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Eyes Wide Shut - "We Are In A Bad Spot"
Submitted by Chris Martenson of Peak Prosperity,
After traveling some, speaking with lots of people, reading, and digesting, I cannot escape the conclusion that things remain hopelessly off track. Whatever form of 'recovery' is being sought here simply will not arrive.
The core of my views is shaped by the idea that the very thing being sought, more economic growth (and exponential growth, at that), is exactly the root of the problem. I suppose I would take a similarly dim view of an alcoholic trying to drink their way back to health as I do the increasingly interventionist central bank and associated political policies the world over.
Go on then, drink more, but I think we all know what the result will be.
The most pressing concept at the center of it all is the idea of net energy, or the energy returned on energy invested. As I explained in the Crash Course, the price of energy is not really the most pressing that we need to keep track of. Instead, what we care about is the net, or surplus, energy that is returned from our energy exploration and production efforts for society to do with as it wishes.
Figure 1: This hypothetical chart reveals the energy returned (green area) on energy invested (red part) and postulates what trying to live in a world of 3:1 energy returns would look like visually. Where petroleum finds of just a few decades ago where offering 95% or greater returns on energy invested, a future of 3:1 oil offers just a 66% return.
The above chart reveals the world towards which we are rapidly moving with new petroleum finds being deeper, tighter, smaller, and generally more difficult to get to and extract, thereby offering lower net energy returns than in the past.
If there's less 'green area' in which to organize ourselves, then we will simply have to do fewer things. However, the idea that we are going to get increasing amounts of exponentially-growing economy in conjunction with falling net energy is simply nuts. It is insane, or at least developmentally immature.
Predictions for a World of Declining Net Energy
The world around me makes a lot more sense when I think about it in terms of net energy and where we are in that story. Everywhere I go, I simply see oil, oil, and more oil, expressed in jets in the air, cars and trucks on the road, abundant and varied food types at every time of the year, and stores crammed with consumer goods from hither and yon. We truly live in the age of abundance.
Yet that abundance is heavily subsidized by petroleum as well as other fossil fuels.
Where the prior 150 years were defined by ever-increasing amounts of both gross and net energy, a remarkable experience unlikely to ever again be replicated, the next 150 will be defined by its exact opposite.
The predictions for living in such a world are impossible to make in terms of timing and magnitude, but the trends and direction can be pinned down.
The big picture items are these:
- Living standards are going to fall. Ever-rising gross and net amounts of energy provide the essential building blocks for rising living standards, both directly through the goods and services brought to our doorsteps, such as food and warmth and mobility, and indirectly by allowing lots and lots of people to deploy their talents to things other than securing the basics. In fact, this process has already begun; it will follow the 'outside in' model where the weaker elements of society and the weaker nation states will absorb the first effects of 'less than there used to be.'
- Inflation will come. Because of the tendency of humans to try and print their way out of trouble, and because the system is now so saturated with debt that 'allowing' it to crumble to meet the realities of a world of less would risk a catastrophic systemic collapse of institutions and ruling parties, there's not much doubt that sooner or later all this will end in a very scary round of inflation. Some currencies will not survive at all, and the areas served by them will experience hyperinflation first and complete monetary destruction second.
- Stocks and bonds will fail to generate real returns. Real returns, meaning positive growth in the value of stocks and bonds after inflation is subtracted, are an impossibility in a world where the economy is not growing in real terms. You have to have real growth in the economy if you want real growth in stocks and bonds (in aggregate, that is). Stripping away all of the gobbledy-gook, real GDP growth is simply not possible without real increases in real things – and those depend, in very large measure, on how much net energy there is to go around. With declining net energy, there will fewer things to sell and do.
