Game Over

How You Can Prosper in a Shattered Economy


By Stephen Leeb

Formats and Prices




$12.99 CAD



  1. ebook $9.99 $12.99 CAD
  2. Trade Paperback $19.99 $24.99 CAD

This item is a preorder. Your payment method will be charged immediately, and the product is expected to ship on or around January 28, 2009. This date is subject to change due to shipping delays beyond our control.

You already know about the devastating recession we’re in. Jobs are being cut by the tens of thousands. Real estate values are plummeting. Retirement plans and 401ks are going up in smoke. And then there’s rising inflation. And whether we like it or not, higher gasoline prices again are right around the corner.

Then there’s the ever-present confusion and dips in the stock market, and, whether we want to admit it or not, the fact that the world is finally beginning to run out of essential raw materials, such as silver, titanium, and, of course, oil.

Yes, the economy is definitely a wreck. Even worse, according to most experts, our problems are not going away soon. We’re going to be in serious financial trouble for a long time.

So . . . are you ready for some good news?

As you will discover in Game Over, bestselling author and investment advisor Dr. Stephen Leeb shows you how to not only survive in the current economic maelstrom but actually find a way to thrive.

Dr. Leeb first tells you just how bad things are by exposing the basic suppositions of our institutions, and how quickly outdated they’ve become. Warning bells are sounding especially for Americans looking forward to a relaxing retirement and living off their savings, investments, Social Security, and Medicare. The time to sit up and take action is now.

Dr. Leeb provides a clear-cut and well-crafted financial road map to protect every investor in the years to come. Specifically, he reveals which key investments will steadily rise . . . the best ways to hedge surging inflation . . . and which sectors will boom.

Many will lose their savings, watch their investments shrink, and never fulfill their financial dreams. But with Dr. Leeb’s advice, you can make sure yours come true.


This publication is designed to provide competent and reliable information regarding the subject matter covered. However, it is sold with the understanding that the author and publisher are not engaged in rendering legal, financial, or other professional advice. Laws and practices often vary from state to state and if legal or other expert assistance is required, the services of a professional should be sought. The author and publisher specifically disclaim any liability that is incurred from the use or application of the contents of this book.

Copyright © 2009 by Stephen Leeb

All rights reserved. Except as permitted under the U.S. Copyright Act of 1976, no part of this publication may be reproduced, distributed, or transmitted in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

Business Plus

Hachette Book Group

237 Park Avenue

New York, NY 10017

Visit our Web site at

Business Plus is an imprint of Grand Central Publishing.

The Business Plus name and logo are trademarks of Hachette Book Group, Inc.

First eBook Edition: January 2009

ISBN: 978-0-446-55736-8


Oil: Racing to Run-Out

We are headed toward a potentially catastrophic collision between hard reality and a worldview that has long refused to acknowledge it. Even on a best-case basis, this collision will involve a tumultuous, painful, and lengthy period of transition, marked by a decline in living standards and an increasingly out-of-control economy that careens from recession to periods of growth during which inflation reaches ever more stratospheric levels.

With luck, and if we face the situation sooner rather than later, we may emerge at the other end in reasonably decent shape, enjoying a likely simpler but sustainable economy based on renewable energies. Meanwhile, individuals who play their cards right during the coming turbulent years— putting their faith and money in the small handful of investments that will thrive as most others are plummeting in value— could become a new generation of wealthy Americans.

If we blow it, though, it could mean nothing less than the collapse of our civilization. It even could mean total annihilation in the wake of international turmoil and wars over ever-diminishing natural resources.

Yes, Peak Oil Is Real

It all starts with oil, and the first hard fact we need to face is that increasingly we don't have enough of it to meet the voracious demands of global growth. Oil has been essential to our economy for more than a century, and it's the lifeblood of the world's entire transportation network, powering hundreds of millions of cars and trucks as well as ships, tankers, airplanes, and trains. But in this decade, oil production has begun falling behind rising demand, which has caused the steep increases we've seen in oil prices. For many reasons, oil will never again be as plentiful and cheap as it used to be.

