Those with a more apocalyptic bent seem to see the onset of a world peak in oil production and the current economic “credit crunch” as a sure sign that the end is nigh. I disagree—I think we’re in the midst of a “slow crash” that will unfold over the next several decades. That doesn’t, however, mean that I think the timing of the credit crunch won’t have a serious effect on peak oil…
I think that our economy is fundamentally strong, both in
This increase in transaction costs of our specialization-driven economy is the real problem, and it is driven by peak oil—actually peak primary energy. Right now, our global economy is fundamentally based on the easy energy surpluses available to us, primarily from crude oil, high-quality coal reserves, and natural gas. Evidence suggests that global production of crude oil has peaked, and that natural gas and then coal are not particularly far behind. But, while the peak may be here now (or very soon), significant decline in production has not yet arrived. This is highly significant for two reasons: 1) significant decline isn’t far off, and 2) these energy sources (oil, coal, natural gas) represent our society’s primary energy sources. By primary energy source I’m not pointing to the fact that they represent the largest share, but rather that they produce energy with such a high Energy Return on Energy Invested (EROEI) that they can fuel the economic energy of our society. This high EROEI keeps the benefit from exchange, especially the very complex and long-distance specialization and exchange in a modern industrial economy, providing benefits in excess of transaction costs. No “alternative” energy source can make this claim—not photovoltaics, not wind, not biofuels, and probably not nuclear (which, at least with current technology, is also subject to a peak in uranium production). I think that solar thermal power has the best chance of proving me wrong here, but no one has yet performed sufficiently inclusive analysis of an operational solar thermal plant to convince me that it can be our salvation. Some alternative energy advocates make outlandish claims about the EROEI of new sources, but when the totality of energy inputs is accounted for these claims fall flat, as I’ve argued many times. Here's one recent example of how the cost for wind generation--one of the "EROEI darlings" of the renewable power world--is (surprise) experiencing dramatic cost increases as an associated phenomena raises its ugly head, what I've called "boot-strap EROEI." That is, while renewables may produce an apparent 5:1 EROEI when they can leverage inputs and infrastructure that was build on 100:1 EROEI "easy oil," the EROEI of these renewables begins to drop precipitously when new or replacement supporting infrastructure, ores, transport, etc. must now be provided with 20:1 or even 10:1 EROEI oil. This drives home the criticality of primary energy to the functioning of our society.
It’s important to point out that we don’t know that these alternatives won’t, at some point in the future, become truly viable primary energy sources to fuel society (though this only raises the Problem of Growth, which I’ve covered previously). And I could certainly be wrong in my EROEI calculations—we could currently have technology sitting in some R&D lab that can power the world. But there is a fundamental difference between developing a new, sustainable primary energy source in a laboratory that *could* power society and actually building out the full panoply of energy generation facilities and accompanying infrastructure necessary to actually continue society as we know it. This is where the timing of the credit crunch and the onset of significant declines in global oil production due to peak oil becomes vitally important: the current economic slowdown due to the credit crunch is masking the price signals that will warn of the significant declines to come, and is postponing the political viability of any kind of crash-program to adapt our present society to one that is based on a sustainable energy source.
If the recovery from the credit crunch lingers on through 2008 and resolves in the middle of 2009, as I think seems likely, then America’s growth engine (and, to a lesser degree, the world’s) will get its feet under it again just about the time that global oil production will likely begin to experience significant declines, either from simple geologically driven declines, or from the addition of a more geopolitically-driven phenomena such as the Export-Land Model (LINK). Either way, the current “undulating plateau” of global oil production represents a vital, and probably fairly short-lived opportunity to seriously transition our economy to a sustainable energy source. It’s my opinion that, with the benefit of historical hindsight, it will be understood that the greatest significance of the credit crunch is that it caused us to squander 2+ years of our oil production plateau that could have been used to fuel an adaptation program. Just look at the political platforms of ALL the
By the time it becomes obvious that we must transition to a sustainable energy source, the huge “down payment” of primary energy required to affect that transition seems unlikely to be available. And there won’t be any “sub-prime lender” of primary energy willing to give us 125% of equity on our economy! Judging by both
31 comments:
I guess that I have been less worried about the implosion caused by the credit crunch (whether or not it does cause a "meltdown") and more with the impact of higher grain prices. I have two concerns that I would love to see you address in a later post.