- Retirements will be postponed, if they happen at all. It is only the very recent generations that have been afforded the reality of this thing called 'retirement,' which is the idea that you can live off of one's prior savings and investments for a decade or three, consuming and not producing the whole time. Not so coincidentally (to me, at any rate), retirement and the exploitation of fossil fuels came along at roughly the same time. That is, with enough 'green area,' we humans can do anything at all that we want with all that surplus energy. We can go to the moon, we can take long holidays to distant places, we can host Olympics, we can retire or do any of a billion other things. For many, especially those at the margins of society, retirement will simply not be an option. Retirement as a concept, and these individuals specifically, will be casualties of circumstances.
- We're just going to do fewer things and produce less stuff. What exactly will go away as the green area gets pinched downwards is impossible to predict, as much will depend on decisions that have not yet been made. Perhaps we'll do something completely surprising with our remaining energy, channel the spirits of Easter Island, and build some huge yet frivolous monuments to ourselves. Perhaps we'll squander the last bits of good energy on bad wars that end up destroying infrastructure that could only be built when there was enough surplus to go around. Or maybe we'll get it right and choose a future that we can strive for and use our remaining resources wisely to achieve those dreams. While the exact features are impossible to predict, we can say that the map of our territory will shrink. We won't be able to do everything, or even very many things as compared to before.
- More resources will be dedicated to and consumed by the energy sector. One easy observation to make is that if net energy is declining, then we are going to be spending more of our energy wealth on the process of obtaining more energy. This is one great field to be in, whether in the production side or the efficiency side. If it takes more and more energy to get energy, what does that mean? It means more drilling, pipelines, processing facilities, and all of the thousands of job types and millions of parts and components that are needed to get the energy out of the ground and to market. As prices inevitably rise, the desire (if not the necessity) of using energy more efficiently will skyrocket. Everything in the entire "built" environment, from commercial and residential buildings, to factories, to how we move ourselves around, and the water we drink will be targets for improvements and enhancements. If you are thinking of a career to move into, the energy sector is a great place to start.
Eyes Wide Shut
I think we're in a bad spot. I mean the globe here, but the developed economies in particular. I am losing hope that we will navigate towards anything other than a hard landing at some point because even with copious amounts of data accumulating suggesting that the old ways are not working, I cannot detect even the slightest hint of original thinking or new thoughts coming out of the marbled halls of power.
Business-as-usual and more-of-the-same seem to be the only operative ideas right now. And that's not really unexpected; systems always try to preserve themselves long after it should be obvious that a new tack is in order. So there's nothing really surprising here about where things seem to be headed.
But what is a bit startling to me is the number of individuals that have not yet caught onto the idea that things have permanently and irrevocably changed.
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"The increase in horse manure alone would doom a New York at some point."
Wait. You're saying NYC isn't buried under manure?
It depends. Castles with walls and moats should be a great business going forward.
Would buried shipping containers and tunnels be easier?
"Dr. Morlock's Mole-Holes"
Funny because I choose the numb pain that is the world we live in: insane inbred thinking of central banks and the unending hunger for greed and power shared by the psychopaths calling themselves politicians.
Are you saying this ia chicken and egg thing? How about you show me a world starting to wake up before I give up my booze and I'll show you a recovering numbist.
Who wants to innovate by creating new technologies when what we've learned is that these very same technologies eventually steal our jobs, our freedoms, and our souls.
I get your point, but it's really the monetary system that is the problem. Innovators and inventors are like artists... they create things more for beauty, function, and accomplishment than money. The stealing of jobs, freedoms, and souls is done by men in suits.
Saw the grape-vine-pruning robot yesterday. Can prune 600 vines a day. Soon the shit jobs that 'nobody wants' - NOBODY will be able to get. That's awesome!
And when every person that was picking fruits and veggies becomes capable of repairing circuit boards and back-planes while splicing new fiber connectors onto the meshed grid of Global-Con-Veggie-Harvestors insuring 99.89% water-holding capacity of tomato-like foods and Pre-Ketch(up)-Potatos (tm), and are able to make 120% of minimum-wage. They'll be happy, and we'll be happy...
Until we turn 30 of course, and have to show up to Carrousel.