Many people on Wall Street and elsewhere still resist the whole notion of Peak Oil, which was first propounded in the 1950s by a geologist named M. King Hubbert. As Hubbert formulated it, oil production in a given field peaks when more than half the oil has been taken out. At that point, he argued, while you still can get more oil out of the field, annual production steadily and permanently declines.

The concept also can be more broadly applied to the world as a whole. Technically, this would lead to defining Peak Oil as the moment when global oil production reaches its maximum level. After that, production may stay flat for a time, or it may begin to fall. Either way, if demand rises, the result will be shortfalls that push oil prices continually higher. However, we prefer to define Peak Oil a bit differently: as the point at which increases in oil supply can no longer satisfy increases in demand. This definition, though slightly more amorphous than the technical definition, is more useful and relevant because it takes into account both the supply and demand of oil.

The usual response of those who reject the relevance of Peak Oil is to argue that technology will rescue us. Either it will let us get more oil more easily out of existing fields or it will help us find enough new fields to develop. But the evidence doesn't support this. In the United States, the most technologically advanced country in the world, production has been declining since the 1970s. If technology really could solve problems of oil shortages, we'd have cracked that nut by now. And we haven't.

Admittedly, you might argue that the real reason we haven't raised production has been limits imposed on drilling. There's no doubt that opening up areas now off-limits, such as the Arctic National Wildlife Refuge (ANWR), would add to production. But the process would be slow and in the end would add relatively little oil to the world. Opening up ANWR, for example, would take five to ten-years to complete and would probably add no more than a million barrels a day to the world's oil production. At best this would satisfy just a small portion of additional demand, even assuming the world is growing fairly slowly. Moreover, given the time frame of five to ten-years, this portion is likely to be considerably less than the drop in overall oil production that would be occurring. Meanwhile, the offshore areas that have become political bones of contention would take even longer to complete, would be very expensive to develop, and would offer only uncertain results. Even on a best-case basis, they, too, would do little to satisfy incremental demand.

Alarmingly, the evidence suggests that no matter how you define Peak Oil, the world today is fast reaching— and may already have reached— it. Even worse, a series of other factors are converging that could result not just in declining oil production but in an absolute halt. If we allow ourselves to reach this sorry stage, we will truly be at Game Over.

Earth's Gas Tank Is Half Empty

According to the best estimates, when our ancestors were just beginning to walk upright, the planet's crust held about 2.2 trillion barrels of oil. We have used up half of it in the past century alone.

Naturally, we went for the good stuff first: the light, sweet oil that was easy to get at and cheap to extract. But most of that is gone. From now on the quality goes down. Increasingly we've been relying on heavy, high-sulfur oil that costs more to refine, as well as on unconventional sources, such as tar sands, that take more money and resources to extract.

We have combed the earth so thoroughly that we are running out of places to drill for oil on land. Most of the undiscovered, close to shore oil already has been factored into the 2.2 trillion-barrel estimate. Now the search has headed out into the deepest oceans, where the costs go up considerably.

Two of the most recent, headline-grabbing oil finds are located in such places. The Jack 2 field in the Gulf of Mexico lies 20,000 feet below the ocean floor, which itself is 7,000 feet below sea level. It would take over five miles of pipe to reach this oil, and a rather expensive operation to pump it out.

Similarly, the Carioca field off the coast of Brazil, while potentially the third largest ever found, is also located under 7,000 feet of water and is more than 22,000 feet below the seabed. Building wells under these conditions presents enormous engineering challenges, and extraction costs will likely range from exorbitant to prohibitive.

And even then, the amount of oil in these two fields equals only what the world consumes every eighteen months.

As William J. Cummings of ExxonMobil put it, "All the easy oil and gas in the world has pretty much been found. Now comes the harder work in finding and producing oil from more challenging environments and work areas."