1. The rapid increase in price of a commodity once scarcity becomes the dominant paradigm. If it is true that rice could increase from an already high price to increase another 50% in a couple of weeks, will the same happen with oil? Could we, if scarcity becomes a common fear, go from 110 a barrel to 165 in a matter of weeks?
2. Is the stress on the way we grow and distribute food going to break, even before production comes off of the plateau? Perhaps there was not as much slack in the energy system as I, at least, believed. I have always been concerned with the "people problem" of peak oil more than the geological problem.
In a theoretical world we could powerdown in a controlled, if costly, way. People, however, have a tendency to break the sterile field of the theoretical and I can think of nothing that would cause them to get rowdy faster than hunger. It is much more motivating than the loss of home or the inability to drive the SUV to the corner market.
Keep up the good work,
The situation as you describe it here, particularly with reference to EROEI, seems in my mind to mitigate against the sanguine belief that the economy will bounce back. Of course you may be right, but I think the current industrial/consumer economy is in for a much bigger "correction," and what arises from the wreckage will be a much more localized and simpler economic system.
I fear we have pretty much wasted our window of opportunity for using high-density fossil fuels to underpin a big expansion of renewables (which would not save the industrial/consumer economy, but would help us achieve a soft landing).
BTW, I think the situation with nuclear is more serious than just higher priced uranium. From start to finish, nuclear is highly dependent on fossil fuels. So even if uranium is cheap, nuclear power would be dead in the water if fossil fuels are not affordable. Claims that nuclear will keep the lights on even if we have no oil are totally unrealistic.
Olduvai theory makes more sense with each passing day.
Nice post.
Can't say I'm seeing any signs of an economic downturn here yet - they keep turning up interest rates just to stop the economy overheating (and trade deficit exploding further).
With regards to the primary energy source / renewables issue, I think there could be an interesting project for someone to do some modelling to determine how much renewable power you need to put in place in order to manage the switch from oil/gas/coal without dropping into an EROEI hole.
In an ideal world, we'd be well on the way to switching and would never drop below the net EROEI of a fully solar/wind/ocean/geothermal/biogas powered economy when we make the transition.
In a less than ideal scenario, we would find ourselves trying to bootstrap back up with the EROEI of our "primary sources" now less than the fully renewables outcome would give us.
I wonder if Charlie Hall and Nate are looking at that ?
Isn`t it very easy and simple?
The "Price Estimated EROI" proves, that the price of everything, every product is 100 % based on the price of energy, and if energy out of an energy-producing machine is higher in price than the energy, needed to produce it NOW this energy will be higher in price EVERYTIME. It means a waste of energy, quite simple and easy to calculate by the endprice (taxes included!)divided by the price of energy.
There are only two ways out of this problem:
1. Accept, energy is becoming rare and we will have to get along with much less energy (and not trust on machines! The Endprice is the only important statement about the energy spent in whole)
2. Find a way, to produce energy cheaper, from the beginning and without externial costs (environment ff)!
In the moment there is no chance nor any new idea for #2,
so let`s start to get used to a life with much less energy right now!
Even those, who think, they have saved a lot of money, will be dissapointed - their money isn`t wort nothing, as soon as there is no more energy to buy with it. Inflation will suck the money very soon. as we see it right now.
Those will survive, who got used to a life with less energy - people in africa f.e. but unfortunately after they are minimized by famines.
More elections won`t solve any of these problems.
Even with no consideration of the environment the oilsands of canada are no hope, too - their production was higher in price everytime, too, and will be in future.
Isn`t it very easy and simple?
