Will the Upheaval in Fossil Fuel Industry Take the Rest of the Economy Down With It?

Yves here. The strength and weakness of this article is the range of information it covers. That comes at points at the expense of providing context. For instance, it describes how 65% of the independent oil and gas companies are at risk of going bankrupt. But it doesn’t tell you how large the independents are relative to the “majors”. Similarly, it appears to switch two paragraphs later to the total debt of oil and gas companies, which is $2.5 trillion. So one should read this with some attention to definitions and context.

By Nafeez Ahmed,s an investigative journalist and international security scholar. He writes the System Shift column for VICE’s Motherboard, and is the winner of a 2015 Project Censored Award for Outstanding Investigative Journalism for his former work at the Guardian. He is the author of A User’s Guide to the Crisis of Civilization: And How to Save It (2010), and the scifi thriller novel Zero Point, among other books. Originally published at AlterNet

It’s not looking good for the global fossil fuel industry. Although the world remains heavily dependent on oil, coal and natural gas—which today supply around 80 percent of our primary energy needs—the industry is rapidly crumbling.

This is not merely a temporary blip, but a symptom of a deeper, long-term process related to global capitalism’s escalating overconsumption of planetary resources and raw materials.

New scientific research shows that the growing crisis of profitability facing fossil fuel industries is part of an inevitable period of transition to a post-carbon era.

But ongoing denialism has led powerful vested interests to continue clinging blindly to their faith in fossil fuels, with increasingly devastating and unpredictable consequences for the environment.

Bankruptcy Epidemic

In February, the financial services firm Deloitte predicted [3] that over 35 percent of independent oil companies worldwide are likely to declare bankruptcy, potentially followed by a further 30 percent next year—a total of 65 percent of oil firms around the world. Since early last year, already 50 North American oil and gas producers have filed bankruptcy.

The cause of the crisis is the dramatic drop in oil prices—down by two-thirds since 2014—which are so low that oil companies are finding it difficult to generate enough revenue to cover the high costs of production, while also repaying their loans.

Oil and gas companies most at risk are those with the largest debt burden. And that burden is huge—as much as $2.5 trillion [4], according to The Economist. The real figure is probably higher.

At a speech at the London School of Economics in February, Jaime Caruana of the Bank for International Settlements said [5] that outstanding loans and bonds for the oil and gas industry had almost tripled between 2006 and 2014 to a total of $3 trillion.

This massive debt burden, he explained, has put the industry in a double-bind: In order to service the debt, they are continuing to produce more oil for sale, but that only contributes to lower market prices. Decreased oil revenues means less capacity to repay the debt, thus increasing the likelihood of default.

Stranded Assets

This $3 trillion of debt is at risk because it was supposed to generate a 3-to-1 increase in value, but instead [6]—thanks to the oil price decline—represents a value of less than half of this.

Worse, according to a Goldman Sachs study [7] quietly published in December last year, as much as $1 trillion of investments in future oil projects around the world are unprofitable; i.e., effectively stranded.

Examining 400 of the world’s largest new oil and gas fields (except U.S. shale), the Goldman study found that $930 billion worth of projects (more than two-thirds) are unprofitable at Brent crude prices below $70. (Prices are now well below that.)

The collapse of these projects due to unprofitability would result in the loss of oil and gas production equivalent to a colossal 8 percent of current global demand. If that happens, suddenly or otherwise, it would wreck the global economy.

The Goldman analysis was based purely on the internal dynamics of the industry. A further issue is that internationally-recognized climate change risks mean that to avert dangerous global warming, much of the world’s remaining fossil fuel resources cannot be burned.

All of this is leading investors to question the wisdom of their investments, given fears that much of the assets that the oil, gas and coal industries use to estimate their own worth could consist of resources that will never ultimately be used.

The Carbon Tracker Initiative, which analyzes carbon investment risks, points out that over the next decade, fossil fuel companies risk wasting up to $2.2 trillion of investments in new projects that could turn out to be “uneconomic” in the face of international climate mitigation policies.

More and more fossil fuel industry shareholders are pressuring energy companies to stop investing in exploration for fear that new projects could become worthless due to climate risks.

“Clean technology and climate policy are already reducing fossil fuel demand,” said James Leaton, head of research at Carbon Tracker. “Misreading these trends will destroy shareholder value. Companies need to apply 2C stress tests to their business models now.”

In a prescient report published last November, Carbon Tracker identified the energy majors with the greatest exposures—and thus facing the greatest risks—from stranded assets: Royal Dutch Shell, Pemex, Exxon Mobil, Peabody Energy, Coal India and Glencore.

At the time, the industry scoffed at such a bold pronouncement. Six months after this report was released—a week ago—Peabody went bankrupt. Who’s next?

The Carbon Tracker analysis may underestimate the extent of potential losses. A new paper just out in the journal Applied Energy, from a team at Oxford University’s Institute for New Economic Thinking, shows [8] that the “stranded assets” concept applies not just to unburnable fossil fuel reserves, but also to a vast global carbon-intensive electricity infrastructure, which could be rendered as defunct as the fossil fuels it burns and supplies to market.

The Coming Debt Spiral

Some analysts believe the hidden trillion-dollar black hole at the heart of the oil industry is set to trigger another global financial crisis, similar in scale to the Dot-Com crash.

Jason Schenker, president and chief economist at Prestige Economics, says [9]: “Oil prices simply aren’t going to rise fast enough to keep oil and energy companies from defaulting. Then there is a real contagion risk to financial companies and from there to the rest of the economy.”

Schenker has been ranked by Bloomberg News as one of the most accurate financial forecasters in the world since 2010. The US economy, he forecasts, will dip into recession at the end of 2016 or early 2017.

Mark Harrington, an oil industry consultant, goes further. He believes the resulting economic crisis from cascading debt defaults in the industry could make the 2007-8 financial crash look like a cakewalk. “Oil and gas companies borrowed heavily when oil prices were soaring above $70 a barrel,” he wrote [6] on CNBC in January.

“But in the past 24 months, they’ve seen their values and cash flows erode ferociously as oil prices plunge—and that’s made it hard for some to pay back that debt. This could lead to a massive credit crunch like the one we saw in 2008. With our economy just getting back on its feet from the global 2008 financial crisis, timing could not be worse.”

Ratings agency Standard & Poor (S&P) reported this week that 46 companies have defaulted on their debt this year—the highest levels since the depths of the financial crisis in 2009. The total quantity in defaults so far is $50 billion.

Half this year’s defaults are from the oil and gas industry, according to S&P, followed by the metals, mining and the steel sector. Among them was coal giant Peabody Energy.

Despite public reassurances, bank exposure to these energy risks from unfunded loan facilities remains high. Officially, only 2.5 percent of bank assets are exposed to energy risks.

But it’s probably worse. Confidential Wall Street sources claim [10] that the Federal Reserve in Dallas has secretly advised major U.S. banks in closed-door meetings to cover-up potential energy-related losses. The Federal Reserve denies the allegations, but refuses to respond to Freedom of Information requests on internal meetings, on the obviously false pretext that it keeps no records of any of its meetings.

According to Bronka Rzepkoswki of the financial advisory firm Oxford Economics, over a third of the entire U.S. high yield bond index is vulnerable to low oil prices, increasing the risk of a tidal wave of corporate bankruptcies: “Conditions that usually pave the way for mounting defaults—such as growing bad debt, tightening monetary conditions, tightening of corporate credit standards and volatility spikes – are currently met in the U.S.”

The End of Cheap Oil

Behind the crisis of oil’s profitability that threatens the entire global economy is a geophysical crisis in the availability of cheap oil. Cheap here does not refer simply to the market price of oil, but the total cost of production. More specifically, it refers to the value of energy.

There is a precise scientific measure for this, virtually unknown in conventional economic and financial circles, known as Energy Return on Investment—which essentially quantifies the amount of energy extracted, compared to the inputs of energy needed to conduct the extraction. The concept of EROI was first proposed and developed by Professor Charles A. Hall of the Department of Environmental and Forest Biology at the State University of New York. He found that an approximate EROI value for any energy source could be calculated by dividing the quantity of energy produced by the amount of energy inputted into the production process.

Therefore, the higher the EROI, the more energy that a particular source and technology is capable of producing. The lower the EROI, the less energy this source and technology is actually producing.

A new peer-reviewed study [11] led by the Institute of Physics at the National Autonomous University of Mexico has undertaken a comparative review of the EROI of all the major sources of energy that currently underpin industrial civilization—namely oil, gas, coal, and uranium.

Published in the journal Perspectives on Global Development and Technology, the scientists note that the EROI for fossil fuels has inexorably declined over a relatively short period of time: “Nowadays, the world average value EROI for hydrocarbons in the world has gone from a value of 35 to a value of 15 between 1960 and 1980.”

In other words, in just two decades, the total value of the energy being produced via fossil fuel extraction has plummeted by more than half. And it continues to decline.

