Energy Spiral

How we are losing fossil fuels faster than we could replace them

Image source: Pixabay

Energy builds into everything, and ultimately feeds back into its own production. Oil. Coal. Natural Gas. Metals going into reactors and ‘renewables’. This is a classic self-reinforcing feedback loop, one that is very hard to escape. And just because this has been happening under the radar up until recently — a trend best described by a hockey-stick curve — it does not mean that it can’t spiral out of control very fast.

What this means, is the cost of mining is being driven up, as each of the higher quality deposits are extracted and processed. In particular, the truck and shovel fleet in open pit mining is required to haul much more ore per unit of metal, resulting in an increase in diesel fuel consumption. To put things in appropriate context, decreasing grade does not mean that the supply of copper in the ground is running out. It does mean that the supply of copper that is economical to extract is declining, forcing the production cost going up. It also makes mining very reliant on the energy (diesel fuel in particular).

Global diesel and other distillate fuel stocks have been on the decline for a while now, and there is no reversal of this trend in sight. Demand, on the other hand, has been growing, leading to a widening shortage.

Well, it seems Saudis cannot increase production, and might not even want to, as they need oil prices above 76 USD to balance their budgets and finance their massive welfare program. It’s worth noting here that Saudi Arabia is a net food importer: if food prices rise (due to higher fertilizer costs for e.g.), their breakeven price for oil rises too… posing a huge security risk for them. If they fail to generate high enough revenues for a long enough time from oil they will be forced to make (further) cuts to public welfare.

We are not only facing peak oil here, but at the same time, peak metals as well.



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