The "Price Estimated EROI" proves, that the price of everything, every product is 100 % based on the price of energy, and if energy out of an energy-producing machine is higher in price than the energy, needed to produce it NOW this energy will be higher in price EVERYTIME. It means a waste of energy, quite simple and easy to calculate by the endprice (taxes included!)divided by the price of energy.
There are only two ways out of this problem:
1. Accept, energy is becoming rare and we will have to get along with much less energy (and not trust on machines! The Endprice is the only important statement about the energy spent in whole)
2. Find a way, to produce energy cheaper, from the beginning and without externial costs (environment ff)!
In the moment there is no chance nor any new idea for #2,
so let`s start to get used to a life with much less energy right now!
Even those, who think, they have saved a lot of money, will be dissapointed - their money isn`t wort nothing, as soon as there is no more energy to buy with it. Inflation will suck the money very soon. as we see it right now.
Those will survive, who got used to a life with less energy - people in africa f.e. but unfortunately after they are minimized by famines.
More elections won`t solve any of these problems.
Even with no consideration of the environment the oilsands of canada are no hope, too - their production was higher in price everytime, too, and will be in future.
Jeff,
If you were the modern day version of Ghengis Khan and Julius Caesar combined, what would you do to solve the oil crisis? You were all powerful and could compel everyone to do as you commanded to save civilization?
I guess that is the total opposite of how you think, because that is as far from Rhizome as you can get, but still I think it would be a good brainstorming exercize.
I am open to the fact that someone like this just might come along. Because the time might be calling for it. Eco-dictator.
Say he had a big buldozer and Kunstler as his cheif advisor, how would the world be rebuilt?
My big Idea
Hi Jeff,
Nice post.
The major factor that I consider with peak oil (and climate change), is industrial agriculture and gigantic human population that it unsustainably supports.
Agri-business is wholly dependent on fossil fuels at all levels; from producing fertilizers, running industrial farming equipment, transportation, storage, etc.
The amount if change in infrastructure away from fossil fuels is daunting, and I suspect impossible to achieve a smooth transition whatsoever.
What will happen to the human populations that are completely dependent upon agri-business when the adversities of peak oil strike, plus climate change, both short and long term?
Unfortunately, I anticipate a radical shift in population, i.e., a massive die-off (especially of urban and sub-urban dwellers).
I think various populations will be resilient (I'm optimistic for the long term of humanity), but a lot of people will face a lot of suffering in the not-so-distant future. I hope there can be some solution to this before this happens, but I remain pessimistic in the short term.
7.4.08
Up to me, I really start hating this whining about all the fates occuring out of peak oil.
And all the predictions or hopes for a maybe better government are useless, before we don´t STOP wasting energy RIGHT NOW!
Why not instead of moaning shape a real statement?
IF the Price Estimated EROI is a right thesis,
- and up to me it is sincerely rhight -
than lets demand to stop wasting of energy RHIGHT NOW!
Especially stop subsidising any technique to produce so called renewable energy.
If it is not obvious cheaper than the energy, that was used to produce it, than stop producing it immediately, go back into development.and don`t start to produce, before the technique isn`t producing energy much cheaper.
Especially stop producing photovoltaikpanels for general purpose immediately and stop expensive windcraft, energy out of biomass and so on.
Subsidizing is allowed only for development, not for daily use!
Every energy out of “renewable technique”, that is more expensive is a waste of ressources, nothing else. Only a technique costing less than average energy should be allowed to be installed.
Invest all the spare money into the development – don`t waste it in useless technique!
Next thing is traffic:
“Bio”fuel is more expensive than “normal” (fossil) fuel?
Stop producing it! We WASTE fuel by it!
“Hybrid” cars:
As long, as the use of electricity instead of gas isn`t believalble proved to be cheaper, than there is a waste of energy to assume – STOP IT!
As long, as the accumulatore is not calculated into the consumption of the hybridcar (and up to now it isn`t!) , it is sincerely a huge waste of energy!
