My Old Blog

Jason mentioned this article the other day and I finally got around to reading it.

For those without the time to take a look, since it is sort of long, I’ll give you quick summary: 1) Fossil fuels are a finite resource. 2) We will hit a world wide production peak in the next 5 years. 3) Without cheap energy to fuel “progress”….we are fucked.

I have actually read a good bit about the oil production peak, and since I think like a pop economist (which means I pretend to be savvy buy really have no underlying theory on which to base my opinions)…….I really do see this as a crisis the likes of which modern man has never seen.

I am not much for doom and gloom, as we are all still here, despite decades of warnings about acid rain, nuclear holocaust, the extinction of the whales, and dozens of other “the sky is falling” scenarios.

This is one is pretty plausible though…..and I’ll explain why.

1) Fossil fuels are a finite resource: Everyone knows this is true in theory. Oil lies beneath the earth and is created over a long period of time from biomass under certain conditions. If you extract it faster than it is being created…..you eventually you run out. We are attempting to extract in a few hundred years what it has taken the Earth 4 billion years to manufacture.

That’s great, you say….but people are smart and will find new creative ways of extracting and finding oil and we will be good for many, many years to come, right? No. Why?

Because we don’t need to run out for there to be a real crisis.

2) We will hit a world wide production peak in the next 5 years.

What does “production peak” mean? Well…..it means we’ve extracted as much oil in a year worldwide as we are able to. The next year, no matter how hard we work, we will find and extract less oil. 50% of the oil that the Earth contains has been used up and we are on the downward slope to 0%.

What does “production peak” mean to us?

3) Without cheap energy to fuel “progress”….we are fucked.

Everything you do each day to participate in modern life is predicated on the assumption of cheap energy.

You drive a car. That requires gas. You flip a light switch. That requires electricity, which is overwhelmingly generated through burning fossil fuels.

You want to eat? That doesn’t require fossil fuels, but the truck/plane/boat that brought the food to you does. Plumbing…uses electricity. You have furniture? It was manufactured, shipped, and processed using fossil fules.

Modern cities? They require not just energy….but cheap energy as their whole premise would be rendered moot without cars to sit in traffic and tool around town. Retreat to the suburbs? Urban sprawl becomes impossible without cars.

Don’t think you can retreat to your house and sit on the Internet though. How will you buy your food, your computer? They will have to be transported to you from the foreign countries where they are all now made. Distance adds money in transportation costs. The absense of cheap fossil fuels will add to the cost until, potentially, everything not made locally becomes cost prohibitive.

If we go back to most goods being manufactured and grown locally we have essentially regressed to life before the industrial revolution.

Is it all that bad? We’re not running out, we’re just hitting the production peak.

Well…..as we hit the production peak the price of energy will rise as it becomes less available. This price increase gets transferred to the cost of all goods that require energy to produce….which is basically everything.

So as prices rise for even the basic goods people have less money to spend and save in general. This creates a downward spiral of productivity.

But we replace oil? To an extent yes. But what we replace it with will be more costly and require more effort than oil, which will be a drag on production. Oil, despite what oil companies tell you, is relatively easy to get to compare to what you can sell it for. A third of the most profitable companies on the planet are oil companies.

What about wind? Wind energy currently supplies less than 1% of our energy needs, and is not a viable alternative to oil. We’d need so many turbines that there would be no place left for urban sprawl.

Renewable sources? Like biomass? Again, This is like wind…simply not scalable enough. The entire US would have to be turned into a corn field for ethanol. Besides….it takes effort to grow and convert biomass to energy. Fossil fuels have already done this for us. Biomass will never be as easy as fossil fuel. And what about the effort/people to grow the biomass? That is time people previously spent in more productive pursuits.

Hydrogen? This is the funniest to me. There really isn’t any free hydrogen on Earth. It is bound up in other molecules. So we have to make it. How do we make hydrogen? We transfer the energy extracted from burning fossil fuels to loose hydrogen from its current chemical relationship. Hydrogen requires fossil fuels to make.

Nuclear? Actually, this one is probably our best bet. Uranium though is also a finite resource and the technology for a fusion reactor is still far off.

Think about it another way if you like. The world is growing economically. China just passed Japan as the world’s second largest consumer of oil (we are the first). What would happen if there were less oil? Easy…there would be less growth, because all products made require fossil fuels in some form. No matter how you look at it there would a downturn in production if energy prices increase signficantly.

Not a recession, from which we recover, or a depression, which conotates that we are at a low point and will return to previous levels…..a permanent reduction in our ability to produce because one extremely signficant input, energy, has permanently become more difficult to obtain.

But still….we’ll figure it out…find new oil…..use different sources to replace what we’re losing. Life will go on as before? Wrong.

Here’s an analogy: Imagine we are a small nation that finds lots of bags of gold lying around everywhere….very fortunate. We spend the gold and become important. The standard of living in our country is high. We are not lazy though. We spend the gold in productive pursuits and are a great nation. Eventually though the gold runs out.

We look for some more. We find it but even then there is less. We still have our productive pursuits, as we were not sitting idle, but we always financed our productive pursuits with the gold. The gold is gone, and we are finding new ways to finance our productive pursuits, but they are hard to come by so we are not as productive as we once were. It requires extra work without the gold.

Our standard of living falls slightly as we produce less because effort is diverted from our normal productive activities by finding replacements for the gold that we used to take for granted.

Once our standard of living starts to fall, it continues as producing less means there are less earnings, which means we cannot buy, which means there is no demand for our production, which means less jobs, which means less earnings, which creates a circle of downward productivity. It just isn’t as easy as it once was when there were bags of gold lying around everywhere.

We are currently taking all the “easy” energy so to speak. It is already made for us. The future of energy will be harder than taking pre-made bags of gold out of the earth.

Not to depress you….the flipside of the energy predicament is also true. If we found a cheap, limitless, renewable energy source…..we would see a boom the likes of which man has never seen…..which is really what we’ve been seeing for the last 100 years.

This entry was posted on Tuesday, April 18th, 2006 at 3:48 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.