This is because the more fossil fuel resources that we exploit, the more we have used up those resources that are easiest and cheapest to extract. This compels the industry to rely increasingly on resources that are more difficult and expensive to get out of the ground, and bring to market.

The EROI for conventional oil, according to the Mexican scientists, is 18. They estimate, optimistically, that: “World reserves could last for 35 or 45 years at current consumption rates.” For gas, the EROI is 10, and world reserves will last around “45 or 55 years.” Nuclear’s EROI is 6.5, and according to the study authors, “The peak in world production of uranium will be reached by 2045.”

The problem is that although we are not running out of oil, we are running out of the cheapest, easiest to extract form of oil and gas. Increasingly, the industry is making up for the shortfall by turning to unconventional forms of oil and gas—but these have very little energy value from an EROI perspective.

The Mexico team examine the EROI values of these unconventional sources, tar sands, shale oil, and shale gas: “The average value for EROI of tar sands is four. Only ten percent of that amount is economically profitable with current technology.”

For shale oil and gas, the situation is even more dire: “The EROI varies between 1.5 and 4, with an average value of 2.8. Shale oil is very similar to the tar sands; being both oil sources of very low quality. The shale gas revolution did not start because its exploitation was a very good idea; but because the most attractive economic opportunities were previously exploited and exhausted.”

In effect, the growing reliance on unconventional oil and gas has meant that, overall, the costs and inputs into energy production to keep industrial civilization moving are rising inexorably.

It’s not that governments don’t know. It’s that decisions have already been made to protect the vested interests that have effectively captured government policymaking through lobbying, networking and donations.

Three years ago, the British government’s Department for International Development (DFID) commissioned and published an in-depth report [12], “EROI of Global Energy Resources: Status, Trends and Social Implications.” The report went completely unnoticed by the media.

Its findings are instructive: “We find the EROI for each major fossil fuel resource (except coal) has declined substantially over the last century. Most renewable and non-conventional energy alternatives have substantially lower EROI values than conventional fossil fuels.”

The decline in EROI has meant that an increasing amount of the energy we extract is having to be diverted back into getting new energy out, leaving less for other social investments.

This means that the global economic slowdown is directly related to the declining resource quality of fossil fuels. The DFID report warns: “The declining EROI of traditional fossil fuel energy sources and its eventual effect on the world economy are likely to result in a myriad of unforeseen consequences.”

Shortly after this report was released, I met with a senior civil servant at DFID familiar with its findings, who spoke to me on condition of anonymity. I asked him whether this important research had actually impacted policymaking in the department.

“Unfortunately, no,” he told me, shrugging. “Most of my colleagues, except perhaps a handful, simply don’t have a clue about these issues. And of course, despite the report being circulated widely within the department, and shared with other relevant government departments, there is little interest from ministers who appear to be ideologically pre-committed to fracking.”

Peak Oil

The driving force behind the accelerating decline in resource quality, hotly denied in the industry, is ‘peak oil.’

An extensive scientific analysis [13] published in February in Wiley Interdisciplinary Reviews: Energy & Environment lays bare the extent of industry denialism. Wiley Interdisciplinary Reviews (WIRES) is a series of high-quality peer-reviewed publications which runs authoritative reviews of the literature across relevant academic disciplines.

The new WIRES paper is authored by Professor Michael Jefferson of the ESCP Europe Business School, a former chief economist at oil major Royal Dutch/Shell Group, where he spent nearly 20 years in various senior roles from Head of Planning in Europe to Director of Oil Supply and Trading. He later became Deputy Secretary-General of the World Energy Council, and is editor of the leading Elsevier science journal Energy Policy.

In his new study, Jefferson examines a recent 1865-page “global energy assessment” (GES) published by the International Institute of Applied Systems Analysis. But he criticized the GES for essentially ducking the issue of ‘peak oil.”

“This was rather odd,” he wrote. “First, because the evidence suggests that the global production of conventional oil plateaued and may have begun to decline from 2005.”

He went on to explain that standard industry assessments of the size of global conventional oil reserves have been dramatically inflated, noting how “the five major Middle East oil exporters altered the basis of their definition of ‘proved’ conventional oil reserves from a 90 percent probability down to a 50 percent probability from 1984. The result has been an apparent (but not real) increase in their ‘proved’ conventional oil reserves of some 435 billion barrels.”

Added to those estimates are reserve figures from Venezuelan heavy oil and Canadian tar sands, bringing up global reserve estimates by a further 440 billion barrels, despite the fact that they are “more difficult and costly to extract” and generally of “poorer quality” than conventional oil.

“Put bluntly, the standard claim that the world has proved conventional oil reserves of nearly 1.7 trillion barrels is overstated by about 875 billion barrels. Thus, despite the fall in crude oil prices from a new peak in June, 2014, after that of July, 2008, the ‘peak oil’ issue remains with us.”

Jefferson believes that a nominal economic recovery, combined with cutbacks in production as the industry reacts to its internal crises, will eventually put the current oil supply glut in reverse. This will pave the way for “further major oil price rises” in years to come.

It’s not entirely clear if this will happen. If the oil crisis hits the economy hard, then the prolonged recession that results could dampen the rising demand that everyone projects. If oil prices thus remain relatively depressed for longer than expected, this could hemorrhage the industry beyond repair.

Eventually, the loss of production may allow prices to rise again. OPEC estimates that investments in oil exploration and development are at their lowest level in six years. As bankruptcies escalate, the accompanying drop in investments will eventually lead world oil production to fall, even as global demand begins to rise.

This could lead oil prices to climb much higher, as rocketing demand—projected to grow 50 percent by 2035—hits the scarcity of production. Such a price spike, ironically, would also be incredibly bad for the global economy, and as happened with the 2007-8 financial crash, could feed into inflation and trigger another spate [14] of consumer debt-defaults in the housing markets.

Even if that happens, the assumption—the hope—is that oil industry majors will somehow survive the preceding cascade of debt-defaults. The other assumption, is that demand for oil will rise.

But as new sources of renewable energy come online at a faster and faster pace, as innovation in clean technologies accelerates, old fossil fuel-centric projections of future rising demand for oil may need to be jettisoned.

Clean Energy

According to another new study [15] released in March in Energy Policy by two scientists at Texas A&M University, “Non-renewable energy”—that is “fossil fuels and nuclear power”—“are projected to peak around mid-century … Subsequent declining non-renewable production will require a rapid expansion in the renewable energy sources (RES) if either population and/or economic growth is to continue.”

The demise of the fossil fuel empire, the study forecasts, is inevitable. Whichever model run the scientists used, the end output was the same: the almost total displacement of fossil fuels by renewable energy sources by the end of the century; and, as a result, the transformation and localisation of economic activity.

But the paper adds that to avoid a rise in global average temperatures of 2C, which would tip climate change into the danger zone, 50 percent or more of existing fossil fuel reserves must remain unused.

The imperative to transition away from fossil fuels is, therefore, both geophysical and environmental. On the one hand, by mid-century, fossil fuels and nuclear power will become obsolete as a viable source of energy due to their increasingly high costs and low quality. On the other, even before then, to maintain what scientists describe as a ‘safe operating space’ for human survival, we cannot permit the planet to warm a further 2C without risking disastrous climate impacts.

Staying below 2C, the study finds, will require renewable energy to supply more than 50 percent of total global energy by 2028, “a 37-fold increase in the annual rate of supplying renewable energy in only 13 years.”

While this appears to be a herculean task by any standard, the Texas A&M scientists conclude that by century’s end, the demise of fossil fuels is going to happen anyway, with or without considerations over climate risks:

… the ‘ambitious’ end-of-century decarbonisation goals set by the G7 leaders will be achieved due to economic and geologic fossil fuel limitations within even the unconstrained scenario in which little-to-no pro-active commitment to decarbonise is required… Our model results indicate that, with or without climate considerations, RES [renewable energy sources] will comprise 87–94 percent of total energy demand by the end of the century.

But as renewables have a much lower EROI than fossil fuels, this will “quickly reduce the share of net energy available for societal use.” With less energy available to societies, “it is speculated that there will have to be a reprioritization of societal energetic needs”—in other words, a very different kind of economy in which unlimited material growth underpinned by endless inputs of cheap fossil fuel energy are a relic of the early 21st century.

The 37-fold annual rate of increase in the renewable energy supply seems unachievable at first glance, but new data just released from the Abu Dhabi-based International Renewable Energy Agency shows that clean power is well on its way, despite lacking the massive subsidies behind fossil fuels.

The data reveals that last year, solar power capacity rose by 37 percent. Wind power grew by 17 percent, geothermal by 5 percent and hydropower by 3 percent.

So far, the growth rate for solar power has been exponential. A Deloitte Center for Energy Solutions report [16] from September 2015 noted that the speed and spread of solar energy had consistently outpaced conventional linear projections, and continues to do so.

While the costs of solar power is consistently declining, solar power generation has doubled every year for the last 20 years. With every doubling of solar infrastructure, the production costs of solar photovoltaic (PV) has dropped by 22 percent.

