Our fossil fuel energy predicament, including why the correct story is rarely told
- Nov 15, 2021 4:33 pm GMT
There is more to the fossil fuel energy predicament than we usually hear about.
Strangely enough, a big part of the confusion regarding the nature of our energy problem comes from the fact that virtually everyone wants to hear good news, even when the news isn’t very good. We end up seeing information in the Mainstream Media mostly from the perspective of what people want to hear, rather than from the perspective of what the story really is. In this post, I explain why this situation tends to occur. I also explain why our current energy situation is starting to look more and more like an energy shortage situation that could lead to economic collapse.
This post is a write up of a presentation I gave recently. A PDF of my talk can be found at this link. An mp4 video of my talk can be found at this link: Gail Tverberg’s Nov. 9 presentation–Our Fossil Fuel Energy Predicament.
Most people attending my talk reported that they had mostly heard about the issue on the right end of Slide 2: the problem of using too much fossil fuel and related climate change.
I think the real issue is the one shown on the left side of Slide 2. This is a physics issue. Without fossil fuels, we would find it necessary to go back to using older renewables, such as oxen or horses for plowing, burned wood and other biomass for heat, and wind-powered sail boats for international transport.
Needless to say, these older renewables are only available in tiny quantities today, if they are available at all. They wouldn’t provide many jobs other than those depending on manual labor, such as subsistence agriculture. Nuclear and modern renewables would not be available because they depend on fossil fuels for their production, maintenance and long distance transmission lines.
On Slide 4, note that M. King Hubbert was a physicist. This seems to be the academic specialty that finds holes in other people’s wishful thinking.
Another thing to note is Hubbert’s willingness to speculate about the future of nuclear energy. He seemed to believe that nuclear energy could take over, when other energy fails. Needless to say, this hasn’t happened. Today, nuclear energy comprises only 4% of the world’s total energy supply.
The transcript of the entire talk by Rear Admiral Hyman Rickover is worth reading. I have excerpted a few sentences from his talk. His talk took place only a year after Hubbert published his research.
Rickover clearly understood the important role that fossil fuels played in the economy. At that early date, it looked as if fossil fuels would become too expensive to extract between 2000 and 2050. A doubling of unit costs for energy may not sound like much, but it is, if a person thinks about how much poor people in poor countries spend on food and other energy products. If the price of these goods rises from 25% of their income to 50% of their income, there is not enough left over for other goods and services.
Regarding Slide 6, the book The Limits to Growth by Donella Meadows and others provided early computer modeling of how population growth and extraction of resources might play out. The base model seemed to indicate that economic decline would start about now. Various other scenarios were considered, including a doubling of the resources. Without very unrealistic assumptions, the economy always headed downward before 2100.
Another way of approaching the problem is to analyze historical civilizations that have collapsed. Peter Turchin and Sergey Nefedov analyzed eight economies that collapsed in their book Secular Cycles. There have been many examples of economies encountering a new source of energy (conquering a new land, or developing a new way of producing more energy), growing for a time, reaching a time where growth is more limited, and finally discovering that the economy that had been built up could no longer be supported by the resources available. Both population and production of goods and services tended to crash.
We can think of the current economy, based on the use of fossil fuels, as likely following a similar path. Coal began to be used in quantity about 200 years ago, in 1820. The economy grew, as oil and natural gas production was added. We seem to have hit a period of “Stagflation,” about 1970, which is 50 years ago. The timing might be right to enter the “Crisis” period, about now.
We don’t know how long such a Crisis Period might last this time. Early economies were very different from today’s economy. They didn’t depend on electricity, international trade or international finance in the same way that today’s world economy does. It is possible (in fact, fairly likely) that the downslope might occur more rapidly this time.
Past Crisis Periods seem to feature a high level of conflict because rising population leads to a situation where there are no longer enough goods and services to go around. According to Turchin and Nefedov, some features of the Crisis Periods included increased wage disparity, collapsing or overturned governments, debt defaults, inadequate tax revenue and epidemics. Economists tell us that there is a physics reason for the rich to get richer and the poor to get poorer during Crisis Periods; in some sense, the poor get “frozen out” and the wealth rises to the top, like steam.
Slide 9 is a chart I prepared several years ago, showing the growth in the world production of fuels of various types. What little wind and solar was available at that time was included in the biofuels section at the bottom. Early biofuels consisted largely of wood and charcoal used for heat.
