According to the plot of the movie, The Matrix, robots had won the war on humanity and put each and every one of us into a virtual reality prison; taking our minds back to the “peak of our civilization, 1999”. Based on the data published by the Energy Institute just recently, the Wachowskis were just two decades off the mark — not bad if you ask me. Understanding that energy is the economy, and after examining the underlying dynamics we now have every reason to believe that 2019 was indeed the high water mark for western civilization (at least in economic terms); marking the beginning of a multi-decade long descent ahead back to a much simpler life.
Before we start let me say a heartfelt thank you for all my subscribers and supporters. Your contributions make this work possible. We are almost at 14000 subscribers, but only around 13000 views per month… So if you do not wish to miss any updates, be sure to like and subscribe, or perhaps pay a visit to my other site as well. Thank you.
Perhaps needless to say, few if any western politician will admit that the good days are over. One exception could be France’s Macron, openly floating the idea almost exactly two years ago, that the “end of abundance” is indeed around the corner. Little did he know back then that the entire collective West would still be on the slippery slope of the long decline two years later, accelerating towards a de-industrialized low-tech future. Just like two years ago, these unfortunate turn of events are still blamed on external enemies. If one understands the importance and role of energy in the economic life of any country on Earth, however, it becomes clear as daylight that this decline was a) inevitable due to geologic reasons, and b) was only accelerated by the pandemic response and the economic sanctions war.
Consequently, the decline did not start in 2020, or 2022 either, but a year earlier, when the extraction of oil — the master resource, essential to everything this civilization does — hit a peak both in absolute and in net energy terms. None of this could’ve been seen in GDP figures, of course. Economists and politicians alike are flying high and blind, as they fixate on this entirely fictitious metric, which — contrary to common wisdom — has very little to do with economic activity, much more with the amount of monetary transactions taking place. GDP is thus easily distorted by taking on debt, printing money, measuring the transactional activity of the financial sector, or simply by under-reporting inflation… The prime economic metric used to guide policy is thus an abstraction of an abstraction, not a measure of real life activity or wealth.
What really matters in the economy takes energy to make. Be it a service like running a restaurant, or manufacturing vehicles, every economic activity requires energy, and that in our world unfortunately means burning fossil fuels. Still, after decades of handwaving, only 20% of the economy runs on electricity, the rest — for practical, scalability, economic and yes, hard core technical reasons — still requires massive amounts of fossil fuel inputs to operate… Including every single step of making “renewables”, or mining and refining mineral resources (from sand and limestone to copper and uranium), or making a range of products from paint to toothpaste, or from batteries to building concrete dams.
Ours remains a fossil fuel based civilization. And while it is perfectly possible to build and run a society on wind and solar alone (think: Rome), this level of complexity and material throughput would be impossible to replicate without burning a vast reserve of accumulated ancient carbon… Which, as a side-effect by the way, is busy returning Earth’s climate to the Pleistocene, quite possibly putting an end to the stable conditions and low sea levels required to continue with agriculture. Our actions are not without consequences, it seems.
This takes us to a recently released report from the Energy Institute, titled 2024 Statistical Review of World Energy. While there were a few media reports about it here and there, mostly harping on yet another increase in CO2 emissions, none so far has mentioned the drastic shift in world economic affairs, which is also in the data. The important metric I want to draw your attention to is the production and consumption of diesel and fuel oil. Contrary to the myth of electric and hydrogen powered cars and trucks bringing us to “peak demand” Nirvana, nothing of the sort can be seen in the data, and for a good reason: energy density.
Simply put: none of the proposed alternatives has the punch per pound as these dirty and polluting fuels. Batteries cannot even come close: even if you deduct inefficiencies of internal combustion engines, a thousand pounds of liquid fuel can take you more than twenty times further than a battery of a similar weight ever could. This is why there are no long haul trucks, or container ships (let alone airplanes) running on electricity; only short distance vans and semis pulling out a few shipping containers from a dock to a nearby warehouse. (By the way, due to the big, heavy and expensive vessels needed to store hydrogen — not to mention the difficulties of refilling them — there are no long haul H2 driven vehicles either.)
And why to watch diesel and fuel oil only, and not gasoline or kerosene? Well, while the latter two is good for moving the family car from home to work, or flying to a beach resort, they play little to no role in moving heavy machinery like the ones carrying containers, used in mines, or working on building sites. Actually, less than one percent (!) of global transportation is airfreight by tonne-kilometers, and 90% of trade is still seaborne (which in turn is almost exclusively powered by heavy fuel oil or “bunker” fuel). The rest is road transport (semis) and long distance rail — which, too, is often powered by diesel. The latter fuel is also used to move highly productive agricultural machinery across vast farmlands; enabling a great many of us to pursue bullshit jobs as opposed to growing crops and tending gardens.