At this rate, according to analysts like Tony Seba—a lecturer in business entrepreneurship, disruption and clean energy at Stanford University—the growth of solar is already on track to go global. With eight more doublings, that’s by 2030, solar power would be capable of supplying 100 percent of the world’s energy needs. And that’s even without the right mix of government policies in place to support renewables.

According to Deloitte, while Seba’s forecast is endorsed by a minority of experts, it remains a real possibility that should be taken seriously. But the firm points out that obstacles remain:

“It would not make economic sense for utility planners to shutter thousands of megawatts of existing generating capacity before the end of its economic life and replace it with new solar generation.”

Yet Deloitte’s study did not account for the escalating crisis in profitability already engulfing the fossil fuel industries, and the looming pressure of stranded assets due to climate risks. As the uneconomic nature of fossil fuels becomes evermore obvious, so too will the economic appeal of clean energy.

Race against time

The question is whether the transition to a post-carbon energy system—the acceptance of the inevitable death of the oil economy—will occur fast enough to avoid climate catastrophe.

Given that the 2C target for a safe climate is widely recognized to be inadequate—scientists increasingly argue that even a 1C rise in global average temperatures would be sufficient to trigger dangerous, irreversible changes to the earth’s climate.

According to a 2011 report by the National Academy of Sciences, the scientific consensus shows [17] conservatively that for every degree of warming, we will see the following impacts: 5-15 percent reductions in crop yields; 3-10 percent increases in rainfall in some regions contributing to flooding; 5-10 percent decreases in stream-flow in some river basins, including the Arkansas and the Rio Grande, contributing to scarcity of potable water; 200-400 percent increases in the area burned by wildfire in the US; 15 percent decreases in annual average Arctic sea ice, with 25 percent decreases in the yearly minimum extent in September.

Even if all CO2 emissions stopped, the climate would continue to warm for several more centuries. Over thousands of years, the National Academy warns, this could unleash amplifying feedbacks leading to the disappearance of the polar ice sheets and other dramatic changes. In the meantime, the risk of catastrophic wild cards “such as the potential large-scale release of methane from deep-sea sediments” or permafrost, is impossible to quantify.

In this context, even if the solar-driven clean energy revolution had every success, we still need to remove carbon that has already accumulated in the atmosphere, to return the climate to safety.

The idea of removing carbon from the atmosphere sounds technologically difficult and insanely expensive. It’s not. In reality, it is relatively simple and cheap.

A new book by Eric Toensmeier, a lecturer at Yale University’s School of Forestry and Environmental Studies, The Carbon Farming Solution, sets out in stunningly accessible fashion how ‘regenerative farming’ provides the ultimate carbon-sequestration solution.

Regenerative farming is a form of small-scale, localised, community-centred organic agriculture which uses techniques that remove carbon from the atmosphere, and sequester it in plant material or soil.

Using an array of land management and conservation practices, many of which have been tried and tested by indigenous communities, it’s theoretically possible to scale up regenerative farming methods in a way that dramatically offsets global carbon emissions.

Toensmeier’s valuable book discusses these techniques, and unlike other science-minded tomes, offers a practical toolkit for communities to begin exploring how they can adopt regenerative farming practices for themselves.

According to the Rodale Institute [18], the application of regenerative farming on a global scale could have revolutionary results:

Simply put, recent data from farming systems and pasture trials around the globe show that we could sequester more than 100 percent of current annual CO2 emissions with a switch to widely available and inexpensive organic management practices, which we term ‘regenerative organic agriculture’… These practices work to maximize carbon fixation while minimizing the loss of that carbon once returned to the soil, reversing the greenhouse effect.

This has been widely corroborated. For instance, a 2015 study [19] part-funded by the Chinese Academy of Sciences found that “replacing chemical fertilizer with organic manure significantly decreased the emission of GHGs [greenhouse gases]. Yields of wheat and corn also increased as the soil fertility was improved by the application of cattle manure. Totally replacing chemical fertilizer with organic manure decreased GHG emissions, which reversed the agriculture ecosystem from a carbon source… to a carbon sink.”

Governments are catching on, if slowly. At the Paris climate talks, 25 countries and over 50 NGOs signed up to the French government’s ‘4 per 1000’ initiative, a global agreement [20] to promote regenerative farming as a solution for food security and climate disaster.

The Birth of Post-Capitalism

There can be no doubt, then, that by the end of this century, life as we know it on planet earth will be very different. Fossil fueled predatory capitalism will be dead. In its place, human civilization will have little choice but to rely on a diversity of clean, renewable energy sources.

Whatever choices we make this century, the coming generations in the post-carbon future will have to deal with the realities of an overall warmer, and therefore more unpredictable, climate. Even if regenerative processes are in place to draw-down carbon from the atmosphere, this takes time—and in the process, some of the damage climate change will wreak on our oceans, our forests, our waterways, our coasts, and our soils will be irreversible.

It could take centuries, if not millennia, for the planet to reach a new, stable equilibrium.

But either way, the work of repairing and mitigating at least some of the damage done will be the task of our childrens’ children, and their children, and on.

Economic activity in this global society will of necessity be very different to the endless growth juggernaut we have experienced since the industrial revolution. In this post-carbon future, material production and consumption, and technological innovation, will only be sustainable through a participatory ‘circular economy’ in which scarce minerals and raw materials are carefully managed.

The fast-paced consumerism that we take for granted today simply won’t work in these circumstances.

Large top-down national and transnational structures will begin to become obsolete due to the large costs of maintenance, the unsustainability of the energy inputs needed for their survival, and the shift in power to new decentralized producers of energy and food.

In the place of such top-down structures, smaller-scale, networked forms of political, social and economic organization, connected through revolutionary information technologies, will be most likely to succeed. For communities to not just survive, but thrive, they will need to work together, sharing technology, expertise and knowledge on the basis of a new culture of human parity and cooperation.

Of course, before we get to this point, there will be upheaval. Today’s fossil fuel incumbency remains in denial, and is unlikely to accept the reality of its inevitable demise until it really does drop dead.

The escalation of resource wars, domestic unrest, xenophobia, state-militarism, and corporate totalitarianism is to be expected. These are the death throes of a system that has run its course.

The outcomes of the struggles which emerge in coming decades—struggles between people and power, but also futile geopolitical struggles within the old centers of power (paralleled by misguided struggles between peoples)—is yet to be written.

Eager to cling to the last vestiges of existence, the old centers of power will still try to self-maximize within the framework of the old paradigm, at the expense of competing power-centers, and even their own populations.

And they will deflect from the root causes of the problem as much as possible, by encouraging their constituents to blame other power-centers, or worse, some of their fellow citizens, along the lines of all manner of ‘Otherizing’ constructs, race, ethnicity, nationality, color, religion and even class.

Have no doubt. In coming decades, we will watch the old paradigm cannibalize itself to death on our TV screens, tablets and cell phones. Many of us will do more than watch. We will be participant observers, victims or perpetrators, or both at once.

The only question that counts, is as follows: amidst this unfolding maelstrom, are we going to join with others to plant the seeds of viable post-carbon societies for the next generations of human-beings, or are we going to stand in the way of that viable future by giving ourselves entirely to defending our ‘interests’ in the framework of the old paradigm?

Whatever happens over coming decades, it will be the choices each of us make that will ultimately determine the nature of what survives by the end of this pivotal, transitional century.

Print Friendly, PDF & Email


  1. Gaylord

    Life on planet earth will be very different by the end of this century??? Think the end of the next decade to mid-century at the latest. We are now in the midst of runaway heating and the sixth mass extinction. The sooner industrial civilization crashes, the more likely some species will survive, but certainly not humans or any other complex organisms. We are done for — all our remains will become a tissue-thin fossil layer in the earth’s crust.

    1. divadab

      sure ya – the most adaptable species, inhabiting every biome on the planet successfully, will go extinct? Apocalyptic doom-and-gloomers like you are just to lazy to adapt and evolve…

      1. pretzelattack

        in all probability, not, but we really don’t know for certain. things are getting worse faster than expected. that’s not apocalyptic doom and gloom. there is also ocean acidification to worry about.

        1. divadab

          Oh ya we will probably wipe out 90% of the species on the planet – it’s a fucking tragedy and we are barely seeing the start of it. The issue for me is – what needs to be done? We can put everyone to work, for sure – organic agriculture sea-to-sea, dikes and pumps, solar and wind infrastructure, a return to local economies – and, regretably, the need for armies will not go away. People in favored areas will have to kill or be killed by invaders. Sad truth which we must confront to survive.

          Who I call doom-and-gloomers are the people who throw up their hands and say we’re doomed – the fucking soylent green brigade – because that’s all they are – sad meat waiting for extinction.

          1. Moneta

            Let’s say a die-off in the billions is a given. This would mean that no matter how optimistic and industrious we are, the die-off would still happen…

            I have trouble believing that those who are sure 100% of being hit with a calamity will not suffer from some kind of anxiety. From my experience, those who can avoid anxiety are those who can delude themselves.

