The Road to Ruin — Part 3
Our leadership class displays an extraordinary amount of stupidity and ignorance when it comes to solutions regarding the dire energy crisis we face in Europe — and soon around the world. What are the pitfalls caused by this lack of imagination and the false beliefs surrounding topic of energy security? And more importantly, what could be done differently?
In the first two installments of this series we have seen how the lifecycle of civilizations affected Europe and the entire West in general. Building a society on the belief of infinite growth was never a good idea and has always ended up with the same predictable results. In Part 2 we have reviewed the false assumptions behind our modern economic belief system, and saw how energy is the basis of all economic activity — not money.
Based on this understanding we can now take a hard look at the “solutions” proposed by our political class and economic experts all around the world. The one thing which could actually help them and their societies is rarely discussed though, and almost never dared to be imagined — but let’s not just get ahead of ourselves.
Drill, Baby, Drill!
My “favorite”. We need more oil, so out with those pesky regulations together with nit-picky officials and let’s get down to business! Frack the gas from underneath Europe, lay pipelines all across America, give drilling leases to everyone who has a desire to put holes into the ground — and all will be fine.
There is a tiny winey problem here — besides releasing megatons of carbon into the atmosphere in the process. We’ve run out of everything. Already in April. Steel pipes. Pumps. Sand. Water. You name it. “Despite calls on U.S. oil firms to ramp up production, many producers are being plagued by rising costs and supply chain bottlenecks.” As Pioneer CEO Scott Sheffield noted earlier this year:
“Whether it’s $150 oil, $200 oil, or $100 oil, we’re not going to change our growth plans”
There is a very good reason for that, and an even better explanation. The reason is, that the best of the sweet spots, where oil flows more abundantly are now drilled. Whatever area is left to be drilled require deeper wells, more pipes to be laid, more concrete to be poured, more water to be pumped down the hole and more sand to keep those holes open. How much? Up to a 1000 truckloads — per every single well.
All this to yield less and less oil and gas than the previous well. Rinse and repeat, then throw in the extra pipework needed to get the oil and gas to the refinery (from sites further and further away from sweet spots of course), and you start to see why oil CEO-s are reluctant to drill more. It is getting more expensive, to the point where its not worth the risk. It’s no wonder then that one of them told recently:
“Shale will likely tip over in five years, and U.S. production will be down 20 to 30 percent quickly. When it does — this feels like watching the steam roller scene in Austin Powers. Oil prices in the late 2020s will be something to behold”
Others say shale oil could peak already in 2024. Saudis have just cut back on production — for almost the same reason, but more on that in a later post. Russia has definitely passed its production peak years ago. Other nations fare no better. What’s wrong with the world?
Here comes energy into the picture — providing a clear explanation. All this work of drilling, pouring, pumping, not to mention pipeline and equipment manufacturing takes a helluva lot energy. Coal, oil and gas. Hauling a thousand truckloads of sand, water and equipment takes tens of thousands of diesel in gallons. For a single well.
In other words, to expand production (and to substitute depleted wells with new ones) oil companies need to spend more energy than ever, while giving less and less net energy back to society. Today 15% of the energy we gain from oil has to be reinvested into drilling. Since this process is driven by geology, and not lawyers, we can safely predict that by 2050 we would have to reinvest half (50%) of the energy we earn from wells back to replacing depleted sources of oil.
This is impossible, thus it will most likely never happen. What will happen instead, is that oil companies will maintain production for a while (as long as they see it profitable) then slowly let it dwindle down — making sure to keep shareholder returns above water levels all the way through, of course. Ever wondered why they are buying back their own stocks instead of investing in more drilling…? They are saving for their retirement.
This is peak oil supply: a retirement party. Not an evil conspiracy of the greens. It is neither an effect of bad regulations or ESG, nor the works of various monsters from the closet. It is an economic process, driven by geology and physics.
Just stop oil
Then, on the other end of the spectrum we have this. While stopping all new oil and gas projects seems to be a noble goal, it shows how oblivious the average citizen is to the role oil plays in modern society, and how it gets extracted in the first place.
The problem with stopping all new activity is that existing wells have a natural decline rate of 1–60% depending on their size. Larger fields, like the ones in Saudi Arabia decline (fall in production) slower, while small, mostly shale oil plays (discussed above) empty out at a breakneck speed. In the former (Saudi) case the well you have drilled thirty years ago may still produce oil reliably, while in the later (shale) case a hole you put in the ground 5 years ago might be abandoned by now.
