Reasons for our Energy Predicament – An Overview

TL/DR The economy may not support energy extraction. We may have large oil reserves, but they will mostly stay in the ground because our economies can’t afford the extraction.

Our Finite World

Quiz: What will cause world oil supply to fall?
  1. Too little oil in the ground
  2. Oil prices are too low for oil producers
  3. Oil prices are too high for oil consumers leading to recession, debt defaults, and ultimately a cut back in credit availability and very low oil prices
  4. Oil exporters are subject to civil unrest and overthrow of governments, due to low prices and/or depleting reserves
  5. Lack of money (and physical resources that might be purchased with this money) to pull oil out of the ground.
  6. Pollution related issues–too much smog in China; too many problems with fracking; too many problems with CO2.
  7. The financial current system fails, and can only be replaced by one that allows much less debt. Oil prices remain too low under such a system. 

In my view, any answer other that the first one is likely to be at least partially right. Ultimately, the…

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6 Responses to Reasons for our Energy Predicament – An Overview

  1. mindweapon says:

    From above article.

    The Two Way Escalator Problem

    As I see it, the economy as it is currently constructed only gives us two options: up and down. The markers of the “up escalator” are

    Cheap energy
    Growing energy supply
    GDP growth
    Wage growth
    Debt growth
    Growing government programs
    The markers of the “down escalator” are

    Expensive to produce energy supply
    Energy supply grows slowly
    GDP Growth lags or declines
    Wages lag
    Outstanding debt tends to shrink
    Increasing inability to fund government programs
    The two deal-killers with respect to these two escalators are

    Moving from debt supply growth to debt supply shrinkage. This is like moving from Keynesian economics to the opposite. Or from getting a credit card with a large available balance, to having to pay back old credit card debt without adding new debt.
    Increasing inability to fund government programs
    The above two reasons are why I expect financial and governmental problems to lead to the end of our current system. Diminishing returns is already leading to higher oil prices, and thus moving us from the up escalator to the down escalator.

    I am doubtful we can reestablish very widespread use of long-term debt after a collapse because by that time, the economy will clearly be shrinking. A person often hears people talk about getting rid of the fractional reserve banking system because it requires growth to maintain, but in fact, having such a system has been very helpful in enabling extraction of fossil fuels and allowing the economy to use metals and concrete in quantity. The availability of bonds for financing has been helpful as well.

    One essential part of today’s economy is very long supply lines. These allow very complex products to be made, using supplies from all over the world. What we found in the 2008 credit crisis is that many businesses (both large and small) in these supply chains were hit hard by lack of credit availability. I see this issue as being very difficult to solve. If it cannot be solved, we will be faced with making goods locally using smaller companies and very much shorter supply lines. It would be a different system than we have today, and would likely support a smaller world population.

    A lot of “peak oilers” would like to think that somehow it is possible to “get off at the mezzanine,” and have a viable economy similar to today’s with a small amount of expensive renewables, plus a continuing supply of fossil fuels. I have a hard time seeing this actually happen. One problem is the likelihood that fossil fuel supply will decline quickly because of low price. Another potential problem is a major cutback in credit availability making transactions difficult; a third issue is governmental problems, as taxes fall short of what is needed to fund programs.

    We could in theory get back on the up escalator if we find alternative fuels that meet all of the required specifications–very cheap; available in huge quantity, expanding year by year; can be transformed to a liquid fuel similar to oil; and non-polluting. This seems unlikely right now.

    Otherwise, what we do have is all the “stuff” we have today, for as long as it lasts. The economy won’t stop on a dime. We also have the ability to recycle things that we can no longer use, that might be more helpful in another place. Solar panels that people currently own will continue to function for a while (especially off-grid), and the grid will probably continue for a while. We know that many people lived in local economies, before we had fossil fuels, and it is likely to be possible again. We certainly live in interesting times.

    • Rita Rabbit says:

      This will be good in the long run. The gov didnt like our “parochial” communities and having cars and ex
      tensive highways did much to break up families and communities. We’ll see a reversal of sorts if your theory plays out.

  2. eyeslevel says:

    “What will cause world oil supply to fall?”
    The supply curve shifting to the left as the quality of resources declines.

  3. banned56 says:

    “The gov didnt like our “parochial” communities and having cars and ex
    tensive highways did much to break up families and communities. We’ll see a reversal of sorts if your theory plays out.”

    I often despair for our race. And then I get long-term optimistic.
    Losing Cheap Oil is gonna leave a mark.
    But, there are solutions and work-arounds to peak oil. However, none of them are easy like sticking a pipe in the ground and come a-bubblin’ crude. All the solutions (ocean-energy-derived ammonia as a liquid fuel and LFTR-style thorium-burning nuclear power plants) require Smart White Guys who Work Hard to implement them — and lots of ’em. And, by necessity, they require there be few parasites, so that all hands are productive hands.

    Peak Oil fed our parasites. That we are implementing none of the Peak Oil workarounds before the oil gets too energy-expensive is lucky for us. Because there’s gonna be a Die Off. But the die-off will be,yes, some of us, probably (war) but, mostly, the parasites.

    Then, parasite-free and healthy again, we Whites can get back to our Manifest Destiny of colonizing the solar system.

    • mindweapon says:

      Great way to put it, banned56. Let’s hope for a mega-die-off of the parasites, even if we have to suffer through the sickness of energy starvation and infrastructure collapse to do so.

    • Mr. Rational says:

      The USA doesn’t have a monopoly on Smart White Guys.  Russia, Korea, and China are all working on the energy problem.  China’s count of operational nuclear power plants went from 17 to 21 in just a few months.  Not only are they generating power, they’re desalinating water.  This cuts their reliance on scarce and polluted rivers.

      America is in trouble because the nation has lost control of its state.  Executives of international corporations and globe-trotting billionaires control energy to wring out the maximum from the economy in the short term, not to grow it or benefit the nation.  After nuclear was beaten down in the 1970’s with the establishment of the NRC, we now have a battle between coal (taking a beating in the news with ash-dump spills) and fracced natural gas with its greenwash of wind turbines.

      Meanwhile, France hums merrily along with its 78% nuclear grid and some of the cheapest electricity in Europe.  That’s where the USA should have been, and would have been if Americans had been in charge.

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