            So if you want the doomers to disappear give them hope! You can’t go around saying there WILL be a massive die-off and expect doomers to shut up…

            1. divadab

              the prospect of violent death does tend to focus a society’s efforts – the struggle to survive is very strong – otherwise the suicide rate would be much higher, no?

              What I’m saying is people will struggle heroically when they are threatened. Vague future events won;t do it – it requires crisis. My money;s on sea level rise. But invasions and war may beat it to the punch. Even the stupidest conservative understands the Noah story and can relate it to actual flooding. But they also understand war all too well. So better to focus on civil projects rather than invasions, at least until they start to happen….

              1. Moneta

                The thing is that right now the vast majority of people in developed countries do not see a die-off, they just see incompetent leaders stopping their forever growing consumerism and blocking their access to the American dream.

                Many doomers are depressed because they see the problems coming our way and nothing of importance can be done because most of the population is completely blind.

                I would be willing to bet that those you call doomers are the types who see farther in the future than 90% of the population. Genetics. Therefore, many are frustrated because nobody is listening. They might annoy you but chances many are preparing themselves in their own way.

                The yin and the yang… you can’t get doomers without perma-optimists.

                1. dots

                  “The thing is that right now the vast majority of people in developed countries do not see a die-off”

                  I’m not so sure of this assumption for the longer term (or possibly even for much longer). Already tensions are rising between displaced populations from fragile regions and stabilized populations in ‘developed countries’ The response against displaced populations is protectionist, isolationist, and appears downright aggressive in nature. That puts the entire notion of ‘developed countries’ at grave risk. It doesn’t take too many years of prolonged conflict before infrastructure is demolished and resources are squandered. A façade falls away rather quietly and without apology, but there is always a huge cost involved.

                  I don’t know that is the way things will go, but that is the energy that has surfaced first and doesn’t seem such a good sign to me.

                  “The general rule for use of the military is that it is better to keep a nation intact than to destroy it. It is better to keep an army intact than to destroy it, better to keep a division intact than to destroy it, better to keep a battalion intact than to destroy it, better to keep a unit intact than to destroy it. […] The lowest is to attack a city. Siege of a city is only done as a last resort.” Lao Tzu, The Art of War

                2. susan the other

                  And one such solution is at hand. People. Too many people to subsist in a crazed-fossil-fueled capitalists world means there will be changes. If the MIT professor is correct and the solution is decentralized regenerative farming, aka organic farming on a vast scope, then we’ve certainly got the people power to do it. It’s always good to hear that China understands these things. I’m sure India does too.

          2. subgenius

            You obviously have zero idea about how complex and delicately balanced the biosphere is. Wipe out 90% of species and the rest are highly.unlikely to survive. You might want to.start studying ecology and biology before spouting off and looking like a wanker.

            1. myshkin

              Agreed. To have any confidence that the “People in favored areas (who) will have to kill or be killed,” will experience signifcantly different outcomes then, “the fucking soylent green brigade – because that’s all they are – sad meat waiting for extinction,” has the cant of hollywood induced fantasy, a Strangelovian delusion.

              By the time 90% of the biosphere is wiped out I would assume humans would be long gone among the cascading die offs.

              Ya, right, bring it on.

  2. Russell

    Nafeez Ahmed offers ways out that realists know are dependent on a load of luck. Still we have to admit a lot of us never expected to make it this far.
    “I have one word for yah kid.”
    “What’s that?”
    Otherwise it is “Superconductors.”
    Meantime the goal of getting us through Jared Diamond’s “bottleneck” means nothing less than the elimination of WMDs in a multi polar power balanced world.
    While this thing of war has been with us, and will be, it is only to be fatal to our status as a Big Time Species if the weaponry is designed to be so apocalyptic as to satisfy the superstitious who substitute the mushroom cloud for the cross, rapture, and gifts of young women when they have no bodies.
    My supposition is that the warrior class would come around when it was made manifestly clear their would be war enough for them to keep working.
    Far as my mention of Superconductors, they do represent more out of less.
    We share not only the planet, the seasons, and nightmares, but moods. What we must work to give realistic justification for is hope. We are near to the good sense to abandon that, and this is why a cold cheeriness is as vital as whatever science and engineering might provide.

  3. kimyo

    saudi arabia has 268 billion barrels of ‘proved’ reserves.

    yet, saudi arabia is planning to build 10 nuclear plants “with a total capacity of 50 gigawatt[s], which is the Kingdom’s present electricity requirement. This will enable the Kingdom to avoid its dependence on traditional power stations powered by oil.”

    maybe matthew simmons had it right the whole time…..

  4. meeps

    Thanks, Yves, for posting this information rich and pertinent article. Your curation is impeccable.

    The cited documents are lengthy and I intend to read further. At a glance, I was surprised to learn that, despite years of Peak Oil investigations:

    1) EROI is virtually unknown in conventional economic and financial circles.
    2) Lack of institutional awareness and disinterest at DFID is widespread, such that research isn’t influencing policy. The essence of irony!
    3) Experts remain focused on comparitively high energy solutions (such as underground carbon capture technologies) over low energy biological solutions (such as carbon sequestration by soil organisms, trees and plants).

    I’m heartened, though, to see some regenerative farming citations. Eric Toensmeier and the Rodale Institute are wonderful. Bill Mollison, David Holmgren, Brad Lancaster, Geoff Lawton and Darren J. Doherty are also excellent resources. BTW, the 60999 EROI Global Energy Resources pdf cites a Lambert, et al 2013. Is that THE Lambert?

    A broader understanding of energy is and will remain critical in a post-capitalism, post-carbon future. Currently, work is neglected because “it doesn’t pay” to do it. That is a tragic squandering of available resources. By any meaningful metric, it pays to liberate latent energy to do the work of restoring the environment.

    There was a lively discussion this week about community building. I’m happy to spend my days installing earthworks, natural building, growing yummy stuff…

    1. TheCatSaid

      Thx for highlighting the regenerative agriculture references. An important resource I’d add to the list regarding regenerative agriculture and large scale carbon sink benefits is the Savory Institute. Their website is constantly adding links to recent research.

      1. meeps

        TheCatSaid @ 10:24 am

        I appreciate your feedback, but I intentionally crossed Savory off my list. His erroneous belief that elephants cause desertification resulted in the deaths of 40,000 of them. To add insult to injury, he now advocates for animal agriculture (in deserts!) as a way to save the Earth. Strike two, no more pitches.

  5. EndOfTheWorld

    I’m not a huge Rolling Stones fan, but whenever I see a complex economic analysis like this, I’m reminded of what Mick Jagger said when they asked him why he dropped out of the London School of Economics: “There’s too many variables.”

    1. Synoia

      Mick Jagger said when they asked him why he dropped out of the London School of Economics: “There’s too many variables.”

      True. And many of “the variables” were blond.

  6. Tom Ford

    Fascinating article. One niggling question about EROI. I get how it’s relatively easy to calculate the EROI of a barrel of oil — the barrel holds a specific number of gallons and each gallon is capable of producing X amount of energy. But what about renewables? You know the production cost of a wind turbine, for instance, but the energy it produces over its lifetime is much more open-ended. So the Energy Return for it must be the total expected energy returned over the turbine’s projected service life, right? If so, the longer it lasts, the higher it’s EROI.

    1. Paper Mac

      It’s a lot more complicated even than that, it really depends on where you draw the boundaries of the system. Prieto and Hall did an analysis of Spanish solar that was probably the most comprehensive yet, including things like the truck trips to lay the gravel for the surface roads, maintenance trips to clean the panels, etc, and got a much lower EROEI figure than is typically given for solar. As far as wind goes, turbines tend to fail at a higher frequency than manufacturers estimate (go figure) so the best way to measure things like turbine lifespan is to look at those in the field. The article is generally correct that renewable EROEI tends to be lower than that of fossil fuels, although it seems not to contemplate that there is a lower bound on EROEI beyond which these systems can’t/won’t be sustained anyway. It’s not just that less energy is available for non-energy production use but that there is an EROEI return below which you probably can’t operate the infrastructure necessary to mine/smelt materials for renewables on the scale being contemplated here (total replacement of FF-burning infrastructure)

      1. meeps

        Paper Mac @ 7:30 am

        “It’s not just that less energy is available for non-energy production use but that there is an EROEI return below which you probably can’t operate the infrastructure necessary to mine/smelt materials for renewables on the scale being contemplated here (total replacement of FF-burning infrastructure)”

        Yes. Nicole Foss totally gets this. Complexity matters. In her response to David Holmgren, Crash on Demand, she notes:

        “Once the financial system has the accident that is clearly coming, we will be looking at a substantial fall in societal complexity, but that fall in complexity will eliminate the possibility of engaging in such highly complex activities as fracking, horizontal drilling, exploiting the deep offshore or producing solar photovoltaic panels and inverters. “Low energy profit ratio” energy sources cannot by themselves maintain a level of socioeconomic complexity necessary to produce them, hence they will never be a meaningful energy source.”

