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Diminishing Returns, Energy Return on Energy Invested, and Collapse

What do diminishing returns, energy return on energy invested (EROI or EROEI), and collapse have to do with each other? Let me start by explaining the connection between Diminishing Returns and Collapse.

Diminishing Returns and Collapse

We know that historically, many economies that have collapsed were ones that have hit “diminishing returns” with respect to human labor–that is, new workers added less production than existing workers were producing (on average). For example, in an agricultural economy, available land might already have as many farmers as the land can optimally use. Adding more farmers might add a little more production–perhaps the new workers would keep weeds down a bit better. But the amount of additional food the new workers would produce would be less than what earlier workers were producing, on average. If new workers were paid on the basis of their additional food production, they would find that their wages dropped relative to those of the original farmers.

Lack of good paying jobs for everyone leads to a need for workarounds of various kinds. For example, swamp land might be drained to add more farmland, or irrigation ditches might be added to increase the amount produced per acre. Or the government might hire a larger army might to conquer more territory. Joseph Tainter (1990) talks about this need for workarounds as a need for greater “complexity.” In many cases, greater complexity translates to a need for more government services to handle the problems at hand.

Turchin and Nefedof (2009) in Secular Cycles took Tainter’s analysis a step further,  analyzing financial data relating to historical collapses of eight agricultural societies in operation between the years 30 B.C. E. and 1922 C. E.. Figure 1 shows my summary of the pattern they describe.

Figure 1. Shape of typical Secular Cycle, based on work of Peter Turkin and Sergey Nefedov.

Figure 1. Shape of typical Secular Cycle, based on work of Peter Turkin and Sergey Nefedov.

Typically, a civilization developed a new resource which increased food availability, such as clearing a large plot of land of trees so that crops could be planted, or irrigating an  existing plot of land. The economy tended to expand for well over 100 years, as the population grew in size to match the potential output of the new resource. Wages were relatively high.

Eventually, the civilization hit a period of stagflation, typically lasting 50 or 60 years, as the population hit the carrying capacity of the land, and as additional workers did not add proportionately more output. When this happened, the wages of common workers tended to stagnate or decrease, resulting in increased wage disparity. The price of food tended to spike. To counter these problems, the amount of government services rose, as did the amount of debt.

Ultimately, what brought the civilizations down was the inability of governments to collect enough taxes for expanded government services from the increasingly impoverished citizens. Other factors played a role as well–more resource wars, leading to more deaths; impoverished common workers not being able to afford an adequate diet, so plagues were more able to spread; overthrown or collapsing governments; and debt defaults. Populations tended to die off.  Such collapses took place over a long period, typically 20 to 50 years.

For those who are familiar with economic theory, the shape of the curve in Figure 1 is very similar to the production function mentioned in Two Views of our Current Economic and Energy Crisis. In fact, the three main phases are the same as well. The issue in both cases is diminishing returns ultimately leading to collapse.

There seems to be a parallel to the current world situation. The energy resource that we learned to develop this time is fossil fuels, starting with coal about 1800. World population was able to expand greatly because of additional food production permitted by fossil fuels and because of improvements in hygiene. A period of stagflation began in the 1970s, when we first encountered problems with US oil production and spiking oil prices.  Now, the question is whether we are approaching the Crisis Stage as described by Turchin and Nefedov.

Why Might an Economy Collapse?

Let’s think about how an economy operates. It is built up from many parts, over time. It includes one or more governments, together with the laws and regulations they pass and together with their financial systems. It includes businesses and consumers. It includes built infrastructure, such as roads and electricity transmission lines. It even includes traditions and customs, such as whether savings are held in gold jewelry or in banks, and whether farms are inherited by the oldest son. As each new business is formed, the owners make decisions based on the business environment at that time, including competing businesses, supporting businesses, and the number of customers available. Customers also make decisions on which product to buy, based on the choices available and the prices of these products.