Scientists Weigh In

In claiming that the world is running out of affordable oil, we are in very good company. Most scientists express similar views (even if most stockbrokers don't).

For example, in the August 2003 issue of New Scientist, the Hydrocarbon Depletion Study Group from Sweden's Uppsala University reported the startling conclusion that actual world oil reserves are as much as 80 percent lower than is commonly thought.

The study, titled Too Little Oil for Global Warming, argues that there's so little oil left that burning all of it wouldn't produce enough carbon dioxide to alter the climate, much less melt polar ice caps. (Don't think this is good news for the environment, however. The study also points out that if we're forced to switch from oil and gas to coal, the resulting emissions would heat the atmosphere and lead to even worse air pollution.)

The Uppsala team aren't mavericks. In fact, they lead an ever-growing chorus of scientists bewailing the rapid disappearance of affordable oil. (By and large, the only scientists expressing an opposite view are those employed by oil industry firms, who may have an incentive to ignore impending shortages.) A typical sharp-tongued comment came from David Goodstein, vice provost of Cal Tech and author of Out of Gas: The End of the Age of Oil (voted one of the most notable books of the year by the New York Times Book Review in 2004). When asked whether huge new fields capable of meeting the world's future need for oil are waiting to be discovered, he replied, "Better to believe in the tooth fairy."

To be fair, we will continue to find new giant oil fields. (By giant we mean fields containing more than 500 million barrels of oil or 3 trillion cubic feet of natural gas.) But the rate of discovery has been dropping since 1965. And while it has picked up a little since the turn of the millennium, the latest projections suggest we will find fewer than half as many giant fields this decade as we did in the 1970s.

Most of the fields we are finding are extensions of existing fields or, as we pointed out earlier, deepwater, remote, or otherwise expensive to develop (Paul Mann, "Tectonic Setting of 79 Giant Oil and Gas Fields Discovered from 2000–2007: Implications for Future Discovery Trends," presentation of American Association of Petroleum Geologists, 2007). Meanwhile, production at older fields is winding down. U.S. oil production has been falling since the 1970s. North Sea oil production, which saved the world's bacon in the 1980s, is also declining, as is oil production throughout the non-OPEC (Organization of Petroleum Exporting Countries) world.

At the same time as supplies are becoming constrained, worldwide oil consumption continues to grow. Since 2002, humanity has been consuming four times as much oil as we've been able to add to reserves. This mismatch between demand and reserves is the major reason that over the past half decade or longer, oil production has started lagging demand. As a result, the excess oil supply, which was above 5 percent in 2002, is now close to zero. And within twenty years, according to most experts, demand will rise by over 50 percent.

We are clearly racing toward run-out. But, dishearteningly, hardly anyone in government or within the oil industry seems willing to raise the alarm in a loud enough voice to hit home.

How Close Are We?

Estimates of when the world will hit Peak Oil vary widely, from those who think that new discoveries and technology will give us to at least 2040— we think they're wildly off— to more pessimistic types who believe it already has happened. We think we very likely are already there, or if not that we'll be there very soon. That's because, for starters, with the possible exception of Canada and its tar sands, there is little chance that any Western country can significantly increase its oil production. And the tar sands, as we'll discuss in chapter 8, have many inherent limitations that make it unlikely that they will be able to take over oil's role in the world.

But what about oil from the Middle East? The International Energy Agency and the U.S. Department of Energy believe the world's demand for oil over the next decade or so will be met through higher oil production from that part of the world, and specifically from Saudi Arabia. The evidence is strong, though, that they are being way too optimistic.

First, if Saudi Arabia really does have spare capacity, it's odd that it hasn't increased oil output over the past several years. In late 2004, Saudi production reached nearly 9.8 million barrels a day. At that time oil was trading at under $60 a barrel. Since then, less than four years later, oil prices have nearly doubled. Yet the Saudis have reduced their daily output by nearly 600,000 barrels.