        The logic that we can engineer our way out of a this and maintain the level of civilizational complexity we are accustomed to increases the danger of stranding more assets.


        1. Paper Mac

          TBH this whole piece strikes me as highly derivative of Nicole Foss’ work. I’m glad that people are paying more attention to biophysical economic concepts, I guess, but it’s a little weird to see the fundamental thermoeconomic problem with renewables (low EROEI) described and then its implications basically ignored (we’ll replace FF infrastructure with renewables! Well.. no, probably not, because low EROEI).

        2. dots

          From Crash on Demand

          Nicole Foss writes, “Personally, I believe a rapid financial crash combined with an initially slow, but then increasingly rapid fall in energy supply is the most likely scenario.”

          Based upon the observed responses of those who govern, I agree. Either they are misleading the public on to their (in)ability grasp and respond to critical events, or they have magnificently over-developed blindspots so that even identifiable global, regional, and local weaknesses seem ‘unpredictable.’ There are simply too many examples of this.

          Inflexibility, overshoot, or a lack of imagination -any and all of these- increase the odds of making a series self-destructive decisions (or continually making them) on a large scale. The odds of ‘shooting ourselves in the foot’ go up with every choice that is made to maintain the status-quo.

          The more we try to sustain what is unsustainable, the more precarious our collective position becomes. Ecologically, we’ve been building a Tower of Babel.

          She’s a very impressive public speaker.

    2. Steve H.

      It’s best to think of these as order-of-magnitude comparisons with each other. Local conditions provide huge variability on energy generated by renewables. Likewise fossil fuel extraction.

      I’ve invested in LED lighting for a long time. Output per unit increases by a rule-of-thumb called Haitz’s law, about a factor of 20 per decade. Many bulbs tout a lifetime of 20 years, but haven’t been around that long, so that’s an extrapolation, and I have the dead bulbs to prove the point. So when someone talks about LED efficiency, it’s not a static number, but it’s still useful for discussion.

    3. Brooklin Bridge

      A factor that I believe is missing from EROI is cost of clean up or, lacking clean up, the cost of consequences, which should be determined taking into account the negative effects of our propensity for corruption, personal gain at the expense of the whole, (which is why nuclear should have a stratosphericly high cost, for ex.). For oil, coal and uranium, this is a high cost that should be subtracted from EROI. For solar and wind, the cost is much less, except possibly in the manufacture of components that convert sun/wind into electricity. Life span is supposed to be around 30 years so the clean up/consequence cost of manufacture should be divided by that number.

    4. heresy101

      EROI has been used as a method to bash renewables in recent articles and comments. While it is correct in theory, it seems to more of a Koch talking point to attack renewables as a waste of resources that shouldn’t be pursued.

      A 500MW NG combined cycle plant at 85% capacity factor, $950/kW construction cost, over 30 years yields a levelized cost of about $0.008/kWh – a bargain! A 500MW unsubsidized utility level photovoltaic plant at $1,100 construction costs, 20% capacity factor over 25 years yields a levelized cost of $0.045/kWh – what a waste of money. Unfortunately, the combined cycle needs fuel for 30 years! At the normal 7,000 BTU/kWh, the cost of that fuel at $3/mmBTU will add another $0.021/kWh in fuel costs for a total of $0.0293/kWh. When NG costs go back to $5/mmBTU, the combined cycle cost is $0.043/kWh – not quite such a bargain.

      If we assume the energy costs of all the rare minerals for pv and all the energy costs of making the steel for the combined cycle are captured in the capital costs (a reasonable assumption but won’t exactly match energy flows), the pv has by far the worst EROI. Adding in the fuel costs for 781 million mmBTU tells another story. 30 years of fracking, steel for the wells and pipelines would give the combined cycle the worst environmental EROI.

      What other commenter’s miss about the upfront cost of pv is that there is no energy cost, repeat there is no energy cost with solar, wind, and wave. Wind, solar, and wave have high capital costs but there is no need to dig coal, frac natural gas, and refine uranium in a constant flow of energy to the electric generating plants.

      The Solutions Project out of Stanford has laid out a path to renewable energy for all 50 states and the world: search “Solutions Project”.

      1. Paper Mac

        Dollar-denominated costs are absolutely not substitutable for energy in EROEI calculations, which is why EROEI calculations exist.

        “What other commenter’s miss about the upfront cost of pv is that there is no energy cost, repeat there is no energy cost with solar, wind, and wave. Wind, solar, and wave have high capital costs but there is no need to dig coal, frac natural gas, and refine uranium in a constant flow of energy to the electric generating plants.”

        This is simply wrong- all renewables require ongoing energy inputs, in the form of embedded energy (replacing turbines, panels, etc), maintenance, etc. Again, this is why EROEI calculations exist- capital cost tells you nothing about how many joules you’re getting out of a system for every joule you put into it, it just tells you what some of the inputs are valued at, which is a completely different proposition. It’s entirely possible for a net energy sink (eg using fossil fuels to grow corn to make biofuels) to be “economical” in dollar denominated terms. Says nothing about whether you can run a civilisation on the surplus (or lack thereof) produced by that system.

        1. Code Name D

          I also disagree, and think that EROE calculations should be held skeptically. The problem is that you really are trying to compare apples to oranges here.

          Fossil fuels are scalable. The more energy you want out of the system, the more energy you need to put into it. Within that ratio, there is no limit (or at least the limit is very high) how much energy you can take out and how fast.

          Renewable energy sources however are restricted to the amount of free energy available to harvest at any given point in time. A wind farm on a low-wind day is going to have a far lower EROE number than when compared to a high-wind day, which will change the overall EROE number over a span. And there is a finite limit to how much energy can be extracted in a unit period of time, even on high energy days. Unless EROE calculations take this into account how can they be considered accurate for renewable sources?

          The essay also notes that the use of renewable will require a whole new way of thinking about the demand side of the equation. With fossil fuels, you could produce as much energy as needed, on demand. A refinery could operate 24/7, shutting down only for maintenance and holidays. But with renewable energy, you are constrained by the amount of free energy available on any given day. Thus your refinery will likely only operate on high energy days, then go into a gray mode or complete shutdown on low energy days. Production becomes far more spontaneous, and harder to predict. (Something that the current economy can not tolerate.)

          And because there are fundamental limits to the availability of free energy, there are limits to the scale of your consumption. Where with fossil fuel systems, the scale of your economy is only limited to the scale of your extraction. A small, properly managed economy is probably doable. Where as our current infinite-growth economy could never be sustained with renewable energy. I am not sure EROE takes changes and management of the demand side of the equation into accounts, and is likely rooted in the more traditional infinite-growth model of the economy.

      2. Paper Mac

        “While it is correct in theory, it seems to more of a Koch talking point to attack renewables as a waste of resources that shouldn’t be pursued.”

        Incidentally, for those following along, this is going to be the favoured rhetorical device for those attempting to discredit anyone who wants to empirically examine the consequences of blowing what remains of our CO2 budget on trying to prop up industrial capitalism with energy infrastructures that produce much smaller surpluses than the ones it developed under.

        1. heresy101

          Yes, thermodynamics rules all, even economics, but the perversion of the argument to attack renewables is the flavor of the day.

          “all renewables require ongoing energy inputs, in the form of embedded energy (replacing turbines, panels, etc), maintenance, etc. Again, this is why EROEI calculations exist- capital cost tells you nothing about how many joules you’re getting out of a system for every joule you put into it, it just tells you what some of the inputs are valued at, which is a completely different proposition”

          The capital costs are nearly the same and the total energy inputs to the capital are probably nearly equal, but you conveniently ignore the FUEL costs! This isn’t an academic argument but very real in the electric industry world. Solar and wind are becoming such a large part of CA and TX electric markets that coal and NG are being forced out of those markets.
          In fact, a vice-president of San Diego Gas & Electric pronounced that their recent combustion turbine would be the last and that future peaking power would come from storage batteries. (can’t find the link – it is at work). Page 36 of this presentation that did show up indicates why renewables & storage are making fossil fuels obsolete: http://energytransition.umn.edu/wp-content/uploads/2015/06/Energy-Storage-Power-System-Game-Changer-by-Janice-Lin-.pdf Combustion turbines can’t meet a 5 min start-up/shut-down requirement.

          How can you ignore 30 years of fracking in your EROEI calculations. The amount of energy inputs to drill, to make the pipes, dig the waste water storage ponds is much greater than the energy inputs to a combined cycle plant. The O&M for wind and solar is only a TINY TINY fraction of the fossil fuel procurement energy!

          The driving force behind the Solutions Project is Mark Jacobsen, the Director, Atmosphere/Energy Program at Stanford.

          1. Paper Mac

            If you think I’m arguing in favour of continued use of fossil fuels, you’ve missed the boat entirely I’m afraid.

      3. Steve H.

        – no energy cost, repeat there is no energy cost

        Are we to assume you mean fossil fuel costs? Is there a way to generate electrical energy that doesn’t require mining raw materials?