Over time, the economy gradually changes. Some parts of the economy gradually wither and are replaced by new parts of the system. For example, as the economy moved from using horses to cars for transportation, the number of buggy whip manufacturers decreased, as did the number of businesses raising horses for use as draft animals. Customs and laws gradually changed, to reflect the availability of automobiles rather than horses for transportation. In some cases, governments changed over time, as increased wealth allowed more generous social programs and wider alliances, such as the European Union and the World Trade Organization.

In the academic field of systems science, an economy can be described as a complex adaptive system. Other examples of complex adaptive systems include ecosystems, the biosphere, and all living organisms, including humans. Because of the way the economy is knit together, changes in one part of the system tend to affect other parts of the system. Also, because of the way the system is knit together, the system has certain requirements–requirements which are gradually changing over time–to keep the economy operating. If these requirements are not met, the economy may collapse, just as the eight economies studied by Turchin and Nefedov collapsed. In many ways such a collapse is analogous to an animal dying, or climate changing, when conditions are not right for the complex adaptive systems that they are part of.

Clearly one of the requirements that an economy has, is that it needs to be wealthy enough to afford the government services that it has agreed to. Scaling back those government services is one option, but when these services are really needed because citizens are getting poorer and finding it harder to find a good-paying job, this is hard to do. The other option, unfortunately, seems to be collapse.

The wealth of an economy is very much tied to the availability of cheap energy. A huge uplift is added to an economy when the (value added to society) by an energy resource such as oil greatly exceeds its (cost of production). Over time, the cost of production tends to rise, something measured by declining EROI. The uplift added by the difference between (value added to society) and (cost of production) is gradually lost. Some would hypothesize that the falling gap between (value added to society) and the (cost of production) can be compensated for by technology changes and improvements in energy efficiency, but this has not been proven.

Our Economy is Already in a Precarious Position

As I indicated in my most recent post, if a person computes average wages by dividing total US wages by total US population (not just those employed), the average wage has flattened in recent years as oil prices rose. Median wages (not shown on Figure 2) have actually fallen. This is the same phenomenon observed in the 1970s, when oil prices rose. This is precisely the phenomenon that is expected when there are diminishing returns to human labor, as described above.

Figure 2. Average US wages compared to oil price, both in 2012$. US Wages are from Bureau of Labor Statistics Table 2.1, adjusted to 2012 using CPI-Urban inflation. Oil prices are Brent equivalent in 2012$, from BP’s 2013 Statistical Review of World Energy.

Figure 2. Average US wages compared to oil price, both in 2012$. US Wages are from Bureau of Labor Statistics Table 2.1, adjusted to 2012 using CPI-Urban inflation. Oil prices are Brent equivalent in 2012$, from BP’s 2013 Statistical Review of World Energy.

The reason for the flattening wages is too complicated to describe fully in this post, so I will only mention a couple of points. When consumers are forced to spend more for oil for commuting and food, they have less to spend on discretionary spending. The result is layoffs in discretionary sectors, leading to lower wage growth. Also, goods produced with high-priced oil are less competitive in the world market, if sellers try to recoup their higher costs of production. As a result, fewer of the products are sold, leading to layoffs and thus lower average wages for the economy.

In the last section, I mentioned that the economy is a complex adaptive system. Because of this, the economy acts as if there are hidden laws underlying the system, parallel to the laws of thermodynamics underlying physical systems. If oil supplies are excessively high-priced, very few new jobs are formed, and those that are created don’t pay very well. The economy doesn’t grow much, but it does stay in balance with the high-priced oil that is available.

The Government’s Role in Fixing Low Wages and Slow Economic Growth

The government ends up being the part of the economy most affected by slow economic growth and low job formation. This happens because tax revenue is reduced at the same time that government programs to help the poor and unemployed need to grow. The current approach to fixing the economy is (1) deficit spending and (2) interest rates that are kept artificially low, partly through Quantitative Easing.

The problem with Quantitative Easing is that it is a temporary “band-aid.” Once it is stopped, interest rates are likely to rise disproportionately. (See the recent Wall Street Journal editorial,” Janet Yellen’s Greatest Challenge.”) Once this happens, the economy is likely to fall into severe recession. This happens because higher interest rates lead to higher monthly payments for such diverse items as cars, homes, and factories, leading to a cutback in demand. Oil production may fall, because the cost of production will rise (because of higher interest rates), while the amount consumers have to spend on oil will fall–quite possibly reducing oil prices.  If interest rates rise, the amount the government will need to collect in taxes will also rise, because interest on government debt will also rise.

