a single barrel of oil’s worth of energy in order to get 100 barrels out of the ground. That surplus balance of 99 barrels of oil went to market, and the nation used it however it wished.
This oil could have been used frivolously, or to build up the nation’s infrastructure. It could power the plowing of new farmland, or the import of feather boas from Brazil.
The point we’re making here is this: our culture, our economy, our jobs—progress and society itself—all exist due to surplus energy. Whether the world can produce 100 million barrels of oil per day or just 50 million is far less relevant than how much surplus energy there is to support the rest of our complex economy and the way of life we consider to be normal.
Now suppose for a moment that you live 30 years in the future and all new oil discoveries return just 1.5 barrels of oil for every barrel expended to find, produce and deliver that oil to market. What kind of a world do you suppose that would be like? Instead of expending a barrel of oil and getting 99 barrels back like we did in 1930, we’d only get 0.5 barrels back.
What’s the difference between 99 and 0.5? Night and day. Not everything that can be supported on 99 surplus barrels can be supported on a measly 0.5 barrels. In fact, we’d argue that practically everything we hold dear about our modern, comfortable lifestyles would vanish if we were suddenly forced to exist on a paltry 0.5 barrel surplus.
In rough terms, where the energy industry was once using 1% of our total annual energy and leaving 99% for society, it will someday be consuming 67%, leaving the rest of us to fight over the remaining 33%.
For those of us who have studied what life will look and feel like under these conditions, the answer is obvious. We will inherit a future defined by less of everything. The world will be a far less dynamic, less easy place to live with a much-simplified economy, reduced travel, and vastly fewer—or at least very different—opportunities compared to today. Unless you happen to work in the energy extraction business, in which case you may be very busy indeed trying to meet the demands of your increasingly-frustrated customers!
The sober truth is that we are well on that path of diminishing energy returns. The much-vaunted shale plays in the US you’ve seen touted in the media as the savior to the world’s oil needs? Those deliver perhaps 8:1 to 5:1 net energy returns.
Put another way, in the past 85 years of oil production, we now find ourselves getting just one-twentieth the return as when we started. It’s difficult to overstate the importance of this fact. It’s an astonishing development touching on everything we hold dear and you should rightly be wondering why you are reading about it here and not on the front page of every major newspaper.
The trends clearly show that the diminishing energy returns of oil are a permanent feature. Plentiful, cheap oil was a once-in-a-species bonanza. We’ve been blowing through it as if it were a massive and self-replenishing party fund, and we’ve fashioned our entire way of life and all our plans for the future on the comforting but false belief that oil’s age will never end.
The golden age of oil discoveries, you may be surprised to learn, peaked way back in the 1960’s. In 2014, world discoveries of new oil reserves dropped to a 20-year low, marking the fourth consecutive year of discovery declines, and only replaced roughly one-sixth of what we burned during that same year.
At the time of this writing in spring of 2015, there are no serious efforts underway for a smooth transition to a new energy source after the oil is gone.
Should a credible transition plan ever be devised, it will ask much of society. Such an effort will require the sort of dedication brought to the moon project, multiplied by the constructive intensity that gave us the interstate highway system, multiplied by some large whole number like 10. Or maybe 100. The budget and manpower needed will be staggering. But as of now, those in the halls of power are not debating this. It’s not even on their radar.
As for other forms of energy that might ride to the rescue, well, let’s just say that the current levels of investment in alternative energy (solar, wind, hydro, etc) are not yet equal to the task. Although energy production from alternative sources has been advancing nicely, it’s swamped each year by the gross increase in additional fossil fuel use. It’s an unfair race where fossil fuels have a gigantic head start.
More importantly, wind and solar are not replacements for oil. Oil gives us transportation fuels and chemical feed stocks while wind and solar give us electrons. They are not interchangeable inputs given the transportation industrial infrastructure we currently have.
As the surplus energy we receive from oil and other fossil fuels dwindles (the same dynamic is happening in coal and natural gas, too, albeit on a different timeline), we’re going to have to get used to getting by with less, because we will be able to do less. This will impact our lifestyles over the next several decades, affecting some harder and more quickly than others. (As we often say: your local mileage will vary).
But one thing we all care about is extremely vulnerable to a decline in surplus energy: the economy. Remember when we talked earlier about all that economic growth our corporate and political leaders are so fixated on? Perhaps it’s time to be asking what will happen to it when there’s not enough surplus energy left over to dedicate to growth.
This completes a (very) brief tour of energy, which will allow us to better appreciate the economy, the next “E” in our story. Trust us, this is important information that is leading somewhere.
ECONOMY
The economy is an easy thing to explain. While some describe it as the complicated sum of all the products and services a region produces, that’s a definition of what it is. In terms of what it does, the best explanation is that it grows.
We like our economy to grow by some percentage over time (be that a quarter, a year or a decade), which means that it is growing exponentially. This is a hugely important idea so let’s spend a bit of time developing the concept.
WATCH:
Chapters 9 - 22 of The Crash Course
TOPIC: Our Energy Predicament
URL and LINK: See Web Links
Anything that is growing by some percentage over some unit of time is growing exponentially. It could be a single percent (1%) each year or it could be 5% per month. It doesn’t matter by how much or for how long, all that matters is that this thing we’re measuring is growing by some percentage over time.
You’ve heard about this phenomenon endlessly, perhaps without realizing it. The newspapers and televisions constantly repeat the data points: Car sales are up 12% this month. House sales are up 5% year over year. The economy has grown by 3.2% this quarter.
If you look carefully, you’ll see that each of these is actually referring to a percentage increase over a unit of time – which means that the things we most carefully measure, track and report to ourselves are all growing exponentially.
So why is it so important to understand the concept of exponential growth? Because it is literally going to kill us if we don’t. We need to understand exponential growth because we are completely surrounded by it, and appreciating that will help us to both understand what’s happening today as well as predict what’s coming tomorrow.
“The greatest shortcoming of the human race is our inability to understand the exponential function”
—Albert Bartlett
Unfortunately, exponential growth is not an intuitive concept. We’re hard-wired to understand direct, linear relationships. We can hit a fastball, but slipping on ice surprises us. No matter how fast the ball is thrown it’s moving at a constant speed, while gravity accelerates exponentially. Exponential rates of change confuse most of us except for a very few well-trained mathematicians; so please don’t be put off by any doubts you may have about fully grasping