Any time I make similar arguments at ZH I get the "crypto-energy will save us" response or the "Malthus was obviously wrong" response or the techno-utopian "we will innovate our way to a solution" response or the "you green-tards are behind the curve again" response.
Okay. Fine. I get it.
You don't want to hear about it. That the party was a fluke, nature will never again provide us with this bounty, and that we're really not that special in the end except for being lucky enough to have been born at a time when humans were still actively punching holes in the ground and eating what came out.
So, never mind. Think whatever you like. Because right now, honestly, it no longer matters what any of us thinks anymore.
But it feels bad and wrong and I don't want to go forward from this place because we have left the edge of the map. Beyond here there be monsters.
The disease IS the cure, blu. When energy from oil is more expensive than energy from human effort, unemployment and obesity will both be solved.
Maybe even permanently.
Keep Obama in president... U know.. He gave us a phone. Errr buddy on social securty, disability, err minority got obama phone.
Keep Obama in president...
Nah, that can't help.
Electing Obama over Romney will have about as much impact on everyone's life as whether that guy wins that award for that movie he was in (and it was totally different from his last film and)...uh...
Half the reason those President guys get that job is because they won't change too much. C'mon and be serious a minute.
It's all just a question of how much you think he's changed stuff that determines how "liberal" or "conservative" *you* are.
LENR-CANR, Bussard's Polywell, Thorium, Anhydrous Ammonia... I could go on and on. Energy will get worked out. People find ways to get what they need. If there even is a petroleum squeeze (that isn't artificially ginned-up).
Not to be cynical... but please let us know when those technologies start producing billions of tons of plastics, rubber, chemicals, and other life-sustaining, civilization-sustaining products like petroleum does.
Having lots of energy allows you to use your remaining petroleum for other purposes. Or you can synthesize from other products.
I agree on your first point only, but you can't get here from there from within the petro-monetary system. Also, somehow replicating or circumventing the petroleum-based products which make up the very fabric of modern civilization is beyond even the most enlightened naked apes (persons).
Re Where petroleum finds of just a few decades ago where offering 95% or greater returns on energy invested, a future of 3:1 oil offers just a 66% return.
Hate to be pedantic Chris, but I think your math is a bit off kilter.
If returns on energy invested were 95% or greater (your best case) then, since a 100% return is break-even, 95% represents less than break-even - and energy would NEVER be extracted!!!
Using your 2nd example to clarify : a 3:1 return in fact offers a return of 200% on the initial investment and NOT 66% - which again is less than you invested. (you put in $100 & get $300 back which is a net gain of $200 which is 200% of your initial $100)
Reverse-engineering the bad math in your first example, I can only assume you meant to say that each $5 put in you got back $95 - which would tranlate into a gain of 18 times the initial investment (or 1,800%)
Hope this clarifies things for you - and leaves fewer of your readers scratching their heads.
Martenson might have sold a million horror books for $15 each and is laughing all the way to the bank prior to buying his 90ft yacht.
I wonder if the oil oligarchs made sure to lower their profit margin in relationship to the added cost of extraction?
What's up with these fuckin ING Direct ads taking over your whole fuckin screen?!?!?! They suck!!!!! Fix it ZH or I'm gone!!!!!
Scared now aren't ya?
That's odd. All the ads on my screen pertain to "Hot Local Ladyboy's in your area." There are pictures of Asian boys with red-haired bowl cuts underneath. Hmmm...
I think when that happens you did maybe a bit too much you know just a bit but it's cool just chill right...
His first 5 predictions are correct, but (Net) Energy has nothing to do with it.
Sorry, but have to LMAO every time I see someone refer to the "free market." Free? Never was, never will be. What a fool believes....
Many "off-topic" comments here. So, the author's thesis is that without energy and work one cannot produce order (reduce entropy). Very true and the basis of our standard of living and of life itself. However, thinking only in terms of energy released from chemical bonds (i.e. fossil fuel) is very naive. All fossil fuel is derived from solar irradiation which in turn is produced by conversion of mass into energy, specifically, E = mc^2 in the sun. The amount of energy released by fission or fusion is enormous compared to a chemical bond since, the conversion factor, c=3 x 10^8 m/sec is immense (hence humans natural fear of atomic vs chemical explosions).