Slide 10 shows average annual increases for 10-year periods corresponding to the periods shown on Slide 9. This chart goes to 2020, so covers a full 200 year period. Note that the increases in energy consumption shown are especially high in the 1951-1960 and 1961-1970 periods. These periods occurred after World War II when the economy was growing especially rapidly.
Slide 11 is similar to Slide 10, except I divide the bars into two pieces. The bottom, blue part corresponds to the amount that population grew, on average, during this ten-year period. Whatever is left over I have referred to as the amount available to increase the standard of living, shown in red. A person can see that when the overall growth in energy consumption is high, population tends to rise rapidly. With more energy, it is possible to feed and clothe larger families.
Slide 12 is like Slide 11, except that it is an area chart. I have also added some notes regarding what went wrong when energy consumption growth was low or negative. An early dip occurred at the time of the US Civil War. There was a very long, low period later that corresponded to the period of World War I, World War II and the Depression. The collapse of the central government of the Soviet Union occurred in 1991, so is part of the 10-year period ended 2000. Most recently, we have encountered COVID shutdowns.
The peaks, on the other hand, tended to be good times. The period leading up to 1910 corresponded to the time of early electrification. The period after World War II was a period of growth and rebuilding. Most recently, China and its large coal resources helped pull the world economy forward. China’s coal supply stopped growing about 2013. I have written that we can no longer depend on China’s economy to pull the world economy forward. With recent rolling blackouts in China (mentioned in the next section), this is becoming more evident.
Without enough energy, the current period is beginning to look more and more like the period that included World War I and II and the Great Depression. Strange outcomes can occur when there basically are not enough resources to go around.
Slide 14 shows recent energy production. A person can see from this slide that wind and solar aren’t really ramping up very much. A major problem is caused by the fact that wind and solar are given the subsidy of “going first” and prices paid to other electricity producers are adjusted downward, to reflect the fact that their electricity is no longer needed by the grid. This approach tends to drive nuclear out of business because wholesale electricity rates tend to fall to very low levels, or become negative, when unneeded wind and solar are added. Nuclear power plants cannot easily shut down. Instead, the low prices tend to drive the nuclear power plants out of business. This is sad, because electricity from nuclear is far more stable, and thus more helpful to the grid, than electricity from wind or solar.
Fossil fuel producers need quite high energy prices for a variety of reasons. One of these reasons is simply because the easiest-to-extract resources were removed first. In recent years, producers have needed to move on to resources with a higher cost of extraction, thus raising their required selling prices. Wages of ordinary citizens haven’t kept up, making it hard for selling prices to rise sufficiently to cover the new higher costs.
Another issue is that fossil fuel energy prices need to cover far more than the cost of drilling the current well. Producers need to start to develop new areas to drill, years in advance of actually getting production from those sites. They need extra funds to work on these new sites.
Also, oil companies, especially, have historically paid high taxes. Besides regular income taxes, oil companies pay state taxes and royalty taxes. These taxes are a way of passing the “surplus energy” that is produced back to the rest of the economy, in the form of taxes. This is exactly the opposite of wind and solar that need subsidies of many kinds, especially the subsidy of “going first,” that drives other electricity providers out of business.
Prices for oil, coal and natural gas have been far lower than producers need, for a long time. The COVID shutdowns in 2020 made the problem worse. Now, with producers quitting at the same time as the economy is trying to reopen, it is not surprising that some prices are spiking.
Most local US papers don’t tell much about world energy prices, but these are increasingly becoming a big problem. Natural gas is expensive to ship and store, so prices vary greatly around the world. US natural gas prices have roughly doubled from a year ago, but this is a far lower increase than many other parts of the world are experiencing. In fact, the bills that most US natural gas residential customers will receive will increase by far less than 100% because at the historic low price, over half of the price for residential service is distribution expenses, and such expenses don’t change very much.
Slide 17 shows another way of looking at data that is similar to that in Slide 14. This slide shows amounts on a per capita basis, with groupings I have chosen. I think of coal and oil as being pretty much the only energy resources that can “stand on their own.” The recent peak year for combined coal and oil, on a per capita basis, was 2008.
Natural gas, nuclear, and hydroelectric were the first add-ons. If a person looks closely, it can be seen that the growth rate of this group has slowed, at least in part because of the pricing problems caused by wind and solar.
The “green” sources at the bottom are growing, but from a very low base. The main reason for their growth is the subsidies they receive. If fossil fuels falter in any major way, it will adversely affect the growth of wind and solar. Already, there are articles about supply chain problems for the big wind turbines. Any cutback in subsidies is also harmful to their production.
