Europe, and only Turkmenistan was allowed to export natural gas to Ukraine. This derives from a longstanding Gazprom position: Because the company is required to supply natural gas to the Russian market at prices below the cost of production, Gazprom has jealously protected its monopoly on exports. Turkmenistan was granted an exemption to supply a few former Soviet republics because Moscow, in an effort to maintain political alliances, dictated that their supplies should be subsidized. Gazprom, therefore, had Turkmenistan sell to its regional undesirables for peanuts, while the company pocketed hard currency from European customers paying top dollar.

Under the new deal, Turkmenistan, Kazakhstan and Uzbekistan will be able to sell natural gas directly to Ukraine at sharply higher rates than before. While that might seem like an improvement for Ukraine in terms of both political palatability -- the natural gas is not Russian -- and supply diversification, it is neither. Just as Russian natural gas must go through Ukraine en route to Europe, all Central Asian natural gas must go through Russia to reach Ukraine. The terms of the new agreement mean that Europe's natural gas supplies now will depend not only on the tenor of Russian-European and Russian-Ukrainian relations, but also on Russian-Kazakh, -Uzbek, and -Turkmen relations. Suddenly Europe has a vested, if reluctant, interest in ensuring that Moscow is satisfied with its level of influence in the bulk of the largest former Soviet territories.

Such developments cannot come as much of a shock to the United States. Truth be told, American policy toward Ukraine has been a bit of a Hail Mary all along. Washington's tools of influence in Ukraine and Russia are few and far between, and it cannot even pretend to offer an alternative energy supplier for the Europeans or Ukrainians. In fact, some of Washington's policies have even encouraged Europe's dependence on Russian energy: The Continent's most viable alternative to Russian natural gas is Iran -- which, with President Mahmoud Ahmadinejad regularly shouting "Death to Israel," is hardly a place the United States wants the Europeans to foster warm relations.

The elegance of Medvedev's strategy lies in the fact that simply causing the Europeans to think about Russian interests means that the Kremlin has driven a wedge not only between the Europeans and the Ukrainians, but between the Europeans and the Americans. If Russia is to recover what it has lost in geopolitical stature these past 15 years, this is precisely the sort of policy that will give it a fighting chance.

While Russia's perspective on the matter is certainly central, this is not all about Moscow -- Germany has a stake as well.

There, Chancellor Angela Merkel is in a bit of a fix. Her East German roots prompt her instinctually to side with her fellow Central Europeans, and by extension, the Ukrainians. But she is hardly oblivious to the fact that Germany is the "old" European country that relies most heavily on Russian energy supplies. In Germany, more than in any European state, power rests upon location and economic strength (Germany has not had a military to speak of in more than a decade). With the one internationally approved vehicle for German ambition -- the European Union -- in rather less than the best shape, Berlin's options for furthering its interests are nil. Without energy to power its economy, Germany will remain the underwhelming geopolitical power it has been since the end of World War II.

For most Central European states, this would be no large disaster -- if not for the possibility of flickering lights or sudden mid-winter cold. The Poles, Hungarians, Balts, Czechs and others -- all of whom have visceral memories of wartime experiences at German or Russian hands -- like the idea of German nationalism being contained by pan-European organizations such as the European Union, even if they do not embrace everything that the EU requires them to do.

But now Medvedev's maneuvering will force Germany to take the greatest interest of all the European powers in keeping the Russians happy, even if Merkel might be personally inclined to let Moscow rot. Which means that, moving forward, whatever compromises are made in relations between Moscow and the West will be actively brokered by Berlin. And while that may ensure steady energy supplies to Europe, having affairs in the region managed by a de facto partnership between Germany and Russia is not the sort of development that will lead to restful nights in the vast tracts of easily-marchable land between Berlin and Moscow.

Thus, when Russian President Vladimir Putin and European Commission President Jose Manuel Durao Barroso were meeting in Moscow yesterday (March 17) Gazprom was unlikely to offer a deal. Russia's desire to exert absolute control on the economic sectors that contribute most to its treasury, and its foreign policy, has prevented (and will continue to prevent) it from taking a more cooperative and mutually beneficial stance.

But when I mention ‘gas’ an alternative energy source (that could make an immediate contribution to energy supplies) I would like to mention ‘liquified natural gas’ (LNG). General Electric, for example, is in the forefront in turboma­chinery, products vital to the liquefied natural gas industry, as well as in the storage and transmission of energy sources such as natu­ral gas. Two other companies we like are Chicago Bridge & Iron (CBI) and Air Products and Chemicals. And based in the Netherlands, Chicago Bridge & Iron is the engi­neering and construction firm most leveraged to the world's growing need for new energy supplies.

Two, wind accounts for less than 1 percent of overall energy usage in the United States. Yet over the past six years, use of wind energy has grown by 30 percent a year. It is only a question time before wind becomes recognized as critical in meeting I energy needs. Plus good news for the US as an additional alternative, comes  from Cana­dian tar sands, which by some estimates contain as much oil as Saudi Arabia. The problem is that developing the reserves is difficult and costly.