So we are already sitting on the edge, waiting for something to push the economy over. The Affordable Care Act (“Obamacare”) may provide a push in that direction. Inability to pass a federal budget could provide a push as well.  So could a European Union collapse. Debt defaults are another potential problem because debt defaults are likely to increase dramatically, as economic growth shrinks, as discussed in the next section.

Debt is Major Part of our Current Precarious Financial Situation

If an economy is growing, it is easy to add debt. People find it easy to find and keep jobs, so they can pay back debt. Businesses and governments find that their operations are growing, so borrowing from the future, even with interest, “makes sense.”

It is as also easy to add debt if the economy is not growing, but there is an ample supply of cheap oil that can be extracted if increasing debt can be used to ramp up demand. For example, after World War II, it was possible to ramp up demand for automobiles and trucks by allowing purchasers to use debt to finance their purchases. When this increased debt led to increased oil consumption, it greatly benefited the economy, because the (value to society) was much greater than the (cost of extraction). Governments were able to tax oil extraction heavily, and were also able to build new roads  and other infrastructure with the cheap oil. The combination of new cars, trucks, and roads helped enable economic growth. With the economic growth that was enabled, paying back debt with interest was relatively easy.

The situation we are facing now is different. High oil prices–even in the $100 barrel range–tend to push the economy toward contraction, making debt hard to pay back. (This happens because we are borrowing from the future, and the amount available to repay debt in the future will be less rather than more.) The problem can be temporarily covered up with deficit spending and Quantitative Easing, but is not a long-term solution. If interest rates rise, there is likely to be a large increase in debt defaults.

The Role of Energy Return on Energy Invested (EROI or EROEI)

EROI is the ratio of energy output over energy input, a measure that was developed by Professor Charles Hall. To calculate this ratio, one takes all of the identifiable energy inputs at the well-head (or where the energy product is produced) and converts them to a common basis. EROI is then the ratio of the gross energy output to total energy inputs. Hall and his associates have shown that EROI of oil extraction has decreased in recent years (for example, Murphy 2013), meaning that we are using increasing amounts of energy of various kinds to produce oil.

In previous sections, I have been discussing diminishing returns with respect to human labor. Oil and other energy products are forms of energy that we humans use to leverage our own human energy. So indirectly, diminishing returns with respect to the extraction of oil and other energy products, as measured by declining EROI, will be one portion of the diminishing returns with respect to human labor. In fact, declining EROI may be the single largest contributor to diminishing returns with respect to human labor. This will happen if, in fact, low EROI correlates with high oil price, and high oil prices leads to diminished wages (Figure 2). This may be the case, because David Murphy (2013) indicates that the relationship between EROI and the price of oil is in fact inverse, with oil prices rising rapidly at low EROI levels.

Contributors to Declining Return on Human Labor

Human labor is the most basic form of energy. We humans supplement our own energy with energy from many other sources. It is this combination of energy from many sources that is reflected in the productivity of humans. For example, we take it for granted that we will have tools made using fossil fuels and that we will have electricity to power computers. Before fossil fuels, humans supplemented their energy with energy from animals, burned biomass, wind, and flowing water.

What besides declining EROI of fossil fuels would lead to diminishing returns with respect to human labor? Clearly, the same problems that were problems years ago continue to be problems. For example, growing world population tends to lead to diminishing returns with respect to human labor, because resources such as arable land and fresh water are close to fixed. Greater world population means that on average, each gets person less. Oil production is not rising as rapidly as world production, so the quantity available per person tends to drop as world population rises.

Soil degradation is another issue, according to David Montgomery, in Dirt: The Erosion of Civilizations (2007). Declining quality of ores for metals is another issue. The ores that are cheapest to extract are extracted first. We later move on to poorer quality ores, and ores in less accessible locations. These require more oil and other fossil fuels for extraction, leaving less for other purposes.