Just to use (charge an accumulatore and discharge it for a limited amount of cycles) is wasting three times the energy, you might be able to put into/ out of it.
Every owner of a laptop knows about the problems of accumulatores – why not the buyers of much more expensive hybridcar accumulatores?? They don`t last long – not even three years and must be reproduced than again (recycling is needing even more energy!)!
Stop advertising and selling or even subsidize hybridcars RIGHT NOW! Develop a better concept for cities than this!
Instead of declining waste of energy (and all the consequences for the environment and climate change) the industrial states produce more and even much more technique of all kind, that is in fact wasting a uncredible amout of fossil ressources.
STOP IT RIGHT NOW!
It is very easy to find out:
If it is cheaper – do it,
If it is more expensive – leave it and better spend the energy into development first!
That is the clear and easy to learn message of the Price Estimated EROI!
Afterwards we can talk about predictions.
Lef-
To whom are you addressing?
The entrenched energy industry corporate execs?
Our elected officials (who are bankrolled and beholden to aforementioned execs)?
Not gonna happen.
Krugman on food crisis.
@ anonymus:
It is a huge delusion, nearly everyone all over the world is involved,
even in the poor Gambia (where I`m often) ministers and people believe (better: underlie the barefaced lie), that photovoltaik is an energy-saving technique, although they SEE very soon, it is much more expensive then any other energy even there.
In all industrial countries there is to be found an accordance between the people, science, industry and therefore of course the government, that "renewable energy" is much more expensive, but nevertheless is a benefit to the environment.
But all that is basing on a wrong philosophy, everyone succumbs.
The money, that is spent to produce any ware (of couse renewable energy technique, too!) is not independent from the amount of (fossil, "dirty" ) energy invested into the ware,
but is a real accurate and precise sign, how much energy is spent into the production.
That is the declaration of the "Price Estimated EROI", and up to now it is not contradicted and so far it is a true thesis.
So it will be no use to replace the government! Their politics will be no better than the government before, because they are led astray be the same wrong statements.
It is ridiculous!
On one hand all the world is whining about increasing food prices,
but in the same moment everyone in the world (even those, who are concerned, f.e. in Westafrica!!) waste energy like hell into crazy energy-wasting technique and produce (!) these exploding energy and food prices by themselves!
So there is only one way:
Contradict to the "Price Estimated EROI" and prove its a wrong statement or thesis,
or accept it and stop wasting the ressources RIGHT NOW!
It is not a matter of electing another government but a question of cherishing a wrong philosophy.
Sorry, I fell a bit behind in response to comments. I'll respond with separate comments in the order in which they appear:
Anon: I think that commodity prices can increase very rapidly on a sudden realization. Right now, for example, oil in 2015 is trading about $8 less than oil today. There is no reason why, with the right kind of news over a few weeks (e.g. current peak oil deniers all admit they're wrong, or at least OPEC does so), that backwardation scenario couldn't suddenly shift to contango where oil in 2015 is priced $10-$15 above present price. That kind of shift seems more likely than a $55 shift in the front month contract over a few weeks, though that also seems possible if, say, we conducted surprise airstrikes on Iran. I keep a running XL spreadsheet on the backwardation curve out to 2015, and will post on this at some point in the near future.
I think that stress to our global food production system is one of the great, looming "grey swans" in that we know it's possible, we just don't have any idea how likely or how it would manifest. One of the problems of the success of modern finance and management methods is that they have largely removed "slack" from the system. In almost all areas, we increasingly live in a highly optimized system. This is great, assuming everything goes well. If something unexpected happens, however (wheat stem rust?), then highly optimized systems are also much, much more vulnerable to cascading failures. There seem to be many things on the horizon that could cause a breakdown in our global food system in the near future. However, I think that peak oil and food shortages are different phenomena (though, to a degree, the first is exacerbating the latter). Peak oil seems to be a matter of the simple extrapolation of existing trends and data, whereas there is the potential for plenty of increase in food supply so long as nothing unexpected happens.