Finally, nuclear energy, carries a lot of baggage, including public resistance and waste storage concerns. Still, in an energy-starved world, nuclear energy will seem preferable to insufficient energy. Plus emerging economies like China and India have little choice but to increase their reliance on nuclear energy, sharply boosting uranium demand. The world's mosts significant uranium producer is Canada-based Cameco. There are other countries like for example Thailand of course, that produce uranium on a small scale.

As for the future of the automobile Tertzakian sees hydrogen being used in his  2020’s car, but he fails to consider climate change. I did this in 2003, however, where I suggested that the cheapest and most environmentally begign way to make hydrogen is by putting electricity into water and capturing the liberated hydrogen gas.

Let me mention just two recent examples, one, on March 14 Iranian Oil Minister Kazem Vaziri-Hamaneh announced that Tehran could revise oil supply contracts, suggesting boycotts against specific buyers, if those countries support the passage of U.N. sanctions against Iran on account of its nuclear activities. Iranian Oil Minister Kazem Vaziri-Hamaneh said March 14 that Tehran could revise oil supply contracts, suggesting boycotts against specific buyers, if those countries support the passage of U.N. sanctions against Iran on account of its nuclear activities. True at first this threat, will not hold much weight outside China. Like most Asian states, there is nowhere for China to get large amounts of crude besides the Persian Gulf. But not even Japan, because of its alliance with the United States, would unlikely give in to Iran's threat. And China of course is quickly making  strides in the direction of diversification.

However there is a second treat that if combined with the previous, could make a strong enough impact to make oil prices go up trough the roof, a terrorist strike in Saudi Arabia for example. (1)

Not surprising for al Qaeda targeting oil is now the highest priority of the economic jihad. And no I do not predict oil would to 200$ a barrel, if a situation like in the previous scenario where to occur, a rise to 150$ a barrel if longer then just a brief period could already have far reaching results. Given the fact that radical Islam wants noting less then to unglue the current social order, we have to ask some serious questions if such a scenario comes to pass.

Also Iran would not have to cut off production to disrupt the world’s oil markets. It could blockade or mine the Strait of Hormuz, the thirty-four-mile-wide passage through which Middle Eastern oil reaches the Indian Ocean. And while the U.S. Navy believe they could keep shipping open by conducting salvage missions and putting mine- sweepers to work. Some specialists in the oil business however estimate that the price per barrel would immediately spike, to anywhere from ninety to a hundred dollars per barrel, and could go higher, depending on the duration and scope of the conflict.

So what if combined forces manage to create an economic collapse, is this possible, and if, what then?

Historian Joseph Tainter in his 1988 book, The Collapse of Complex Societies, argues that the main reason complex societies collapse is that complexity-like other human endeavors-eventually suffers from diminishing returns. For example, the Roman Empire began when Rome discovered it could increase its energy supply by conquering its neighbors and commandeering their grain production and labor (in the form of slaves) to sustain its own needs. At first, the system worked well. Rome became wealthy. However, with each new conquest came a greater need for complexity-a bigger civil service to run the empire, a bigger army to defend it, more education, public works, and social benefits for citizens. All of these required financing, either by taxes or by debasing the currency. Taxes eventually grew so high that many landowners abandoned their farms, causing food production to fall. In time, the costs of conquering new territories exceeded the rewards. Eventually, even defending the existing territory against barbarian invaders became too expensive. Rome, the predator, became the prey. In fact Tainter's emphasis on the importance of energy supplies seems eerily familiar when we look at today's world, where oil is becom­ing increasingly expensive and new reserves harder to find. Yet I am not so fatalistic as Tainter. I believe civilizations can avoid collapse. A crucial element here is the mind-set of the leaders, and how well they perceive and respond to problems.

Jared Diamond provides another way of looking at the downfall of civilizations in his book Collapse. Like Tainter, Diamond thinks most crises are caused by declining resources. However, for Dia­mond, whether or not a civilization survives such a crisis has more to do with whether its leaders make the correct decisions in time.

In his review of fallen civilizations, Diamond presents a picture of leaders who became so fixed in their traditional values that they were unwilling to alter them, even if it meant destruction. For example, one of the best-known examples of a collapsed soci­ety is Easter Island. Diamond describes in detail how, on Easter Island, the ruling class developed a tradition of building enormous statues as a way of proving their legitimacy. The bigger the statue, the more status it gave the chief who had it erected.

Unfortunately, the process of erecting these statues required huge amounts of timber and rope (made from tree bark), not to mention human labor. As a result, over a period of three hundred years, the Easter Islanders cut down their forests until every last tree was gone. This drastically reduced their food supply. No more trees meant no more fruit, nuts, or other wild foods. It meant no more canoes with which to fish in deeper waters. And it caused soil erosion, which lowered crop yields.

Looking at the Easter Island collapse today, we cannot help feeling dismayed by the sheer stupidity of it. Did they not realize what they were doing? Could they not have abandoned their statue building in time to save their food supply? Diamond notes that even today's Easter Islanders have had a hard time admitting their ancestors were so shortsighted. Yet it seems the leaders of Easter were too entrenched in their ways to willingly change.