There are other more-modern issues as well. Growing populations in areas where water is scarce lead to the need for desalination plants. These desalination plants use huge amounts of fossil fuel resources (oil in the case of Saudi Arabia) (Lee 2010), leaving less energy resources for other purposes.

Globalization is another issue. As the developing world uses more oil, less oil is available for the part of the world that historically has used more oil per capita. The countries with falling oil consumption tend to be the ones that recently have had the most problems with recession and job loss.

Figure 3. Oil consumption based on BP's 2013 Statistical Review of World Energy.

Figure 3. Oil consumption based on BP’s 2013 Statistical Review of World Energy.

An indirect part of diminishing returns with respect to human labor has to do with what proportion of the citizens is actually able to find full-time work in the paid labor force, and whether the jobs available are actually using their training and abilities. The Bureau of Labor Statistics calculates increases in output per hour of paid labor. I would argue that this is not a broad enough measure. We really need a measure of output per available full-time worker.

Obviously, there are potential offsets. We hear much about technology improvements and increased efficiency offsetting whatever other problems may occur. To me, the real test of whether there is diminishing returns with respect to human labor is how wages are trending, especially median wages. If these are not keeping up with inflation, there is a problem.

Conclusion

We don’t often think about the return on human labor, and how the return on human labor could reach diminishing returns. In fact, human labor is the most basic source of energy we have. Stagnating wages and higher unemployment of the type experienced recently by the United States, much of Europe, and Japan look distressingly like diminishing returns to human labor.

Stagnation of wages is happening despite attempts by governments to prop up the economy using deficit spending, artificially low interest rates, and Quantitative Easing. Without these interventions, the results would likely be even worse. If QE is removed, or if interest rates rise on their own, there seems to be a distinct possibility that these countries will be reaching the “crisis” phase as described by Turchin and Nefedov.

Historical experience suggests that a major danger of diminishing returns to human labor is that governments costs will rise so high, and wages will drop so low, that it will be impossible for the government to collect enough taxes from wage-earners. In fact, there seems to be evidence we are already headed in this direction. Figure 4 (below) shows that  the US ratio of government spending to wages has been rising since 1929. Government receipts have leveled off in recent years.

Figure 4. Based on Table 2.1 and Table 3.1 of Bureau of Economic Analysis data. Government spending includes Federal, State, and Local programs.

Figure 4. Based on Table 2.1 and Table 3.1 of Bureau of Economic Analysis data. Government spending includes Federal, State, and Local programs.

Adding more health care services under the Affordable Care Act will only increase this trend toward growing government expenditures.

One issue is how the financial benefit of human labor (together with the energy sources leveraging this labor) is split among businesses, governments, and humans. Businesses have the most control in this. If an endeavor is not profitable, they can discontinue it. If cheaper labor is available elsewhere, they can cut hold down wages in countries with higher wages. They also have the option of increased mechanization. Humans and governments both tend to get shortchanged. As the overall return of the system reaches limits, wages of humans tend to stagnate. Governments find themselves with greater and greater costs, and more and more difficulty collecting funds from increasingly impoverished citizens.

Most authors of academic articles assume that the challenge we are facing is one that can be solved over the next, say, the next fifty years. They also seem to believe that the fixes required are simply small adjustments to our current economy. This assumption seems optimistic, if we are really approaching financial collapse.

If we are in fact near the crisis stage described by Turchin and Nefedov, we will need to do something much closer to “start over”. We need to build a new economy that will work, rather than just “tweak” the current one. New (or radically changed) government and financial systems will likely be needed–ones that are much less expensive for taxpayers to fund. We are also likely to need to cut back on basic services, including maintaining paved roads and repairing long-distance electricity transmission lines.

Because of these changes, whole new ways of doing things will be needed. EROI analyses that have been to date represent analyses of how our current system operates. If major changes are needed, their indications may no longer be relevant. We cannot simply go backward, because methods that worked in the past, such as using draft horses and buggy whips, will no longer be available without a long development period. We are truly facing an unprecedented situation–one that is very hard to prepare for.

Gail Tverberg's picture

Thank Gail for the Post!