Such a decline, if deliberate, surely would have outraged oil importers, including the United States and China. Given that the Saudis depend so heavily on the U.S. for their defense, we can assume the U.S. has considerable influence with Saudi leaders. We think that if they could have produced more oil, they would have.

More clues that all is not right in the desert have come from recent statements from Sheikh Al-Naimi, Saudi Arabia's oil minister. In early 2008 he said the Saudis had put on hold any plans to raise oil production past 12.5 million barrels a day. Previously, though, the Saudis had said they would have no trouble raising production levels to 15 million barrels a day or even higher.

Saudi Arabia: Oil Production vs. Number of Rigs

Sources: Bloomberg, Department of Energy

The above chart compares Saudi oil production with the number of oil rigs working in that country. As you can see, even though the number of rigs has risen dramatically in recent years, oil production has stagnated. To us, this disconnect implies that the Saudis have run-out of additional capacity.

Matthew Simmons, energy banker and author of Twilight in the Desert, believes that many OPEC nations have been overstating their oil reserves for over a decade so that, under OPEC's quota rules, they would be allowed to produce more. Based on extensive research, including access to Saudi documents, Simmons argues that the Ghawar oil field, which accounts for about 70 percent of Saudi production, is in trouble and possibly on the verge of a dramatic decline.

Keep in mind that the Saudis aren't known for underestimating their ability to produce oil. Indeed, it's in their interest to overstate their abilities, as it keeps their position in the world secure. And if Saudi production has in fact peaked, there is virtually no chance that global oil production can keep pace with demand, meaning we are already at Peak Oil. Among other things, this means that the price of energy and everything else will accelerate more rapidly.

United States: Oil Production vs. Number of Rigs

Sources: Bloomberg, Department of Energy

Those who claim the Saudis are better positioned than we think don't offer much of a case. An executive at the major Italian oil company Eni, for instance, made the claim in Foreign Affairs that there must be plenty of oil left in Saudi Arabia because wildcatting— drilling experimental wells in areas not known to be productive— had just begun there. But the history of oil production in the United States suggests this argument doesn't hold water: oil wildcatting and a commensurate increase in rigs didn't occur in the U.S. until after 1970, when production had already passed its peak.

Even the most strenuous doubters of anything smacking of Peak Oil, such as money management firm and broker Sanford Bernstein, lend support, despite themselves, to the notion that the Ghawar field could be losing ground. Bernstein recently commissioned an aerial survey of the Ghawar field and, based on the photographs, concluded that Saudi production declines were not "significant." The reality, though, is that any decline is significant. Once a field starts to decline, the rate at which production falls can accelerate sharply at any time. If production at Ghawar, the most important oil field in the world, has begun falling, the clear conclusion is that the Saudis will be unable to meet increased future demand.

Absolute Peaks

Peak Oil certainly isn't a desirable state, but it's nonetheless one we can live with. With Peak Oil, we're talking about a situation where it still makes economic sense to pump oil even though rising demand and lagging production keep pushing oil prices higher. Theoretically, as oil supplies fall behind demand, there is no limit to how high energy prices could reach (though there is a limit to how much the average person can afford to pay for the necessities of life).

But unless we take effective action very soon, rising oil prices ultimately will be superseded by something much worse: Absolute Peak Oil. Once we hit Absolute Peak Oil, it will make no sense at all to keep drilling for oil, because we'd be forced to expend more energy than we could obtain from our efforts. At a certain point, to get a barrel out of the ground, we'd have to invest more than a barrel's worth of energy to pump, refine, and truck it to the local gas station. Oil will exist, but it will be tantalizingly out of reach for all practical purposes.

How much time might we have before hitting Absolute Peak Oil? If we don't develop alternative energies fairly rapidly— managing to avert the worst-case scenarios brought on by the vicious circles of multiple resource shortages that we describe in the next chapter— it could be fairly soon. One point of reference: if we keep using up oil at the current rate of around 31 billion barrels a year, by 2040 there will be no oil left in the ground at all. That's the outer limit of time we might have left.