US papers don’t tell us much about these problems, but they are getting to be very serious problems in other parts of the world. The countries with the biggest problems are the ones trying to import natural gas or coal. If an exporting country finds its own production falling short, it is likely to make certain that its own citizens are adequately supplied first, before providing exports to others. Thus, importing countries may find very high prices, or supplies simply not available.
This slide got a lot of laughs. The university does have some sort of agricultural plot, but teaching subsistence farming is not its goal.
My point about “scientists who are not pressured by the need for research grants or acceptance of written papers are the ones trying to tell the whole truth” got quite a few laughs. As a practical matter, this means that retired scientists tend to be disproportionately involved in trying to discern the truth.
With the military understanding the need to work around energy limits, one change has been to move away from preparation for “hot wars” to more interest in biological weapons, such as viruses. Thus, governments of many countries, including the United States, Canada, France, Italy, Australia and China, have funded research on making viruses more virulent. The vaccine-making industry also supported this effort because it might enhance the industry’s ability to make and sell more vaccines. It was believed that there might even be new techniques that would develop from this new technology that would increase the overall revenue generated by the healthcare industry.
Questions came up, both during the talk and later, about what other changes have taken place because of the need for much of the audience to hear a story with a happily ever after ending, and because of the known likely decline of the economy for physics reasons. Clearly one thing that happens is successful entrepreneurs, such as Elon Musk, aim their production in areas where subsidies will be available. With fossil fuel production not making money, fossil fuel producers are even willing to undertake renewable projects if subsidies seem to be high enough. The issue isn’t really, “What is sustainable?” It is much more, “Where will the profits be, given where subsidies will be, and what people are being taught about how to perceive today’s problems?”
In fact, what has been happening in recent years is that a great deal of debt has been added to the world economy. Mostly, this added debt seems to be creating added inflation. It definitely is not leading to the rapid extraction of a great deal more fossil fuels, which is what really would allow the production of more goods and services. If inflation leads to higher interest rates, this, by itself, could destabilize the financial system.
I tried to explain, as I have in the past, how a self-organizing economy works. New citizens are born, and old ones pass away. New businesses are formed, and they add new products, keeping in mind what products citizens want and can afford. Governments add laws and taxes, as situations change. Energy is needed at every step in production, so availability of inexpensive energy is important in the operation of the economy, as well. There are equivalences, such as employees tend also to be customers. If the wages of employees are high, they can afford to buy many goods and services; if wages are low, employees will be very restricted in what they can afford.
In some sense, the economy is hollow inside, because the economy will stop manufacturing unneeded products. If an economy starts making cars, for example, it will phase out products associated with transportation using horse and buggy.
A self-organizing economy clearly does not operate in the simple way economists seem to model the economy. Low prices can be just as big a problem as high prices, for example.
Another issue is that the energy needs of an economy seem to depend on its population and how far it has already been built up. For example, roads, bridges, water distribution pipelines and electricity transmission infrastructure must all be maintained, even if the population falls. We know humans need something like 2000 calories a day of food. Economies seem to have a similar constant need for energy, based on both the number of people in the economy and the amount of infrastructure that has been built up. There is no way to cut back very much, without the economy collapsing.
I am not exactly certain when the first discussion of the economy as a dissipative structure (self-organizing system powered by energy) started. When I prepared this slide, I was thinking that perhaps it was in 1996, when Yoshinori Shizoawa wrote a paper called Economy as a Dissipative Structure. However, when I did a search today, I encountered an earlier paper by Robert Ayres, written in 1988, also discussing the economy as a dissipative structure. So, the idea has been around for a very long time. But getting ideas from one part of academia to other parts of academia seems to be a very slow process.
Debt cannot grow indefinitely, either, because there needs to be a way for it to be paid back in a way that produces real goods and services. Without adequate energy supplies, it becomes impossible to produce the goods and services that consumers need.
Attendees asked about earlier posts that might be helpful in understanding our current predicament. This is the list I provided:
Humans Left Sustainability Behind as Hunter Gatherers – Dec. 2, 2020
How the World’s Energy Problem Has Been Hidden – June 21, 2021
Energy Is the Economy; Shrinkage in Energy Supply Leads to Conflict – Nov. 9, 2020
Why a Great Reset Based on Green Energy Isn’t Possible – July 17, 2020
The “Wind and Solar Will Save Us” Delusion – Jan. 30, 2017
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