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Discussions

Rick Engebretson's picture
Rick Engebretson on Dec 10, 2013 10:45 am GMT

You provide an outstanding service, Gail. You ask important, timely questions, then offer your thoughtful conclusions. I can’t say I know different. But I certainly experience different, making efforts to re-invent some agriculture methods.

In my politically incorrect perspective, there is no labor available to live more sustainably. For example, there is no such thing as democracy in dairy production. From the feed crops to the store shelf, many steps are taken. Farms got bigger, more automated, more petrochemical hungry, because nobody wants to do the work. Yet everybody votes to eat. Thus, the status of the US Farm bill.

Similarly, heritage seed genetics are being lost, except in a few freezers in the world. If things collapse, it will be a doozie.

Nobody wants to learn anything anymore. But everybody is entitled to an opinion and votes on nearly everything. If viewers run out of beer and chips during a football game, they expect to drive to the store at half-time. If the store is out, opinions will fly.

Bob Meinetz's picture
Bob Meinetz on Dec 10, 2013 6:38 pm GMT

Gail, this analysis is frankly bizarre. For example:

If new workers were paid on the basis of their additional food production, they would find that their wages dropped relative to those of the original farmers.

Instead of noting that the price of food drops, making the wages they do earn more powerful, you imply it leads to desperate outcomes like

The government might hire a larger army might to conquer more territory.

Though this may have been true in preindustrial times, it isn’t now. Agriculture makes up 1% of GDP; 80% of GDP comes from services. Comparing the United States to agricultural economies of centuries ago isn’t remotely relevant, but of course relevance isn’t the goal here – it’s to employ sustainable, healthful food as a metaphor for oil. In recent history how many wars have been fought over wheat vs. oil?

You claim, with emphasis, that

Ultimately, what brought the civilizations down was the inability of governments to collect enough taxes for expanded government services from the increasingly impoverished citizens.

This is the typical rightwing re-engineering of history which tries to transfer abuses of a privileged aristocracy to faulty economic policy. There has never been a “civilization” in history – modern or ancient – which followed this template. Louis XVI and Tsar Nicholas were hardly trying to provide “expanded government services” – they were expanding their own fortunes at the expense of government services, and both societies are potent analogs for our currently polarized class structure.

Although not much of this has to do with energy (dragging Obamacare into the picture was predictable), the notion that oil is the lifeline which will save 21st century civilization from collapse is nonsensical scaremongering. Continuing to rely on oil and unbridled consumption is what will ultimately destroy us, and though its possible humankind doesn’ t have the foresight to avoid it, I’d like to believe otherwise.

Gail Tverberg's picture
Gail Tverberg on Dec 10, 2013 7:17 pm GMT

You are not understanding what I am saying.

The new worker produces less food. If he got paid the same as other workers, the cost of food would rise. If he gets paid a lower amount, the cost of food would stay the same.  In no instance, would the price of food drop.  Perhaps the new workers would indded get paid the same. Then the problem would be transferred to a food inflation problem. 

I am not a right-winger by any stretch of the imagination.  

 

Michael Berndtson's picture
Michael Berndtson on Dec 10, 2013 9:38 pm GMT

This is kind of silly and all-over-the-place. It seems like the author is: pissed off that people don’t follow economic models as well as lab rats run mazes, convinced Obamacare is going to crush civilization and convinced that our only hope is big corporation controlled and efficient output of goods. Take farming for instance. We’ve probably reached peak efficiency with corporate farming. Maybe its time to input people back into farming to produce high quality foodstuffs instead of more machinery and chemicals to produce crap as feedstock for highly processed food. This would limit the money sent to the top of society, but at least there will be more for people to do. We spend so much energy packaging macaroni and cheese(TM), shipping it, displaying it, driving it home and throwing out the serving sized box than simply making it from dryed pasta and cheese. Our problem is we waste so much energy in 2013 on stupid stuff to simply bouy the educated upper middle class. There would be less need for brand managers, but hey are they really adding any value? 