Absolute Peak Oil would be a dire situation. It isn't going to happen overnight, though, and it will be preceded by some striking changes in how the world goes about its business. Among these changes, we expect that at some point prior to reaching Absolute Peak Oil, whatever oil is still available no longer will go to just anyone willing to pay for it. It probably wouldn't be sold, for instance, to owners of private automobiles and trucks. Instead, we envision the possibility of governments getting together to reserve the oil for the most essential uses. Unthinkable? Don't bet against it.

That's why it's critical that between now and then we put into place new sources of energy for our cars, trucks, factories, homes, and everything else. If we don't, our economy, and indeed our civilization, will grind to a halt. It will be Game Over, and not just for the American dream, but for the dreams of the entire world.

Unfortunately, though, as we'll show, the very same things that make it essential that we develop alternative energy on a huge scale are also making this feat increasingly difficult to accomplish. We have at best a fairly small window of opportunity— the time between now and Absolute Peak Oil and Absolute Peak Commodities. If we don't take advantage of that sliver of time, it will be too late. Why is this window of time so critical? Because it will be the last chance we have to extract more resources from the earth than those we use up during the process of extraction.

Meanwhile, as prices of energy and other commodities continue to rise, we face a likely jagged trajectory of economic extremes that will be very hard— though not impossible— for individuals to come through intact. As we said earlier, expect stretches of growth where inflation reaches greater and greater heights interrupted by periods of recession. Not a great outlook. But if we don't tackle resource shortages soon and in a serious concerted way, it will only get worse.


Vicious Circles: Oil, Metals,
and Minerals

Oil isn't the only critical commodity that is becoming both scarcer and more expensive. The same applies to a whole range of metals and minerals that are essential to our civilization and the technologies on which it depends. The table on page 26 presents sixteen of them, indicating how many years' worth of supplies is likely left for each.

At present rates of consumption, we will run-out of antimony, indium, lead, silver, tantalum, tin, and uranium in the next four to twenty years. Within forty years we'll be out of chromium, copper, and zinc. Nickel and platinum will soon follow. For the sixteen metals and minerals as a whole, on average we have roughly twenty-five years of supply left. And that doesn't take into account the likely increases in consumption that will occur over that time.

As with oil, the run-out won't be total. The world will never completely be out of any particular mineral. Metals (other than alloys) are elements that cannot be destroyed: only chemically bonded in different ways. Even if all underground deposits were exhausted, there still would be traces of copper, iron, and even platinum in the dust that covers every street, buried in landfills, or dissolved in the oceans. However, no operation could possibly produce enough metals from such sources to supply our expanding world. It would simply take too much energy to be worthwhile.

Industrial Commodities: Past, Present, Future

%U.S. Imported
Commodity 1999 2006 % Production or Reserves in Developing Countries Years of Reserves if World Consumes at Half the U.S. Rate
Aluminum 30 44 82.0 n/a
Antimony 85 100 97.5 13
Chromium 75 75 99.9 40
Copper 27 50 86.0 38
Gallium 100 99 90.0 n/a
Germanium 45 80 95.0 n/a
Indium 100 100 57.0 4
Lead 20 50 52.0 8
Nickel 60 60 70.0 57
Platinum 92 95 97.5 42
Rhodium 92 95 97.5 n/a
Silver 14 65 80.0 9
Tantalum 100 100 45.0 20
Tin 85 80 96.0 17
Uranium 76 84 75.0 19
Zinc 30 65 56.0 34
Average 64.4 77.6 79.8 25.1
Sources: The Complete Investor (Stephen Leeb, editor), U.S. Geological Survey, New Scientist

Before their reserves run low, the countries with the highest endowments of critical minerals are due for their day in the sun. Until their stores get depleted, they will command any price the market will bear. This, in conjunction with soaring energy prices, will spearhead the super high inflation that we believe lies ahead and that we discuss in detail in part 3.