Rice Farmer: I agree, if I'm right on EROEI (and I need to be the first to admit that this is a big "if"), then I don't think the current iteration of the global economy is long for this world (important to distinguish that from suggesting that there will be no global economy in the future). To me, the question is whether EROEI will begin kill economic growth before we recover from the credit crisis as a discrete economic event, or if we'll recover and proceed in blissful ignorance for a few years before EROEI starts to cause a discrete set of problems.
I've also heard that the fossile fuel investment in creating nuclear reactors is inadequately (or erroneously) accounted for in calculating EROEI for nuclear. My only hesitation in writing it off is the potential for some kind of fast-breeder/thorium reactor set-up. I have yet to see any analysis of the kind of infrastructure set-up required for such a configuration. But, again, that goes to my comment that a technology sitting in a lab, even if it actually *could* save us, is a whole different animal than the fully deployed infrastructure necessary to save us. I don't really like that language--"save us"--too much associated baggage. Oh well.
Big Gav: My intuition says that there is significant de-coupling between the US economy and the global economy AND within geographically different regions of the US economy, but I really haven't seen any good analysis of this that can demonstrate that this is de-coupling on fundamentals, not just a time-lag. Let me know if you find any, and I'll certainly be looking.
On the "primary energy" and bootstrap-EROEI issue, I think my analysis suffers (as seems to be standard in writing on EROEI) from a problem of terminology. I have suggested this problem in a few drumbeats over at TOD (and peripherally in one main post on EROEI), and one of two things happens: people tell me I'm wrong, but we're clearly talking about apples and oranges, or people say "hmmm, that's interesting." I don't really know where to go next to improve the analysis. I'm curious to see what Hall's next 4 posts on EROEI say, and in the meantime I'm going to try to nail down a better methodology to approach this so that, assuming it's necessary, I can pose the question properly to Nate & Prof. Hall...
Lef: I think we (I?) need to be cautious about using "price-estimated EROEI." I think it is a good check, but it is also full of holes caused by subsidies, market distortions, limitations to comparisons against dominant energy sources, etc. That said, it's still my favorite approach (for its ability to actually address the full tail of energy inputs) provided that these shortcomings are kept in mind.
I think it is *possible* that there is a great, renewable energy source ready to be deployed that really has a significantly positive EROEI. It is also possible that we're on the cusp of developing one (who knows, perhaps even with my favorite whipping boy, photovoltaics). I think this is the primary argument that we should keep pursuing research and don't need to dramatically cut our energy usage now. I think this argument is dead wrong and blatantly fails the 'precautionary principle,' but it will be difficult (or almost impossible) to get people to make dramatic sacrifices now when there are still people out there telling them that everything will be OK.
I guess this returns to one of my basic theories (I'm still trying to find a concise formulation or snappy name for it): any plan that requires either better government behavior or better human behavior in order to work is almost certainly doomed to failure.
Theo: Interesting thought experiment. First, while I agree that this is the opposite of how I'd *like* to proceed, I don't think that necessarily makes it unlikely. The main reason that I don't see the "eco-dictator" scenario as likely is that it implies a massive, hierarchal structure. I think that the energy requirements to meet the information processing demnands (due to 'span of control' and 'SNAFU principle') of such a structure make it unrealistic in a lower-energy future.
That said, I'd like to see any future eco-dictator use that power to price all externalities (including a conservative estimation of unknowns to accomodate the precautionary principle) into present market prices. Included in this would be pricing in incompatibility with human genetic ontogeny. I think that would allow ground-up development of localized, sustainable communities that are actually people friendly, while allowing the continuation of the industrial economy and global trade provided that they pursue actually sustainable and human-compatible methods. I guess I'd also like to see this dictator impose frequent but random "mini black swans" (tax modifications, etc.) that force the maintenance of "slack" in local systems, keeping them resilient in the face of true "black swan" events.
A bit weird to think about, I must admit, but potentially very useful (and certainly interesting)...
