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.
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.
The general trend in falling productivity growth does not seem to be particularly recent. OECD data shows a long-term pattern of slowing productivity growth, dating back to the 1970s for many developed economies.
Few people have stopped to realize that intermittent electricity isn’t worth very much. It may even have negative value, when the cost of all of the adjustments needed to make it useful are considered.
Energy products are very different in “quality.” Intermittent electricity is of exceptionally low quality. The costs that intermittent electricity impose on the system need to be paid by someone else. This is a huge problem, especially as penetration levels start exceeding the 10% to 15% level that can be handled by operating reserves, and much more costly adjustments must be made to accommodate this energy. Even if wind turbines and solar panels could be produced for $0, it seems likely that the costs of working around the problems caused by intermittent electricity would be greater than the compensation that can be obtained to fix those problems.
I’m not saying “abandon all renewable energy sources.” I am saying, “you should go read this article… and everything else on that web site.”
Instead of the scenario envisioned by Peak Oilers, I think that it is likely that we will in the very near future hit a limit similar to the collapse scenarios that many early civilizations encountered when they hit resource limits. We don’t think about our situation as being similar to early economies, but we too are reaching a situation of decreasing resources per capita (especially energy resources). The resource we are most concerned about is oil, but there are other resources in short supply, including fresh water and some minerals.
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.
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
… 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?
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
It seems to me, though, that a third outcome is not only possible, but is what is actually happening.
3. Diminishing returns from oil limits are already beginning to hit, but the impacts and the expected shape of the down slope are quite different from those forecast by most Peak Oilers.
~ Gail Tverberg, from WSJ Gets it Wrong on “Why Peak Oil Predictions Haven’t Come True”