But try to talk about the steep shortfalls in metals and minerals that lie just over the horizon and, as with energy, you run head on into complacency. The usual response from Wall Streeters and others, if these facts are brought up, is to blithely say that as prices rise, we'll simply increase exploration and find more of these resources. And certainly this is true— up to a point. Rising commodity prices will encourage the development of additional reserves, making it profitable to undertake mining operations in deposits that at lower prices weren't economically attractive.

There's a catch, though, and it's a huge one. These metals and minerals are mutually interdependent with one another and, even more significantly, with energy. If it were just a matter of one or two commodities becoming scarce, the situation wouldn't be so dire. The problem is that the intricate interdependencies that exist will create a vicious circle that will send the prices of all commodities simultaneously to the moon, making it immensely more difficult and perhaps impossible to develop enough new reserves to sustain civilization at levels we assume to be our birthright.

An Island Fable

To understand how this vicious circle will unfold, let's use a simple illustration. Imagine a small island blessed with three primary resources: freshwater from annual rainfall, abundant energy from tar sand deposits, and mines replete with metals and minerals. With these resources, the inhabitants have no problem growing enough food and providing themselves with shelter and other comforts.

Eventually, though, the population grows to where all the freshwater is being used for drinking and irrigation, with nothing left over. Soon, the islanders realize, they might not have enough for their needs. But they think they have the answer: using the energy from tar sands, they can extract metals from their mines and build desalination plants to convert some seawater into freshwater.

It's a little tricky, though, because producing each resource— metals, tar sands, and water— depends on each of the other two. Water and metals are needed to extract oil from tar sands; water and oil are needed to obtain and refine the metals; and energy and metals are needed to build and run the desalination plants. But the islanders calculate that they have enough resources to build the new plant. Once it is operational, they can increase their metal and oil production and still end up with enough additional water to meet the needs of their growing population. They build the desalination plant and for a while all goes well.

But nothing lasts forever. Over time, the tar sands become somewhat depleted. The islanders are forced to move to the lower-grade deposits, which require significantly greater inputs of water and metals to yield oil. Producing the extra steel needed for that energy dredging effort requires, in turn, more energy and water. With more and more water now needed to produce both oil and steel, the island needs bigger desalinators— but these, in turn, will take more energy and minerals.

In yet another blow, the best mines start to become exhausted, meaning the islanders have to devote extra oil and metals to explore for new mineral deposits and build new mines. These new mines, though, are lower-grade— not surprising, since naturally the islanders mined the best deposits first— meaning they require more energy to work. Meanwhile, the population continues to grow, further increasing the demand for water and other resources.

At a certain point, the islanders realize they're stuck in a vicious circle. Trying to get enough of any one resource overtaxes supplies of the other two. The more they try, the tighter the noose gets. The only way out would be if they had a limitless supply of energy, enabling them to obtain enough minerals— through exploration, recycling, even extracting them from seawater— and to desalinate enough water. But the tar sands aren't limitless and they are fast running low.

The final upshot: eventually the resources needed to produce metal, water, or oil exceed the value of the resources produced— in other words, the islanders, to get anything out, need to put more than that amount in, an obviously losing proposition. And at that point, it's over. Production of all three resources hits a permanent peak, and the islanders suffer serious shortages of everything.

Or to put it in our terminology, they have moved from Peak Energy and Peak Commodities to that grim state of Absolute Peak Energy and Absolute Peak Commodities: Game Over.

Warning Signs


On Sale
Jan 28, 2009
Page Count
256 pages
Business Plus

Stephen Leeb

About the Author

Regarded as one of the nation’s experts on global economic trends, Stephen Leeb has written several bestselling books, including The Oil Factor, The Coming Economic Collapse, and Game Over.

Learn more about this author