Likewise, I think your "big idea" post is quite interesting. The main obstacle that I see is the plan to have large, multinational corporations bankroll the plan--I'm not sure that their shareholder demand can realistically be reconciled with the desire to have this growth be truly "green." Also, while this may be an environmentally compatible solution, I'm not sure it addresses the problems of the perpetual-growth economy from the perspective of human psychology and the demands of our genetic ontogeny (another reason I like smaller, self-sufficient, resilient solutions).
All that said, however, I think your "akido" approach--trying to use what I'm assuming you see as immutable characteristics of our modern world (lust for power, massive corporations, etc.) as the driving force to solve the problems created by the exact same forces--is very smart. I need to think through this process for a bit and figure out if/how it can be applied to my proposed solutions, or if the two are fundamentally incompatible!
Nick: I'm also pessimistic in the short term (as in the next century), but optimistic for the long-term future of humanity. I think our present situation falls into the classic trap: I am nearly convinced that there are solutions to our problems, and equally convinced that there is no chance in hell we'll take the steps necessary to implement those solutions (which is a corollary to my theory above about 'any solution requring better behavior by governments or humans being doomed to failure').
I think the future will be largely dependent on how the problem plays out (after typing that, it seems like a very stupid and obvious statement!). The best scenario might be a very serious, near-term trip for our global economy that can be clearly blamed on our current energy/food policy. That might kick us into high gear enough to make the near-term sacrifices necessary to actually save (most) of us without an ugly transition. The worst case scenario is the reverse--a slow, gradual slide for a decade or two that eliminates our ability to respond to a significant shock, but that doesn't motivate us to take serious action, and THEN a significant shock. So, as a result of these differing options for the future, the more things drag along without falling apart, I actually get *less* optimistic. Which, I guess, is the point I was trying to make in this post: we're oblivious to the fact that we're squandering our chance to save ourselves because we're temporarily distracted by a largely unrelated economic event.
I commented on Prof. Hall's latest EROEI post on The Oil Drum regarding the bootstrap EROEI issue:
http://www.theoildrum.com/node/3810#comments
I think it's better to start this conversation with a discussion of this more narrow issue than to try to dive right in to the question about the sufficiency of high-EROEI primary energy to build out the necessary renewable energy infrastructure.
Jeff,
Yeah, it is kind of an "akido" approach!
I got some of these ideas while reading "Confessions of an economic Hit man" The book talks about a small powerful group of private contractors, that got the world bank to finance all these huge third world projects designed to make them rich.
The problem is most of them worked horribly, but some of the projects in Saudi Arabia semed to work pretty well, at least for the Saud family. Apparently the shah of Iran back in the 1970's wanted to have a huge project to make the desert bloom and be covered with trees. But I guess this didn't work out partly due to the coup. But anyway, I think if huge projects like this could make some people rich hey would do it.
There is a great graph over at TreeHugger which shows some of the transaction costs of specialization...
http://www.treehugger.com/files/2008/04/energy-wasted-efficiency-graphs.php
It seems to me that we are seeking solutions to maintain things as they are rather than seeking solutions that require any substantial changes in our social structures.
As to economic health, I'm afraid I disagree with you. Our current structures contradict a basic law (not theory) of economics:
Say's Law of Value does remain valid. It is, however, mis-understood and mis-applied in an endeavor to maintain the status quo of massive wealth disparities.
prod. cost/wages/money supply = aggregate, or balance.
It would be more clearly stated by breaking it down.
Original Capital/Cost of production (materials, energy, etc.)/Wages = Value of Product. Money Supply = Value of all products. Pooled profits of all companies tend to cancel one another out ONLY if excess income is returned to replace Original Capital, machinery, etc. as it reaches its life expectancy or for re-investment into new production. Borrowed "savings" for this purpose also have this effect. Say's Law is in balance when the circulating money supply within an economy equals the value of all production within an economy. There is neither inflation or deflation. Neither a shortage of goods in relation to the money supply (inflation), nor a surplus of goods.(recession).