Bob Meinetz's picture
Bob Meinetz on Dec 10, 2013 9:28 pm GMT

Gail, if there’s sufficient arable land the cost of food decreases due to decreased labor costs. But even if there isn’t, drawing parallels between food and oil is specious. While food is necessary for survival, hundreds of millions of people in the world survive today without using a drop of oil – and somehow the Egyptians, Greeks, Romans, and all of our forebears responsible for the Renaissance and Age of Enlightenment got by without it.

What you characterize as a collapse of civilization I would call a collapse of convenience. If cheap energy isn’t available, 95% of the world could get by using less, or relying on other sources. The upsides of this are increased innovation and protection of the enviornment we’re handing off to future generations.

Gail Tverberg's picture
Gail Tverberg on Dec 10, 2013 11:00 pm GMT

Our world economic system is sufficiently integrated that I would doubt that hundreds of milliongs of people survive in the world without using a drop of oil. Oil is used heavily in food production and transport in the industrialized part of the world, and is even used where industrialization is low.  

Even India uses oil for food-related purposes. The country uses urea for fertilizer. This is made with natural gas or coal, and transported with oil. Irrigation is used in parts of the country, using diesel powered pumps. 

People that use food imported from the US, or in fact, from anywhere else, depend on oil, because oil is what is used to fuel ships that transport food. Oil is usually used for land transportation as well, and certainly for air transportation.

In the US, we use oil to create roads and to maintain electrical transmission lines. Most of us would have a pretty tough time getting along without roads and electricity. Your view of what oil is used for is too narrow.

 

Paul O's picture
Paul O on Dec 11, 2013 5:26 am GMT

I think it unfortunate that some respondents might have been rather negative toward your post Gail.  Rather, it got me thinking in a futuristic way.

I have a theory that evrything humanity needs or desires is accessible with a high enough combination of three things. (1) Knowledge, (2) Materials, (3) Abundant and almost unlimited Energy .

If we have unlimited energy sources, and the right combination of raw materials, we could acquire the knowledge to synthesize, or mass produce anything we need. Case in point, I recently saw a TV show (or was it Youtube?)  where meat was cultured in the lab from cow cells, and used to make a hamburger. I think that we human beings can potentially break free from Inevitable cycle by using abundant energy as a currency, and knowledge as an ultimate tool.

The best thing we can do for ourselves as a species is to invest in trully abundant energy sources, not make fit sources, not smart grid sources, but sources where we don’t need a smart grid because anyone can run any appliance at anytime, and it just fine. Sources which can be used to manufacture liquid fuels if need be, where jet transportation is not being  eyed for curtailment, where people are not being urged to huddke together in cities because commutes are too energy expensive,  where we don’t have to drive cars that look like they were built for hobbits.

What I am saying may sound trite, futuristic and idealistic, however I don’t see any alternative for us as a species. We either do what I have suggested, or we suffer and repeat those aincient cycles that you aluded to, Gail,  in your post.

Bob Meinetz's picture
Bob Meinetz on Dec 12, 2013 4:54 am GMT

Willem,

That you consider consuming less underperforming, and growth a measure of the American Dream, reflects a fundamental difference in our worldviews. The current setup was indeed built with cheap energy, but living on cheap energy that’s dirty is precisely analogous to living on cheap credit – it’s unsustainable, and pretending it isn’t only makes the final, inevitable reckoning more painful.

You look in your photo like you might be somewhere between my generation and my father’s, but I don’t believe the difference is a generational one. My father was a child of the Depression and worked his way through medical school to become a respected and successful surgeon. Though his tenacity and drive brought him financial security, he was as prudent as his colleagues were ostentatious; you could find his Chevy station wagon parked next to their Mercedes Benzes in the hospital parking lot. And he saw to it that not a scrap of food on our dinner table was wasted. In monetary terms I’ll never be as successful as my Dad, but quite honestly what I aspire to is not his wealth but his frugality. Viewed through a modern lens his outlook would be considered an abandonment of the American Dream – and in my opinion we’d solve a lot of our problems if we focussed efforts on preservation of capital and resources rather than exploitation of them.

The problem is not that the phantom-money-merry-go-round will come to a halt – it will. The problem is that we ever got on it in the first place.