It is no exaggeration to say that the world is mined, moved, fed and built by burning fuel oil and diesel. The irony is, that without these polluting substances the world economy and this civilization as a whole would quickly grind to a standstill… Then collapse in a matter of weeks.
So what does the actual data tell us about our state of affairs? Upon first sight nothing terribly interesting is going on — no collapse for now — unless one is willing to understand the context, or the background of the data. Based on the diesel and fuel oil consumption numbers alone, we are on an extremely flat plateau: around 35 million barrels of fuel consumed on a daily average around the world for the past ten years (except for 2020 for known reasons).
What is not shown on the chart above is a 10% population increase during the same period, creating more demand of food, and all sorts of goods (at least in theory). Oh, and what about GDP growth? How could the world economy process more raw materials, build more roads, houses and stuff without using more fuel? Is it because of efficiency gains, perhaps? Surely you jest. Diesel engines are in use for more than a century now. There are not a lot of practical efficiency gains left to be made here: the last great advancements in fuel economy were achieved in the 70’s and 80’s, and that was half a century ago already. No wonder that not an iota of improvement was made in actual (on the road) fuel consumption of heavy duty trucks since the turn of the last century.
Here is another catch: for some unknown reason the Energy Institute includes biodiesel into regular diesel figures, thereby masking a potential decline in petroleum based diesel production. In fact, the recent uptick in gasoil consumption is most probably due to such a sudden increase in biodiesel production… And why is that a problem? Isn’t biodiesel a solution to both climate change and resource depletion? Well, only when one is willing to turn a blind eye to a number of inherent limitations:
- Only 7% of bio- can be added to regular diesel without risking harm to the engine. Vehicles modified to work on biodiesel alone are few and far between.
- Biodiesel production directly competes with food production for farmland, fertilizer, pesticides and water. There is physically not enough land to cover both current fuel and food requirements at the same time… Just for the sake of a thought experiment: “Can you imagine loading 40 acres worth of wheat — stalks, roots and all — into the tank of your car or SUV every 20 miles?” — asks ecologist Jeff Dukes, and rightly so.
- Since plants are cultivated by using regular diesel machinery (tractors, harvesters etc.), and grown by spreading natural gas derived fertilizer on them, the energy inputs from fossil fuels needed cannot be overestimated. If you add that produce is transported on regular trucks to biodiesel plants (operating on electricity and natural gas), you start to appreciate that biofuels actually are an energy cannibalizing force on their own. In fact they barely give back more fuel than their production consumes, which makes their reporting in addition to petroleum based products at least somewhat questionable.
- Converting plants into biofuels comes with releasing tons of toxic waste, harming humans and nature alike. Mitigating these risks, on the other hand, requires increased wastewater and air filtering (scrubbing), further worsening the energy balance of the whole enterprise.
So, no, biofuels are not a solution, but a costly boondoggle mostly aimed at subsidizing agricultural overproduction at the cost of furthering energy cannibalism, depleting water tables, polluting the environment and raising food prices through competition.
Now let’s go one level deeper into the data, and take a look at the hard stuff: the decline of western economies. As I mentioned in the intro: energy is the economy, and one can expect little to no (real) economic output growth without a corresponding increase in liquid hydrocarbon consumption. Remember, the world is mined, moved, fed and built by burning fuel oil and diesel; and there were no practical efficiency gains made during the recent decades... With that in mind, take a look at the difference in fuel consumption among OECD countries (or so called “advanced” or “western” economies), and Non-OECD countries (representing the remaining 82% of world population).
What you see on the chart above is how the long decline looks like: a setback followed by a brief respite, then another setback and another brief respite. All this was induced by the loss of cheap and easy to produce petroleum, and made a thousand-times worse (and dangerous) by an oligarchic leadership class mired in a fantasy world. And what makes me say that? Why am I such a “pessimist”? Well, as I explained in last week’s essay, the U.S. is rapidly running out of easy to produce oil. So while production numbers might be high for another year, the actual energy return will keep on deteriorating, with production numbers to follow suit a year or two later. (The best illustration of this process is the proliferation of tertiary recovery techniques, using compressed CO2 to force the remaining oil out of the ground at an exponentially increasing energy cost).