O+C+W+P-P1=V. V=M
Excess incomes tend to generate excess capital, that is, the money is withdrawn from the money supply rather than being retained within the economy as returns to original capital , productive investment or consumer spending. It tends to get parked in unproductive ventures such as existing equities. This has the effect of locking a portion of the money supply in a bank vault or burying it in the backyard. It throws the equation out of balance.
"Corrections" are nothing more than attempts of the economy to come back into balance with Say's Law of Value. The crash of 1929 was a "correction". The hyper-inflation of pre-war Germany was a correction.
There are many theories designed to circumvent Say's Law and in general all they do is postpone a correction. The longer the postponement, the greater the correction that ultimately will occurr.
The government can keep this law in balance through taxation policies, re-distribution of excess capital, and operations of the Fed. When Say originally formulated his law of value, there was capital shortage, not capital surplus. Most savings were returned very quickly into the economy, and excesses did still develop through speculative ventures...withdrawls...and corresponding "corrections" were made.
Huge disparities in income encourage withdrawls of money from the money supply. The equation is thrown out of balance and economies ultimately crash...correct themselves. If Say's Law of Value were adhered to, this need never happen.
--------
Energy problems are just another money wrench thrown into the economy
While I generally agree with both Say and the Austrian School, I disagree strongly with two things that you say:
First, we can call Say's Law a "Law" all we want, but that does not act to prove that it is no longer a theory. It is right until proven wrong, and it is not possible to prove that it will never be proven wrong. In fact, while I think it is largely applicable, there is very significant disagreement among economists about the validity of Say's Law.
Second, I don't think that energy problems are just another monkey wrench thrown into our economy. Our economy has been functioning just fine, from an American-centric, short-sighted perspective, for many decades now despite being in violation of Say's law. So I think that validates, or at least doesn't invalidate my assertion that our economy can continue to run in violation of Say's law for quite some time to come. In fact, to the extent that our current economy is predicated upon figuring out new and inventive ways to temporarily circumvent Say's Law, there is no fundamental reason why we can't continue to expand this bubble by continuing to invent even more inventive ways to circumvent the fundamentals via new and innovative monetary policy and financial instruments. This is NOT true with energy--that is precisely why I think we'll find a nifty (and, ultimately, very shortsighted) way around our current credit crunch, and that ultimately our economy will be brought down (or, at least back to fundamentals) due to energy descent.
I think this illustrates one of the key weaknesses of Say's law of value--it has nothing to say about energy and EROEI issues, which may turn out to be the key representative of value on a macro-economic scale.
I do recall that Bush II was making talks early in his Presidency pre 9/11 regarding the energy issue and indicated something about the energy wall in 2010-2012 period. Again I tried to locate the text on the Presidential web site but likely a better researcher can find. So this date has been know by folks for a number of years and likely the outcome of the 'secret' energy meetings in the early current administration.
Here in Alaska the folks are talking of a energy emergency and the need to look to biofuels ie wood from our forests. So just like corn in the midwest and Palm oil in Indonisia look to see the last great little utilized forest on the planet from Northern Russia, Cananda and Alaska go up in smoke.
Carl
Thanks to Jeff for all his responses (not just the one addressing my comment).
I see I was not clear in my comment about nuclear power, and want to clarify my thoughts here.
I too am interested in the EROEI of nuclear, and in fact have been thinking more about that lately. Nuclear proponents claim it has a high energy density, but the energy density of fabricated fuel is actually the product of much processing and enrichment. Uranium ore in its natural state is far too high in entropy to start or sustain a reaction. So, I suspect that the EROEI of nuclear, especially if we include the energy needed to manage waste until it is harmless (20,000 years?), can't be too spectacular.
However, I was actually not speaking of EROEI. My position is that, even if nuclear had a good EROEI, it would still be a dead technology without fossil fuel inputs. Everything from mining ore to demolishing decommissioned plants suddenly becomes impossible if fossil fuels aren't available.