        I took a look at the Solutions Project site, and couldn’t locate much content. The Board of Directors looks like a Hollywood fundraiser, and the Staff Leadership has a Director of Engagement, a Creative Director and and Executive Producer. A Director of Investments. The Executive Directors’ degree is in marketing.

        The three billion people cooking on three-stone fires are technically using renewable energy. And I still have not heard the solar pv has ever gained a net watt of energy. So you’re not on the wrong track. Please recognize that you are picking a fight when you allege Koch talking points. If you are going to do that, you need to be precise, because I personally find that offensive.

      4. John Wright

        I believe one should replace “high capital costs” with “initial high energy costs” in your statement.

        “High capital costs” hides the energy required for the initial buildout of the new infrastructure

        Here is a listing of how much energy it takes to produce 1 kilogram of some materials:

        • Steel (from recycled steel): 6-15MJ (1,665 to 4,170 watt-hours).
        • Aluminum (from 100 % recycled aluminum): 11.35-17MJ (3,150 to 4,750 watt-hours)
        • Iron (from iron ore): 20-25MJ (5,550 to 6,950 watt-hours)
        • Glass (from sand, etcetera): 18-35MJ (5,000 to 9,700 watt-hours)
        • Steel (from iron): 20-50MJ (5,550 to 13,900 watt-hours)
        • Plastics (from crude oil): 62-108MJ (17,200 to 31,950 watt-hours)
        • Copper (from sulfide ore): 60-125MJ (16,600 to 34,700 watt-hours)
        • Aluminum (from a typical mix of 80% virgin and 20% recycled aluminum): 219 MJ (60,800
        • Silicon (from silica): 230-235MJ (63,900 to 65,300 watt-hours)
        • Nickel (from ore concentrate): 230-270MJ (63,900 to 75,000 watt-hours)
        • Aluminum (from bauxite): 227-342MJ (63,000 to 95,000 watt-hours)
        • Titanium (from ore concentrate): 900-940MJ (250,000 to 261,000 watt-hours)
        • Electronic grade silicon (CVD process): 7,590-7,755MJ (2,108,700 to 2,154,900 watt-hours).

        Silicon from silica takes about 65KWH or about $3.30/KG at $0.05/kw-hour.

        Note that 1KG of aluminum takes about 95KW = $4.75 at $0.05/hw-hr if taken from bauxite ore, or from recycled aluminum about 4KWH or about $0.20, about 1/20 the cost.

        The problem is that if a lot of new aluminum infrastructure is added, recycling might not provide much feedstock for this buildout, forcing higher cost bauxite ore based aluminum to be used..

        I am skeptical that renewables will be embraced in sufficient quantities to make a difference, due to high initial energy(= capital) costs.

        1. heresy101

          Since 5 o 6 coal companies have recently gone bankrupt, this argument about the horrible EROEi has appeared in a number of conversations. Coal is dead and there are those that think that nuclear is still the carbon free path to an energy future and the Kochs and Westinghouse are freaking out. Nuclear used to be $8,000/kW but is over $10,000/kw (the Georgia nuke at least). The only way to try to make them look like the future versus $1,200/kW for pv and $900/kW for wind is to try to make renewables look inefficient and wasteful of energy.

          Have you been through a combustion turbine or combined cycle plant? The alloys and materials in the turbines and heat exchangers use more of the materials listed than you will find in any wind turbine or solar panel. I challenge you to take the amounts used in a NG generator (they are the only one’s that matter nowdays) and compare them to solar and wind. Prices will be an approximate surrogate for each generating energy source and they will be close the costs that I used for capital costs. I didn’t make those costs up; they are what we get when we issue and RFP when adjusted for the ITC. First Solar has claimed a $1,000 all in cost for utility grade solar without subsidies.

          Even if the energy capital costs for wind, solar, wave, and geothermal are more than NG, the energy for fuel is not required. If you only use the energy costs to build the capital equipment (turbines, panels, heat exchangers etc), the argument is totally false unless the FUEL costs are counted as part of the energy returns on the total project over 30 years. The operating and maintenance costs (O&M) of wind and solar are much, much less than a combustion turbine. A replacement inverter or broken turbine blade are a fraction of the NG generators in energy or dollars. Even counting O&M of wind and solar the TOTAL energy costs are much less than NG. Add up all the costs from the materials listed and add them to every mmBTU of natural gas that is fracked. There is no way that their energy requirements can be less than the watts from the sun and the wind blowing.

          Coal is dead and the use of EROEI appears to be used to attack renewables to make nuclear look better. Even James Hansen has come out for nuclear; even after Fukushima.

          California will be 50% renewable in 15 years and Hawaii at 100% in 25 years. You may be sceptical but our small muni is 70% renewable and 100% carbon free in an average hydro year. Additionally, our rates are 20% below PG&E.

  7. mikeW

    I am quite a bit disappointed with this “article”. First off, we haver to acknowledge that other than meteorologists (and yes demographics) we have we skill at forecasting the future. So to me this article reads as though it started from a future condition than constructed a series of facts and thesis that get you there. The reality is we don’t know and one may as well flip a coin.

    That said, there is clearly right now much to be concerned about. Humans seem to be internally wired to be short-term based. “Tell me where my next meal is coming from is all I care about”. So, tackling issues like climate change is not something we’re good at; and there is no historic precedent I can think of for all of mankind collaborating to solve a problem.

    The carbon-energy situation needs to be placed in a context of the slow burn debt deflation we are experiencing, which at a minimum is usually death for the financial performance of commodities and any long term debt supported business. NC has well documented the issues this poses for actuarial based investments (life insurance, think Japan in the early ’90s, pensions, etc.).

    Last thought, the debt situation is likely much worse in the short run as the decline in oil revenues are likely already causing local and regional recessions (e.g., Bakken, Houston) and correlated impact on commercial real estate, home values, mortgages, etc. plus are we facing a sovereign debt crisis in such countries as Venezuela (which used PDVSA to massively borrow on the countries behalf), Brazil, Russia, etc.

  8. Moneta

    This short term glut will probably accentuate the coming problems because it gives the impression that there is no peak oil. People have trouble understanding that there are short-term cycles within a long-term cycle. This bad signal is giving us the impetus to continue investing in energy intensive projects instead of reshaping our economy. And this will make things even worse in 5-10 years.

    If the total cost of extraction is more than 40$ and consumers are paying $40 or less, then somewhere along the way, someone is subsidizing the cost. It could be low tax rates, eZ money, growing deficits, underfunded pensions, underfunded restoration funds, etc.

    A country’s most important asset is energy and historically, countries have never willingly cut total energy consumption. They might increase efficiencies but the total does not drop. This means that most countries, as long as there exist other sectors that can be squeezed, will continue to subsidize the energy sector squeezing out these sectors that are deemed less important or simply those with less clout.

    It is quite obvious that our lives are even more energy dependent than they were when this monetary cycle started in the early 70s. And our system is still based on growing this even more. With NIRP, we are getting very close to the end of this cycle.

    1. Jef

      There is no glut. All the oil is being bought.

      The problem is that there in not yet enough of a shortage to drive the price up. A small distinction but huge ramifications if you understand it.

      And by the way higher prices is not a solution to what ails us.

      Fantastic tour de force article.

      1. Code Name D

        There is no glut. All the oil is being bought.

        I am not sure this is true. Storage for unrefined oil and refined products are at historic highs while production continued on almost at full steam. I also think you need to be carful when you say that “all oil is being bought.” The key point here is what is the ratio of production to consumption? Not how quickly slips of paper are being bought and sold in the mercantile floors by day traders.

        And by the way higher prices is not a solution to what ails us.

        This, I do agree with. In fact it was the elevated prices of oil that got us into this mess in the first place.

  9. divadab

    A few thoughts:
    -time scale – this thing we are in will roll on for thousands of years – the K-T mass extinction took 2-3 million years before species started to increase again;

    -They (we) will keep the oil flowing as long as they can – look how ugly the coal industry’s slow death is getting – until climate events are overwhelming and require extraordinary efforts just to mitigate. My money’s on sea level rise focusing all attention;

    -billions of humans will die – many in climate change-triggered wars and famines – the Four Horsemen are saddling up;

    -like it or not, people in the developed world, less densely populated parts, anyway (USA, Canada, e.g.) once they are over the necessities like lower standards of living (no more trinkets and geegaws ) and hard physical labor in sustainable agriculture, are way better off than over-populated places. However, it will get ugly at the borders, as Europe is experiencing right now.

    -expect more authoritarian governments – the human response to crisis. Tribalism will rule.

    -and the doom-and-gloomers can fuck off they are useless, unable to adapt or evolve, and are just scaring the stupid unnecessarily. The living planet will adapt and evolve as it has always done – and humans in some form or other also. DO you really think the most adaptable species, inhabiting every biome, will not?

    1. Moneta

      Billions will die yet bash the doomers? Your strategy is happy thoughts?

      Something tells me that many of your doomers would adapt better than your positive thinkers.