Our problem is wasting valuable energy on insignificiant sources of energy such light solar voltaics, electic vehicles, wind etc none of which can be economically stored nor provide baseline (i.e. scalable) grid power. Not to mention the huge input energies required to make panels or windmills (which is why they require huge government subsidies).
On the other hand, if you have a enough fission power plants you can easily produce fossil fuels for transportation and the chemical industry with the excess energy (i.e. off peak demand) via electrochemical synthesis using free small molecules like H2O, CO2, or N2. This is how nature makes fossil fuels after all using photosynthesis.
Unfortunately, we should have been doing this (building advanced pebble bed and thorium breeder reactors) starting in the 70s. The author is correct that perhaps it is too late given population and resource pressures. However, it would be an example of a good investment for the future unlike say, tesla or solindra.
As mtomato2 commented above:
Drinking your way out of alcoholism ends in death, Every. Single. Time.
To me, under that metaphor, your solution sounds like switching from beer and wine, to an almost 100% alcohol drink, which can only be made with benzene, or some other solvent, instead of water, to concentrate the alcohol that much. In orther words, continue to basically be an alcoholic, but switch to drinking the most powerful and poisonous alcohol possible.
While I agree with this article above overall, I too hold out hope for some alternative energy sources to postpone or prolong the collapse, due to overshooting. However, my view is that our system is already an almost fatally addicted to its "alcoholic binge," and therefore, I expect genocidal world wars, and democidal martial law to become the ACTUAL "solutions" to these problems.
Your recommendation seems to me to suggest that that alcoholic system should get even more drunk on more concentrated and toxic stuff, in order to guarantee even more completely the suicidal and almost omnicidal runaway of the most probable resonses to the frustration that that "alcoholic system" will feel in the future.
Even IF we had miraculous new energy source, (which I do NOT dismiss) it would still take TIME to implement, and STILL, the exponential growth problem would wipe out whatever benefits were possible.
The bottom line is that we MUST have a better industrial and human ecology, integrated with the natural ecology, so that the death controls work to limit those systems in sustainable ways.
The MOST important thing that atomic energy has done is pump up the potential murder system by billions and trillions of times! Our global electronic fiat money fraud is now backed up by atomic bombs.
The ONLY real solutions are different murder systems, through radical changes in the paradigm of militarism. WE ARE GOING TO GET THOSE ALREADY, SINCE WE HAVE ALREADY AN ABUNDANCE OF WEAPONS OF MASS DESTRUCTION, CONTROLLED BY SERIOUSLY ADDICTED, SELF-DESTRUCTIVE "ALCOHOLICS."
Any sane use of atomic energy MUST be part of a saner design science death control system. Any saner use of atomic energy is not possible outside of a radically different murder system, to sustain a radically different money system, which would make a balanced human and industrial ecology, integrated within the natural ecology, be POSSIBLE.
JUST MORE ATOMIC ENERGY IS GARANTEED TO JUST BE MORE OF THE SAME, MAKING EVERYTHING MUCH WORSE!
There is no overall sane debate of using atomic energy that does not include the primary use, which is to kill people and destroy things. Doing that better is the only genuine solution, and doing that requires profound paradigm shifts in the fundmentals of militarism, and the purposes and methods of death controls.
I like nukes, but they have to be well-maintained and are expensive to operate.
Transitioning to nuclear power would also mean the demand for "fuel" changes from oil to uranium (or thorium or whatever), which may be fine, but may also just create a different shortage.
Anyone ever seen rigorous documentation of exactly how much fuel would be required to replace 100% of our current electrical generation with nukes? I haven't.
America's biggest product is entitlements and fake work government menyons.
you know when a congressman has been reading a book because all the pages are bent over