Which brings up another consideration for evaluating new energy technologies: If the bootstrap is unavailable or unaffordable, the technology is DOA.
Hi Jeff,
It`s a pity, you gave up argumenting against contradicters to Your Price-Estimateed-EROI- theorie.You are sincerely right, but you stopped halfway.
You (and me since 5 years now, but here in Germany) are fighting against a wrong philosophy of the all oeconomists.
Your failure (IMHO !!) is, that you don`t take the ENDPRICE (taxes and subsidizes included, THIS is paying the infrastructure, needed, too) into yout theorie.
Only if you do that, your theorie is right.
As You very correct argument to “Say`s law”: It is right until proven wrong, and it is not possible to prove that it will never be proven wrong.
So is Your theorie.
I would like to be answered here: http://www.jeffvail.net/2006/11/energy-payback-from-photovoltaics.html (the last comment of robin), if you have some time left over.
The “Price Estimated EROI”-theory is very right, but it is a little more difficult to prove.
Nevertheless it is sincerely important, to work it out – it is a main theory für all questions, in which energy is involved.
And it can be an answer in this question, this theme, too.
Rice Farmer: I agree that the EROEI of nuclear is probably very bad when we consider the energy required to deal with the waste for 20,000+ years, but I'm not sure I think that we *couldn't* continue with nuclear power in the absence of fossil fuels--just that it would make the EROEI significantly worse than it already is.
The mining, ore processing, transportation, cement production, etc. required for sustaining nuclear infrastructure is currently all heavily dependent on fossil fuels for energy inputs. I'm not aware of any mining operations that currently operate only on electricity, but I'm also not aware of any fundamental reason why it couldn't work. I think we could have electrical mining systems, electrical trucks, electricity powered ships to transport the ore, even electrical kilns for fly ash production or other means of making cement with only electricity as an input. I think that we're not really in disagreement here, however, because IF we converted all these processes to non-fossil-fuel energy, then I think that would make the EROEI so terribly low that no one would even make an attempt to continue maintaining nuclear infrastructure. This will only become more true as high-grade uranium ore runs out and we need to exploit plentiful but increasingly low-grade uranium ore--a transition that is coming up fairly soon at current uranium consumption rates, and that will only be accelerated if we try to make up for fossil fuel shortfalls with new nuclear...
Lef: I agree, I think that price-estimated EROEI is a very valuable tool, and I need to continue refining the theory. I will get back to the comments on the original thread as soon as I have the time (hopefully today).
Regarding your comment to include the cost of tax and subsidy, as this is necessary to support the infrastructure required for production, I agree in part. Maybe I'm misunderstanding what you're saying, but I agree that taxes are valid inclusion to the extent that they represent the share of the infrastructure used by a given energy source. However, to the extent that taxation is uneven (maybe less a problem with Germany's VAT system, but highly problematic with US tax code), then they essentially act as subsidy to some industry at the expense of another. I don't think subsidy is a valid inclusion--and therefore I think it distorts the resulting EROEI--to the extent that we are comparing the price-estimated EROEI of two different sources, one subsidized more than the other. That's generally why I say that I think price-estimated EROEI, while still perhaps the *best* system available, is far from perfect.
I'll get back to the comments on the PV payback thread you mentioned and we can continue this discussion--even with the problems represented by subsidy, I think it's a methodology that deserves further development.
I will also be commenting on Prof. Hall's EROEI posts at The Oil Drum to try to get this theme integrated into that conversation.
More on disastrous food policies and their disastrous effects
There's an interesting proposal put forward by a company here in SE Australia. It would fit neatly with your Rhizome series as it describes a decentralised biomass energy system incorporating wildlife corridors and the restoration of marginal lands.
See what you think of the Emerald Plan available at the downloads section of http://www.gasificationaustralia.com/
Cheers
Rob
Although this comment doesn't directly relate to this post, your blog is clearly one of the most informed about many of the challenges the energy industry faces going forwards, and we want to invite you to an event which you might find interesting.
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