Gail Tverberg's picture
Gail Tverberg on Dec 12, 2013 5:09 am GMT

You see some of the same problems I see–and this is with all of the government help. If QE stops and interest rates go up, or if interest rates go up even with QE continuing, we are in deep trouble.

Gail Tverberg's picture
Gail Tverberg on Dec 12, 2013 5:11 am GMT

Unfortunately, the way down looks awfully far down, however we got there.

Bob Meinetz's picture
Bob Meinetz on Dec 12, 2013 5:14 am GMT

It’s nice to be able to agree with you, Gail.

Perhaps we should be filling in the hole we’ve dug for ourselves, instead of digging it deeper.

Gail Tverberg's picture
Gail Tverberg on Dec 12, 2013 5:20 am GMT

Thanks for your vote of support!

With respect to investing in energy sources, there are two details you left out:

1. The kinds of energy we add need to match our built infrastructure, or there will be a huge cost of conversion. In particular, we have an awfullly lot of cars, trucks, ships, trains, jets, agricultural equipment, irrigation pumps, and construction equipment that use oil. So it is not just any energy we need. We need oil, or we need to be able to replace a whole lot of vehicles very cheaply.

2. The other issue that is easy to overlook is that the fuel needs to be cheap. Waiting until prices rise is no solution at all–by that time we are deep in recesssion. We need very cheap oil or oil substitute, to make the products that refineries make affordable. Increasingly poor workers can’t afford the ever-higher cost of fuel.

 

Bob Meinetz's picture
Bob Meinetz on Dec 12, 2013 4:35 pm GMT

Agree with all of the above Willem, and without straying too far into political territory and having the kind moderators of TEC transplant this conversation to some antagonistic political blog, I’ll note that all of this makes a case for frugality.

I try to stay positive about the possibility of commanding political will. What’s really holding up the will is the lack of cooperation in Congress, and these problems are not nearly as easy to divide into partisan terms as many people think. The last president to put some dirt back in the hole was Bill Clinton, whose budget posted a surplus in his last year in office. The same president killed Glass-Steagall, which he considered to be “no longer appropriate”.

But pointing out these nuances at Thanksgiving dinner will somehow manage to make one the enemy of the entire table, so I usually nod my head and limit my input to less inflammatory remarks like “please pass the gravy”.

Gail Tverberg's picture
Gail Tverberg on Dec 12, 2013 4:42 pm GMT

Unfortunately, econmists take great pride in how little energy we are able to use per unit of GDP we are generating. This only comes by creating a great amount of GDP of dubious value–brand managers for companies and many people working in financial services, for example. We can’t get rid of all these people without huge loss of jobs. These folks would not be happy picking food by hand on farms–a place where we could pick up jobs, by cutting back on farm mechanization.

Paul O's picture
Paul O on Dec 12, 2013 6:36 pm GMT

Yes Gail. The key to everything is that the Energy Has to Be Very CHEAP, and HIGH QUALITY.

As you rightly say if we can’t get the cost of energy down low enough, we are in a really bad way, but I have added High Quality to the equation, and by high Quality mean that the energy Must be reliable and available 24/7. It has to be there for Researchers, for Tinkerers, for homes, factories, ships, cars, airplanes in whatever CO2 free format that may come to pass. For my money I would not want us to have to conform our lives and society to match the energy source, rather the energy source should be there to meet our needs and diverse uses, On Demand, whenever we may need it.

The second thing I’d mentioned that is just as important as cheap energy  is Knowledge. I cannot emphasize it enough that science and technology must converge with energy and materiel to circumvent all past limitations to growth and quality of life.

Homes could be cheaper, say if they were 3D printed, we could manufacture synthetic fire retardant wood.  Bacteria could manufacture our drugs and medicines, labs could grow high quality proteins. And on the food topic, I am as squeamish about eating bugs as anyone else, but I might give it a try if the bugs were grown in a clean, controlled sterile lab. Food could be preserved and stored for years without refrigeration if irradiated and bagged in plastic. 

Robotics could do a lot of chores, and elderly care for us. (However, we do need to do something about all the senseless fighting, warfare, and terrorism in our world…unfortunately).

 

 

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