Diamond shows that similar attitudes explain the collapse of the Norse colony on Greenland. Like the Easter Islanders, the Greenland Norse unwittingly depleted their natural resources and degraded their environment. By cutting too many trees to create pasture for animals, they found themselves with a shortage of wood for heating their homes, for construction, and for smelting iron. By eroding their limited topsoil, they reduced the production of hay that fed their livestock, as well as their own food supply.

Yet apart from mismanaging their forests, the leaders failed in other ways to adapt to changing circumstances. Having come from Europe, the Norse maintained their tradition of raising dairy cattle, even though that contributed to the deforestation. (Dairy production requires large pastures and firewood for boil­ing water to sterilize milk containers.) The Norse believed in their own cultural superiority, so they failed to develop friendly relations with their neighbors, the Inuit, who could have taught them valuable new technologies to help them survive in Greenland's cold climate-technologies such as seal hunting, burning blubber rather than wood, making boats from sealskin, and more.

The Norse also clung to their religious practices. Traditionally, religion may have helped maintain social order. But unfortunately, as the colony's income from exporting walrus ivory declined (due to lower demand), the Norse continued to spend large sums on expensive church trappings, rather than on more useful imports such as iron that would have helped them survive.

From our perspective, it seems moronic that the Greenland Norse did not look at their growing problems and adapt a strategy that preserved their society. But like all ruling classes everywhere, these were people who likely had been trained from birth to maintain their social position. And that meant enforcing their society's traditional values. The Norse leaders would have felt as compelled to build cathedrals as the leaders on Easter Island were to build statues. They may have believed that to do otherwise would have opened the doors to short-term chaos and their own personal loss of rank.

So if leaders wait until a problem begins to seriously affect a society, it may be too late to solve it. Diamond suggests that by the time the last tree on Easter Island was cut down, saving it would have made no difference anyway. Trees had ceased to be a significant resource to the community. Of course, had the Easter Island leaders been brave enough to consider the longterm health of their society, they might have risked introducing some reforms. Perhaps they could have tied a leader's status to the abundance of his forests, rather than the size of his statues.

 Similarly, if the Roman emperors had paid attention to the long-term health of the empire, they might have devised a nonmilitary solution to the food shortage. And the Norse leaders might have modified their religious beliefs to encourage more modest churches and cultural exchange with their neighbors. Instead, lack of foresight and an almost childlike decision not to worry about the future seem to be human characteristics that are timeless. Ultimately, these psychological weaknesses may be more responsible for why civilizations have failed than resource shortages alone.

 

So what are the keys to survival?

Fact is that societies are not destined to collapse. Many have successfully coped with the problems of limited re­sources and remained intact.

Faced with too high a price for increasing or maintaining complexity, a society for example can choose to become less complex. In the early 1990s, the Soviet Union dissolved into a lower level of complexity. As the need to fi­nance burgeoning military budgets increased, so did the needs of maintaining an increasingly complex society and a government that spanned many republics. In the end, the Soviet Union chose a simpler form of government and granted autonomy to its formerly controlled states.

This lowered the cost of government, while letting Russia keep enough military might to protect itself  We cannot say the transition was without turmoil, but it could have been much worse had Gorbachev and other Soviet leaders been unwilling to take steps toward reform.

A second way of solving the problem of limited resources is for a society to adopt strict measures aimed at achieving a fixed but sustainable level of population, production, and consumption-a zero-growth society. Diamond describes the success of the tiny South Pacific island of Tikopia. Living in near isolation for three thousand years, the Tikopians had to deal with the classic Malthusian problem of lim­ited food production and the risk of overpopulation. And deal with it they did. They developed a complex agricultural system that maximized food production in a sustainable manner, and they created numerous population control methods that ensured their society never numbered more than around thirteen hundred people. Another example of success is Japan, which in 1650 was on the verge of collapse due to deforestation, which (as is typical) was causing soil erosion and lowering crop yields. However, in less than a hundred years, Japan achieved a stable population and in­stituted a forestry management system that prevented disaster.

The third-and perhaps the most preferable-method of preventing a collapse is for a society to develop new energy supplies that allow it to maintain and even increase its complexity without becoming vulnerable to collapse. For example, The Doomsday Myth, by Charles Maurice and Charles Smithson, describes how, in the sixteenth century, En­gland warded off a potential disaster brought about by an energy crisis. At that time, the main energy sources for home heating and manufacturing were wood and its derivative, charcoal. Wood was also used extensively for home and ship construction. Unfortunately, Britain's forests were a limited resource that was being rap­idly depleted. As a result, between 1500 and 1650, wood prices rose eightfold and England began importing wood at great cost. What saved the day was that the British turned to a new en­ergy source that (due to soaring wood prices) became economical-coal. Beginning in 1550, the British increasingly used coal in homes, workshops, and factories. This led to new methods of manufacturing, and the growth of various industries. As a result, by 1700 Britain had become the most productive economy in Europe. In fact, one could argue that the development of coal led to the Industrial Revolution and much of the prosperity the Western world has enjoyed since.

These examples show that reaching a production limit for a vital resource does not necessarily spell disaster. If a society can recognize the problem in time, develop a workable plan, and be willing to change its habits for the sake of survival, it can survive.

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