Supply-and-demand is a model

https://ourfiniteworld.com/2018/05/11/how-the-economy-works-as-it-reaches-energy-limits-an-introduction-for-actuaries-and-others/

The reason for the strange behavior of energy prices near limits is because the system is very interconnected. It is a self-organized system that gradually changes over time. New customers are added over time. These customers are often also wage-earners. They decide what to buy based on their own wages, and based on other considerations, such as the prices of competing products and whether inexpensive financing is available.

~ Gail Tverberg

Supply-and-demand is a model. There’s nothing wrong with the model. Does the model still fit reality as we approach the limits of how much energy our economy can consume? (tl;dr: it does not.)

Chain reaction

https://ourfiniteworld.com/2018/02/21/raising-interest-rates-is-like-starting-a-fission-chain-reaction/

The catch is that we are too close to the “edge” to be testing an increase in interest rates. Economies, below a certain “stall speed,” cannot repay debt with interest, and cannot hope to provide entrepreneurs with an adequate return on investment. Our low rate of growth is already close to this stall speed.

~ Gail Tverberg

There’s a graph early on in this article that is, frankly, alarming.

The Great Depression was an energy crisis

https://ourfiniteworld.com/2017/12/19/the-depression-of-the-1930s-was-an-energy-crisis/

When I put together a chart of per capita energy consumption since 1820 for a post back in 2012, there was a strange “flat spot” in the period between 1920 and 1940. When we look at the underlying data, we see that coal production was starting to decline in some of the major coal producing parts of the world at that time. From the point of view of people living at the time, the situation might have looked very much like peak energy consumption, at least on a per capita basis.

~ Gail Tverberg

One of my rules-of-thumb is to thoroughly read everything written my Gail Tverberg.

Years ago, I found a web site called The Oil Drum which was a collecton of superlative thinkers all writing about things related to petroleum. Actually, it still IS a superlative collection, because they’ve left it up as-is to be an archive.

The “Wind and Solar Will Save Us” Delusion

ourfiniteworld.com/2017/01/30/the-wind-and-solar-will-save-us-delusion/

There has been a misunderstanding regarding the nature of our energy problem. Many people believe that we will “run out” of fossil fuels, or that the price of oil and other fuels will rise very high. In fact, our problem seems to be one of affordability: energy prices don’t rise high enough to cover the rising cost of producing electricity and other energy products. Adding wind and solar tends to make the problem of low commodity prices worse.

Overly Simple Energy-Economy Models Give Misleading Answers

ourfiniteworld.com/2016/07/25/overly-simple-energy-economy-models-give-misleading-answers/

It is not intuitive, but complexity-related issues create a situation in which economies need to grow, or they will collapse. See my post, The Physics of Energy and the Economy. The popular idea that we extract 50% of a resource before peak, and 50% after peak will be found not to be true–much of the second 50% will stay in the ground.

Today, the situation is different

http://ourfiniteworld.com/2015/02/11/the-problem-of-debt-as-we-reach-oil-limits/

There has been much written about past debt bubbles and collapses. The situation we are facing today is different. In the past, the world economy was growing, even if a particular area was reaching limits, such as too much population relative to agricultural land. Even if a local area collapsed, the rest of the world could go on without them. Now, the world economy is much more networked, so a collapse in one area affects other areas as well. There is much more danger of a widespread collapse.

~ Gail Tverberg

Oil price slide

http://ourfiniteworld.com/2014/11/05/oil-price-slide-no-good-way-out/

… demand doesn’t pick up quickly as prices drop. We are dealing with a world that has a huge amount of debt. China in particular has been on a debt binge that cannot continue at the same pace. A reduction in China’s debt, or even slower growth in its debt, reduces growth in the demand for oil, and thus its price. The same situation holds for other countries that are now saturated with debt, and trying to come closer to balancing their budgets.

~ Gail Tverberg

I have now discussed this a few times, and a common objection raised is that she is over-complicating a simple case of supply-and-demand. To which I say: What part of our enormous, intertwined, legacy, critical to everything from food to medicine to transportation to energy production, global dependency on petroleum is simple?

Our oil predicament

http://ourfiniteworld.com/2014/10/22/eight-pieces-of-our-oil-price-predicament/

A person might think that oil prices would be fairly stable. Prices would set themselves at a level that would be high enough for the majority of producers, so that in total producers would provide enough–but not too much–oil for the world economy. The prices would be fairly affordable for consumers. And economies around the world would grow robustly with these oil supplies, plus other energy supplies. Unfortunately, it doesn’t seem to work that way recently. Let me explain at least a few of the issues involved.

~ Gail Tverberg