In other words: relying on existing projects only and stopping every new activity, which makes at least some economic sense, would greatly accelerate the fall of oil supply. The coming winter European leaders will just stop the flow of Russian shipborne oil into Europe (in December) and the delivery of diesel and gasoline in February. What a nice appetizer for the taste of things to come: showing what a significant reduction in oil supply would mean to a region already lacking adequate resources. And yes, that includes Britain too. Be careful what you wish for. You might get it in the end.
Oil is needed in every single minute of our lives: from growing food, delivering goods and transporting people around the globe, to the innumerable amount of products where it’s used as a raw material. From plastics to rubber tires, from paint to asphalt and lubricants to the very shampoo you wash your hair with… Oil is everywhere. Should it’s production experience an abrupt fall, trucks would stop delivering food, garbage would pile up in our streets and we would be facing a truly Mad Max scenario. Being unwashed would be our least concern.
The real issue no one is willing to address here is this: what do we do with depletion? How will we wean ourselves off this climate wrecking magic substance without completely collapsing our societies?
Of course a 10% cut would not lead to a Mad Max scenario. Surely though, an ignorant ‘just stop oil’ approach will not work here. Neither the dreaming up of infinite supplies. We need to be more imaginative than that.
Then renewables and nuclear will save the day!
As I have explained many-many times on this blog already: no, they won’t. They require fossil fuels in every step of their lifecycle. Diesel is burned in those heavy dumpers and excavators mining the various metals in the remotest places on our globe. Copper in Chile. Cobalt in Congo. Bauxite (aluminum ore) in Australia. Rare earth metals in Inner Mongolia.
Trains and ships — again, burning diesel — would carry those raw materials into a foundry in China, where these ores would be turned into clean slabs of metal by using immense amounts of electricity — generated by burning cheap coal (or at least what used to be cheap coal). These metals then get into a factory via trucks where they are melted using natural gas and molded into parts of wind turbines, solar panels, batteries and electric motors.
After final assembly (in yet another plant, usually on the other side of the planet) they finally get to you — dear consumer — in a clean and shiny package. This is what most of us see at the very end of this dirty supply chain soaked in oil: a pure white tower magically popping up (don’t ask where the steel and the concrete came from) and a shiny white box with spinning blades on top. Oh, so green… isn’t it fantastic? No, it’s not.
Without adequate supplies of cheap fossil fuels, these pearly white unicorns are destined to disappear just like oil which made them possible in the first place. For a prime example look no further than this: “GE’s onshore wind power business has been troubled by rising raw materials costs, weakening demand, and supply chain snags.” Who would’ve thought that an unprecedented rise in fossil fuel costs would render these green solutions uneconomic…? At a point the article admits: “The weaker demand came in response to the expiry of renewable power tax credits that made wind and solar cheaper than most alternatives.” — ah, tax credits… I guess you see the point.
This is no fossil fuel propaganda. We are absolutely killing ourselves and the planet with those dirty fuels. This is an addiction we cannot kick one day to another, nor replace with anything else at scale. Energy is the economy, and for us modern humans all energy is derived from fossil fuels. All the alternatives, like hydrogen are in fact even more energy intensive to produce and would bankrupt our civilization even faster.
Fossil fuels are not magical because they make our lives so comfy, but because they were produced by billions of tiny algae collecting sunlight in shallow seas for millions(!) of years, then where cooked to perfection in Earth crust using another round of aeons. Making such energy dense fuels is time and energy consuming. They simply cannot be replaced by artificial fuels like Hydrogen, batteries or renewable fairy dust.
But…, but…, but!
‘The energy flowing from the Sun is infinite!’ — and here we go again, stumbling upon the most undying myths of our time... Yes, while from a tiny human’s perspective our central star does seem to be an unending source of abundant energy, our means of transforming sunlight into useful work, tough, are very much limited by raw material availability and our ability to turn these minerals into panels and turbines. Remember:
We live off the transformation of energy into useful work, not energy itself.
Before you jump out at me, touting that nuclear then surely will save the day this time — making electricity both abundant and cheap — I have to cool your temper. No, it will not. It did not managed to do this feat neither 50 years ago, nor now. Neither in the US, nor in China where it is, how to say, very loosely regulated. And with a good reason. Nuclear is unable to deliver the returns it promises on an immense amount of investment.