      1. divadab

        No my strategy is hard work. Respectful of the planet’s living processes. And honesty.

        Most doomers are at an early stage of consciousness of the magnitude of our society’s death spiral. My aim is to shake them out of their (totally understandable) depression – work is the cure. COllective efforts on a large scale but managed locally – resilient ecology requires complexity – monocultures are doomed.

        1. Moneta

          The way I see it is that you have convinced yourself that you will be on the winning side when calamity strikes. Whether you are is another matter… just like the slowest bug does not get to the field on time to get exterminated by the sprayed pesticides, work and efficiency do not guarantee anything.

          The doomers are those who are not convinced they will be spared. Maybe they can place themselves in the winning group with positive thinking and hard work, but maybe not so in such a case they need help deluding themselves so they can become perma-optimists.

          1. divadab

            Well I’m glad you have that insight into my thinking! Not!

            I see it rather that my own death is inevitable, and that of my lineage and tribe as having a probability of greater than 0. Luck (divine providence?) counts for a lot, as you note.

            Deluded optimists can be organized to do useful work. Better than idle pessimists.

            I utterly reject the “winning side” as a useful concept – there is only living struggle through the generations.

            1. Moneta

              My point is that to feel serene, one has to convince oneself of something positive whatever it is.

              The doomers probably haven’t. And I believe your representation of the doomer philosophy perpetuates doomerism.

        2. cnchal

          . . . work is the cure. . .

          Depends on the type of work. Sitting on one’s ass and doing sweet eff all uses the least amount of energy. So relax, kick back and save the planet.

        3. jrs

          Work as a cure for what at a certain point become physical feedback loops? Gosh this countries work ethic is almost a psychosis, where work is granted magical powers. I mean yes employing people to fix not damage the environment would be good (even unemploying them not to damage it if there basic needs were met is an improvement), but at a certain point it’s really out of our hands, and noone knows what that point is with the climate and we may have reached it or not. It’s possible some hail mary geoengineering solution of blocking solar energy from coming into the planet might work, it’s a long shot. Sure it would take work to develop any such thing I guess.

    2. inode_buddha

      Can’t wait for the coastal mega-metropolises to die off. I would call it a good start. Sub/rural myself, and we’re sick and tired of having the agenda set by the NYC DC LA Chicago folks. So, maybe its a self-solving problem.

    3. Fiver

      I’m afraid the most adaptable species missed the fork leading away from the disaster you rightly acknowledge is probable, one involving loss of billions, ruin for half the planet – and what I ask is if that brief description doesn’t, by itself, meet the requirements of a condition termed Doom? I also balk at the notion the remaining half will automatically, quickly come together and forge ahead, more inclined to believe that anything that damaged the world that much was certain to have done severe damage to what remained. In other words, ‘The Doom is Strong in this one.’

  10. Brooklin Bridge

    I have to wonder, if it is really so easy to clean up the carbon and other toxins we have polluted the atmosphere and oceans with, then why bother to stop producing oil, coal and nuclear other than that they come to be less economical?

    i strongly doubt the projected ease of such a clean up whether it be the biological feasibility or the willingness of humans to work together for common goals – extinction seem to be almost an afterthought – (or conversely, the more realistic “Hillary” element in people to work feverishly for personal gain at the expense of others). Going from coal to sunlight is easy. Going from Clinton to Sanders, not so much.

    1. divadab

      Well President Trump will make the thing go faster and expose the failings of fossil-fueled society as he has the corruption of our fundamentally racist nation. By being the bad thing.

      1. susan the other

        Trump is not stupid. He has eyes and ears and friends. He has lotsa beautiful ocean-side real estate which will be 10 feet under at some point and everyone will know this and he’ll have no small difficulty unloading those properties. Etc. If anyone is a dark horse for renewables, it’s probably the Donald.

    2. meeps

      Brooklin Bridge @ 8:46 am

      You infer a projected ease of cleanup that is supported nowhere in the article, citations or comments. I’m not picking on you, just wondering where this is coming from.

      1. Brooklin Bridge

        In the section, Race against time

        The idea of removing carbon from the atmosphere sounds technologically difficult and insanely expensive. It’s not. In reality, it is relatively simple and cheap.

        A new book by Eric Toensmeier, a lecturer at Yale University’s School of Forestry and Environmental Studies, The Carbon Farming Solution, sets out in stunningly accessible fashion how ‘regenerative farming’ provides the ultimate carbon-sequestration solution.

        Regenerative farming is a form of small-scale, localised, community-centred organic agriculture which uses techniques that remove carbon from the atmosphere, and sequester it in plant material or soil.

        Using an array of land management and conservation practices, many of which have been tried and tested by indigenous communities, it’s theoretically possible to scale up regenerative farming methods in a way that dramatically offsets global carbon emissions.

        Toensmeier’s valuable book discusses these techniques, and unlike other science-minded tomes, offers a practical toolkit for communities to begin exploring how they can adopt regenerative farming practices for themselves[local usage = ease of use, communities/small scale = economical].

        According to the Rodale Institute [18], the application of regenerative farming on a global scale could have revolutionary results:

        Simply put, recent data from farming systems and pasture trials around the globe show that we could sequester more than 100 percent of current annual CO2 emissions with a switch to widely available and inexpensive organic management practices, which we term ‘regenerative organic agriculture’… These practices work to maximize carbon fixation while minimizing the loss of that carbon once returned to the soil, reversing the greenhouse effect.[emphasis mine.]

        1. meeps

          Brookline Bridge @ 8:36 pm

          My reading was that the essay distinguishes complex and expensive technologies from simple and comparatively inexpensive methods, saying nothing of ease.

          1. Brooklin Bridge

            The qualities of; Inexpensive, widely available, simple organic management practices suggest easy to afford, easy to get and easy to use. It is a perfectly defensible categorization of those qualities, particularly as defined by their opposites; complex, costly, unavailable, non organic.
            You are nit picking.

  11. Nicholas Cole

    “Endless growth in materials and energy usage will be impossible in the economies of the future.”

    two paragraphs later:

    Experts are convinced solar energy can continue to grow exponentially to 100% of our electricity supply!

    Otherwise a very good article, but come on…

  12. ke

    All major cultures are in terminal decline, which should be expected, and is not to say that they will not be replaced or that some will not recover, which is neither good nor bad.

    The geneticists and psychologists are snakeoil salesmen. All the geneticists have proven is that you have the same basic gene set as a worm, making up about 2% of your DNA. They haven’t begun to decipher the 98% if then feedback code. Science tells you that the last thing you want to do is inject everyone with the same mitochondrial DNA, but medicine isn’t about science; its about printing money on fear.

    What the psychologists learned is that an irrational majority can be conditioned to do whatever you want. Ironically, in America you are an unfit parent if you have a scientific mind or believe in others, as a Christian, leaving the majority, which lives in fear, to raise children, which doesn’t bode well except for the morons running the show, for now.

    Projecting the future on biased data is a waste of time, the status quo. Too funny, critters who have never developed seed debating corporate versus yuppie farming techniques.

    1. ke

      Medicine will never understand synaptic response, immunological adaptation, intercellular signalling or blood clotting / mRNA feedback, because it is not paid to do so. You are nature’s test tube, and the majority fears the unknown, as conditioned by the cave people running public education.

      As a carbon based life form, it is in your interest to learn how that carbon chain is popped on and off the stack to maintain event horizons.

      1. dots

        That last line is too funny, but I agree with you.

        Getting out there and doing something now that we understand what is going on is probably a better use of our time than trying to protect the current economic structure. Build a new energy paradigm that better fits our ecosystem and see what kind of economic, social, and political structures begin to develop around that.

        Surely, whatever develops will model what has come before it but it needs to be rooted in the physical environment, which clearly it is not currently.

  13. Eduardo Quince

    The author blames the oil patch bust on a geophysical crisis. There is some truth to this argument but by far the biggest driver of the bust is Fed policy. Artificially cheap debt financing led to overcapacity and a vicious cycle of continued overproduction as drillers desperately try to avoid defaulting.

    1. susan the other

      There is method to central bank madness. It has been apparent for 40 years that we were on a collision course with survival. Exxon knew it in the 70s. This article raises the question, Will the end of fossil fuels take down the economy? The answer is no. Because the economy came to a screeching halt in 2007 already. Everything since then is ersatz – not based on fossil fueled capitalism at all. And as we can see it is working, albeit it to most people’s frustration. As Hillary said, “We are taking down coal and oil” and using natgas as a bridge fuel until renewables replace natgas too. Is it possible that the Fed doesn’t know this? What a funny thought. So when you read about the Dallas Fed telling wildcatters with billions in outstanding high yield debt to hide their losses the implication of this is that the Fed has their back. It’s choreography.

      1. Eduardo Quince

        I think you give the Fed way too much credit. The Fed is a one-trick pony with tunnel vision, blind to the fact that it’s policies are deflationary.