The overseas territories of the OECD (Europe, Australia, New Zealand, Japan, South Korea) didn’t even have their own oil supply to start with (at least nowhere near in adequate quantities). So they can be expected to go down even faster, as the rest of humanity closes its ranks to get rid of its former colonizers. Is it any wonder then, that “U.S. diesel demand plummeted in March 2024 to its lowest seasonal level in 26 years, driven by a significant slowdown in economic growth.”
While ‘blame it on the weather’ will be the name of the game for some more years to come, sooner or later the truth of a real economic decline will become impossible to deny. I know that this sounds dire, but this is reality, and this is how it looks like. The end of the oil age came not with a sudden crash, but a slow and steady decline driven by energy cannibalism as transport fuel production took away an ever larger chunk of energy consumption from every other economic use. The true crisis will come somewhat later as the financial system buckles under unsustainable debt levels, which will be eventually impossible to honor on the back of a cratering real economy.
Notice how this uneven decline of the West is matched by a skyrocketing increase of fuel use from Asia at the same time, driven by organic economic growth… At least until resources last. As it stands today, Asia’s decline will start somewhat later, but not more than a decade or two at best. Since oil production is pretty much globalized, the best resources were used up first, leaving the ever harder (and ever more energy intensive) to get stuff for later. The “problem” is that “later” is already here.
Energy cannibalism, driven by the depletion of rich deposits, is a predicament with an outcome; not a problem with a solution.
Then what about powering ships and trucks with natural gas? Is LNG bunkering a way to save on diesel, or is it yet another form of energy cannibalism? Well, if you consider that despite all the hype around LNG during recent years, worldwide natural gas production, too, is on a plateau since 2021 (at around 4000 bcm/year) you start to appreciate how “the end of abundance” really takes shape.
This should not come as a surprise, of course: LNG is very expensive due to the high energy input costs going into its creation (liquification and transportation), and thus it cannot act as an alternative to pipeline gas on the same quantity basis. High prices have thus eventually led to demand destruction and deindustrialization (not only in Europe but in Japan and South Korea as well), leading to costlier to extract gas to be left underground. (Besides, as oil production starts to peak then decline, so will natural gas, as most of the methane we burn comes as associated gas from oil fields, but that takes longer to take effect.)
I guess it will also not come as a surprise that Non-OECD countries pulled ahead in this regard as well. The world of limited resources has turned globalization into a zero-sum game, where economic growth in one place increasingly comes at a cost of economic decline somewhere else. Natural gas is a vital input to many industrial processes from making fertilizer to melting glass, smelting metals, making concrete — and the list goes on. And when you have to burn half of your supply to heat people’s homes (whereas warmer regions in Asia do not) then it puts your economy into a massive disadvantage. Simply put the European and North American economy requires twice as much gas to make the same amount of fertilizer, glass or metal… And while Europe no longer has ample access to cheap pipeline gas, the US might pull it out somewhat longer — at least until their natural gas production embarks on its own long decline. Think about that. (And again, compare the chart below to the one depicting diesel and fuel oil consumption above, and try not to notice how both were peaking in the 2018–2019 period for OECD countries.)
If my understanding of the role of energy in energy production — and ultimately in economic output — is correct, then it’s no mystery why the West is facing so many hardships all at the same time. Inflation and rising food prices. A cost of living “crisis” not willing to recede. Homelessness, rising inequality, falling living standards, failing institutions. Geopolitical tensions, and an increasingly ineffective (profit, not purpose driven) weapons industry unable to manufacture enough ammo, missiles, tanks, you name it. Well, no energy, no economy, no hegemony…
The collective West’s heydays are definitely over, but its rivals face a difficult to navigate future as well. The long decline has begun, and although it looks like a slow and steady process, it can accelerate rather abruptly. As all the buffers, safety stocks and barriers are removed to preserve a semblance of normalcy, the system will eventually lose all its resiliency and become fragile. Western economies are skating on ever thinner ice, without taking notice of the cracks and pops all around them.
Will this end in a massive world war for the last remaining resources then? Well, I’d rather put my bets on a massive flop, and the collapse of the current world order happening much sooner than later. This could quite possibly result in a chaotic dissolution of both the US and the EU in the not so distant future, and eventually forcing all of humanity to go through an involuntary simplification, as the once prodigious energy returns from fossil fuels slowly fade into memory, and “problems” suddenly turn out to be too numerous to handle.
Until next time,
B
Thank you for reading The Honest Sorcerer. If you would like to support my work, please subscribe for free and consider leaving a tip. Every donation helps, no matter how small. Thank you in advance!