Energetic and geologic limitations apply to atomic power just as well. The building of reactors require rare metals and lots of steel — no matter if they are from the modular, fusion, floating, salt melting or starship propelling type. As these materials will continue to get more costly due to fossil fuel depletion, reactors of all kinds will become increasingly more expensive — to the point that their building cost will become simply prohibitive... Just like wind turbines.
To make matters worse, the very same depletion problem affecting oil, is plaguing metal mining just the same: making the next ton of copper, uranium, tellurium, or whateverorium more expensive than the last. We have to dig deeper. Go further. Burn more energy. As a study on the analyzing copper mines found: “the total energy consumption has increased at a higher rate than production (46% energy increase over 30% production increase).” This is an unsustainable trend, and it will not stop just because we want to go green.
Energy builds into everything, and ultimately feeds back into its own production. Oil. 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.
Price caps
In the previous post we have seen how our worsening energy woes in Europe will strangle households and businesses alike. It will lead to unemployment, causing reduced demand for products, ending up in further bankruptcies and even more unemployment. Members of the political class delude themselves in thinking that they can stop this cascading failure by capping utility prices, or trying to give financial support to families and businesses, so everyone could continue with business as usual.
Our elites, lacking any relevant understanding of how the economy really works, keep throwing good money after bad. The problem is not inflation. Not prices. It is the lack of energy supply. The issue with price caps or other financial machinations is that everyone will keep on consuming, until a peak hour comes when there simply will not be enough energy available.
Think of a cold, windless, foggy day (sometimes we have 28 of such in an average winter month here in Central Eastern Europe). In such a case, when demand is simply too high on electricity, and renewables fail to provide support, the grid operator will be forced to shut down entire factories or districts for hours, until demand falls back to a safe level.
On the long run — if blackouts remained the only option — we could be seeing regular planned rolling blackouts to prevent a cascading failure of the grid. The overall effect tough would be the same as letting companies fail because of high prices. Economic activity would fall to zero during blackouts, resulting in the loss of production, loss of sales and consequently a loss of income for companies… leading to bankruptcies.
What is the way out then?
What we in Europe experience at the moment is but a ‘sneak peak’ into the future of less energy and less materials. A fate awaiting most of us, by the way, living a modern lifestyle in an era of slowly decreasing energy availability.
Such a situation — whether self-imposed or due to geology — asks for sobriety. The French government has finally realized that this is not going to be a one-winter affair, still they could not move past virtue signalling. We will definitely need more than rather lackluster slogans like “every gesture counts” and a “10% voluntary cut in energy use over the next years”. We need to plan for the long run — the long descent ahead of us.
With that said, the French proposal is definitely a step in the good direction. Heads in a major European government have finally realized, that it is much easier to save energy than producing it. Taking this idea one step further, knowing that there will be even less energy available next year, one could put together a rather comprehensive plan on how to wean ourselves off of fossil fuels, and with them electricity use as well.
It is all about timing and a phased approach. When you plan your economy around this principle you not only save people from freezing in the dark, but also reduce carbon emissions. Who knows, perhaps you even mitigate the effects of climate change at the same time. But it does not need to happen so abruptly as it is the case with Europe. It does not need to happen through wars or economic sanctions.
It could happen through education: training engineers and architects on using locally available resources, preferring low tech over high tech, sufficiency over efficiency. It is high time to forget the myth of progress, suggesting that things can only get better (and more high tech) in the future. It’s time to be grateful for what we have today and make sober decisions what would like to do with the limited amount of energy we have to spend.
The future, if we get to that without incinerating the planet in a nuclear Armageddon, will be Ecotechnic. People will have to rely on their skills and manual labor much more than today. Automation will all but disappear lacking adequate energy supplies. Prepare to learn how grow and make your own food. Learn what permaculture is. If you are more technically inclined, learn how to repair things, or build simple devices from scraps. The list could go on almost indefinitely.
There is a ton what could be done, and I’m sure it will be done, once we are through the chaos and turmoil the ensuing global economic and political collapse will bring about. Don’t wait for your leadership class to make these changes for you — they will rather hoard whatever resources and high tech remains. For us, normal humans the coming decades and century will be all about how to get back to a lifestyle supported by locally available materials and energy flows captured by plants, instead of placing our hopes in resources long gone, or white unicorns to be built from them.
Until next time,
B