        So when you read about the Dallas Fed telling wildcatters with billions in outstanding high yield debt to hide their losses the implication of this is that the Fed has their back.
        No, I’d say that the implication is that the Fed is trying to maintain confidence in the Potemkin economy.

  14. thoughtful person

    This article seems to me to be an attempt at taking a long term look at a huge issue – humanities future over the next 85-years or so. Given the available text space (no doubt many volumes could cover a small fraction of the subject) Ahmed does a great job of summarizing and provides some promising links to sources.

    One quick quibble, Ahmed writes,
    “There can be no doubt, then, that by the end of this century, life as we know it on planet earth will be very different. Fossil fueled predatory capitalism will be dead. In its place, human civilization will have little choice but to rely on a diversity of clean, renewable energy sources.”

    Of course, I agree life will be different in 2100. I also agree that we are witnessing the fossil fuel end game (as Amory Lovins at RMI would say), and certainty if one looks at current rates of investment in various energy technologies, renewable sources are the future. My quibble is that predatory capitalism will be dead. The Machiavellian ideology arrived prior to fossil fuels of any sort, and I think likely will be around quite a bit longer.

    Granted, Ahmed makes some caveats in the article about how difficult the next few decades will be. He then writes,

    “Large top-down national and transnational structures will begin to become obsolete due to the large costs of maintenance, the unsustainability of the energy inputs needed for their survival, and the shift in power to new decentralized producers of energy and food.

    In the place of such top-down structures, smaller-scale, networked forms of political, social and economic organization, connected through revolutionary information technologies, will be most likely to succeed. For communities to not just survive, but thrive, they will need to work together, sharing technology, expertise and knowledge on the basis of a new culture of human parity and cooperation.”

    Imagine the Sanders campaign working on issues outside electoral politics, run by occupy wall street organizers for example. I suspect there is some truth in Ahmed’s speculations. Enough to be hopeful about. It may just come down to a choice – despair in business as usual, or taking a leap to hope, and work for, the success of some rational changes for the better.

    1. likbez

      The end of cheap oil probably means end of neoliberalism. It is still unclear what will replace it as a dominant social system.

    2. John

      Please don’t get too thrilled by the end of top down authorities…I read last week that Pakistan is investing heavily in tactical nukes and the plan is to give them to local commanders on the Indian border with use decided by local commanders. What could possibly go wrong with that?
      That would be a joke on the Americans..they got preempted on taking down civilization by somebody else.

  15. Dick Burkhart

    Well said! A hard nosed look at what’s already happening makes your forecast look perfectly reasonable. Except, of course, things will change, for better or worse.

  16. vegeholic

    Thanks to NC for posting this article. Such topics are generally not approved by the gatekeepers of our national dialogue. My comment is that the EROI situation is probably worse than the author states. As someone above pointed out it all depends on where you draw the boundaries. Think of the direct energy inputs into a FF extraction operation. Then think of all of the indirect energy inputs. The vehicles, the roadways, the communications system, the computers, the internet, international shipping, the navy, the army, and all of the activity that supports each one of those activities, and all of the activity that supports the secondary ones, etc. It is an infinite regression of energy use which amounts to a very large quantity. Colonel Drake in Pennsylvania needed virtually none of that, hence the huge energy payoff for his operation. Conclusion: Low EROI energy sources (solar, wind, tar sands, fracking) will not support the world we have built, much less allow anything resembling growth. Let’s just agree on this and get on with building the world which is coming. This world will consist mostly of subsistence farming with many fewer people than we have today. There are very unpleasant ways to get there, and less unpleasant ways to get there. We should be trying to divine the less unpleasant ways.

  17. Jay M

    lots to quibble about in this: to avoid 2C increase in av. global temp will require 37 fold increase in supplying renewable energy–recently solar increased 37% annually, etc–growth rate for solar exponential–then, solar power has doubled every year for the last 20–8 more doublings and will supply 100% world energy needs
    totally support solar,but this section seemed kind of weak

  18. Baylor Blackford

    I appreciate this thoughtful dialogue. Yet I’m sad with the thought that many here will disagree with what I will say. A forethought, my interest is whether Renewables’ low Energy Return on Energy Invested (EROEI) renders its use insufficient for modern energy-intensive life. Paper Mac at 7:30 am seems to say the very calculation of EROEI is imprecise & frought with definition ambiguities but ultimately still lacks the economic efficiency to replace fossil fuels. Vegeholic at 8:40 pm perhaps agrees and from a treasured stance of humaneness. I’d appreciate more comment on this. Indeed, a careful scientific economic analysis will most likely get me to where I wish to go. But really I’m writing because I see ambiguity & uncertainty in the overall matter of the urgency of eliminating fossil fuels. Reading Alexander Cockburn on the Counterpunch website put me on to these ideas. I bring up the skeptic’s case with friends who have known me for decades, yet they’ll listen to me not. To my layman’s reading, the plentiful climatologists fall into the “warmist” position, though the persuasive climatologists fall into the “skeptics” position. Speaking of Two Degrees, Bob Tisdale blogged recently that such an increase has been shown in the past to raise sea level by nine meters, but that it takes several millenia. (He was citing James Hansen, the father of Global Warming on this). (https://bobtisdale.wordpress.com/ Search “Are You New to the Global Warming Debate”). On such points do I get caught up in the ambiguity of the likely effects of Fossil Fuels & Greenhouse Gases. Dr. Roy Spencer in his blog discusses new & more accurate ways of calculating the earth’s temperature using satellites & weather balloons. These do not risk the errors caused by the Urban Heat Island Effect. The new methods find a good deal less warming in the last 25 years. (He illustrates UHI by claiming that the nine degree F rise in Las Vegas’ nighttime temperature is caused by all the concrete buildings & lights, not CO2.) (Dr. Spencer estimates about half the recent warming was caused by humans & about half by natural causes.) Anthony Watts looked at all the official US temperature-recording sites, & seeing how many were located in heat sinks, estimated the land-based temperature measurements to be 40-50% too high. Some will claim that there is a cost to inaction. But I am wondering whether there is a cost to reducing atmospheric CO2: I read that it is plant food, that its increase has been stimulating the greening of the planet, thus will increase crop yields to the tune of several trillion dollars over the next 50 years. Roger Pielke Jr. testified that studies might indeed show that increasing CO2 increases severe weather. But it would take 40 years of observation to make the claim. (He says the UN IPCC takes that position, as well). Andy Revkin in the New York Times cites many studies on the threats of Greenhouse Gases, but he has said there remains uncertainty as to how it will all play out. Dr. Richard Lindzen posits that the climate’s emergence from the Little Ice Age of the 19th Century has caused the warming of the 20th Century. Others I read with fascination are Judith Curry, Willis Eschenbach, Rud Istvan & many others; some speak of solar cycles & how the resulting next Ice Age is coming, sooner or later. All the above-mentioned accept the Greenhouse Gas theory: an increase in it will increase the earth’s temperature. What the theory doesn’t tell them is by how much. At this point, climatology is a poorly-understood science. What these scientists have observed so far & what the IPCC climate models tell them about the past & present is that Natural Variability & normal processes of the climate overwhelm whatever temperature increases are brought about by Greenhouse Gasses. I do try to keep an open mind & to remember I am in the lay camp. (Thus are my paraphrasings that of a non-expert). Over the years, I have been enlightened by Naked Capitalism & inspired to value a careful scientific analysis, sometimes arriving at an intersection between a clear sense of matters & an extreme minority position.

  19. Fiver

    Thanks for posting this. While I have concerns on a number of important points, it’s great to see a piece (and links) with as much range for discussion as this on the subject.

    In my mind the critical path for a successful transition is far more front-loaded than believed, meaning that, apart from a genuine technological magic bullet, nuclear war or collapse, what happens a century out will be far more impacted by what we do over the next 15 years than any subsequent one or more sets of 15 years. While we may be ‘sputtering’ relative to an idealized (and grossly misleading) level of growth, we are overall still increasing the total negative impacts on the entire eco-system – including setting in motion any number of very large reactions/feedback cycles we can no longer control, the just-announced death of the Great Barrier Reef a shocking example.

    We have to make the decisive moves now, when we are consuming at or near maximum everything, when we can have the most impact, not in just a permanent crisis by 2030 or a positively horrible 2050 if we should fail. For example, mountain glaciers/snow packs provide the fresh water for billions of people, huge food production and natural green habitat in western North America, huge portions of China, India, Pakistan, Western Europe, the Andean nations etc., and they are melting. Dying fresh water rivers, dying oceans, dead fields, dead forests, not rising sea water, will be the proofs of whether we can make the political and geopolitical breakthrough it’s going to take to get through in one piece.

    I am deeply worried about what’s been going on with oil on the one hand, and a permanent global policy of stimulus rather than any form of re-organizing on the other. With oil, the potential for a violent move in either direction exists right now making it a target for increasing speculation and I would venture the last thing we need is a re-financialization of oil at all, let alone while there is still a horse in the python – plus it’s handy to have a handy, instant financial crisis at your fingertips if you are Wall Street during this election.

Comments are closed.