This cannot possibly end well

10 min readSep 16, 2021


I’ve been a long time, though occasional, reader of both and Viewed from an ecological economics standpoint both sites are mired in neoclassical economics to a level almost on par with self-irony. A recent swipe through the top news on OilPrice really got me thinking about our near term future though.

It’s not that their authors suddenly realized that infinite growth is impossible on a finite planet, or that resource depletion has started to show its teeth to the world economy. Rather it’s those tiny puzzle pieces that are so close to each other, that all it takes is a light touch to snap them together — yet the narrative is still missing. As if it were the utmost taboo to write the word ‘depletion’ on these sites, thus every effort is made to evade the topic at all costs. Economists focus instead on microscopic events around the world to explain what is going on: a mining crew going on strike, or a factory closure due to an accident — literally failing to see the forest for the trees. If there were any shortage mentioned in these articles it must be temporary and would be overcome by “market forces” (ahem, magical thinking) in a couple of years at max. Limits to growth…? What limits? (Just for fun: try and search for the word ‘depletion’ or ‘limits’ in any of the news items posted on economics these days.)

When there is no accidental event laying around to explain the scarcity of the day, the fallback option is to take a ruler and draw some nice linear lines on a graph. If the chart were to bounce up and down like a drunken sailor on a ship during a force ten storm at sea, then draw two lines fencing the unruly graph. Without the understanding that these economic charts are depicting a self-adapting complex system at work, where things never go linear from point A to B and where there is no such thing as “equilibrium”, pundits have no better chance to tell what is coming than astrologists forecasting my fortune at the lottery. (Read this book for an easy to understand yet brilliant explanation on how the real economy works.) Throwing math and charts around while using fancy words does not make neoclassical economics a science.

Energy is the economy

While our economists are too busy calculating supply and demand with a ruler in hand, let’s review quickly what the economy is really about: energy trading. Using a simple example: I’ll do work for you (say, dig up your garden) and expel some of my energy on your behalf. In return you compensate me with cash, which I can spend at a local food market to buy back the energy (in form of wheat and vegetables) to recharge myself and to buy some more for my kids who are not capable of working yet. Whatever I do to create economic value must come with an irreversible spending of energy and in order to profit from my activity I must earn the right to buy more energy — in the form of food and embedded into other goods and services (made by others using their sources of energy).

Enter fossil fuels. These resources gave us much-much more power than human labor and inevitably caused the world economy to explode into a global super-organism: chasing ever more energy to mine, heat, manufacture, or transport goods and services around the world. The fundamentals did not change however: you have to expel energy to obtain more of it (like drilling an oil well to get more oil or mining minerals and manufacturing a solar panel). Only the surplus can be used for other purposes: energy extraction comes first. Without it there is no mining, manufacturing, agriculture or services. Our problem is that we have become totally dependent on external energy sources (mainly of fossil origin), compared to older civilizations where everything could be made by hand.

Price hikes

Traditional (i.e. false) economic theory holds, that whenever a commodity becomes scarce its price goes up, which then enables additional production to come online and everybody lives happily ever after. Not on a finite planet however, where burning energy is a one way street. Theory also holds that even if we run out of something, we can always find a substitute. It fails to mention however that substitutes are often of lesser quality and higher cost… and also prone to run out eventually, putting a huge question mark on profitability — not to mention sustainability. Let’s take oil — our master resource — as an example, but before we go on, it is worth mentioning a subtle difference in language here: oil and other natural resources are not “produced” (falsely inferring that they are a result of an unconstrained manufacturing process), rather extracted — meaning: taken by force from a finite reserve.

We went for the low hanging fruit first: easy to drill shallow oil wells nearby. When they were eventually depleted, we’ve switched countries (how did our oil get under their sand, by the way?!), then went to sea, then deeper under the sea, then fracked the source rock, mined tar sands, and then…? Should we build a pipeline to the Moon next? When an energy resource gets scarce it means that its extraction has hit a limit. If the price starts to rise, more expensive to extract sites will be brought online (i.e. places where you have to drill a lot deeper and pump a lot harder — all costing you much more energy). Notice, how this is a self-terminating process: with increasing energy costs, your extraction sites which require higher energy inputs gets more expensive to operate. One day your company runs out of (depletes) easy to access sites, and all you have is expensive energy sinks with ever rising operating costs.

Rattling sounds coming from the engine

Welcome to peak oil: when it simply isn’t worth to replace depleted wells with more energy intensive sources, because the economy (fully dependent on the surplus left from from fossil fuels after maintaining extraction) already shakes and rattles under high energy prices and cannot afford more. Since every economic activity takes energy to maintain (let alone to grow), financially weaker players start to fall like leaves in autumn. This reduces demand, thus prices start to fall again. All the while fossil fuel extraction might not change at all, or even continue to decline… bringing the next price hike even closer. Covid has just arrived after we have reached an economic peak in oil extraction (Nov-2018). The lockdowns simply made the decline steeper than it would otherwise had to be.

With this in mind let’s go back to and take a look at the recent gas and metal price hikes. Without seeing the big picture (that energy is everything and our resources are finite), it looks like a tremendous investment opportunity! The sarcastic lines from Robert Mankoff comes to mind here:

“While the end-of-the-world scenario will be rife with unimaginable horrors, we believe that the pre-end period will be filled with unprecedented opportunities for profit.”

Of course we, ordinary people who care for the future do not belong to the site’s target audience.

Oil is also near it’s 8-year high and coal has passed it’s all time high (at the time of writing this post). It’s no wonder that the engine of the world economy, China, has started rattling and scrambling. It already struggled under it’s own peak coal extraction (forcing the CCP to allow previously closed, dirtier-than-usual mines to reopen). We have reached a point in a mere couple of months where high import prices of energy made them selling their strategic oil reserves in a desperate move.

If this is not a warning sign that an enormous ball of excrement is flying towards a jumbo-sized fan, then nothing is.

Maybe, it will be a near miss and the “magic money tree” (MMT) method will once again save the day — maybe not…

Meanwhile, the Saudis are bit hesitant to ramp up extraction. Why? Their population has exploded in the past fifty years thanks to their new found wealth, and now they have to import food and desalinate water (using oil, what else?) at an unsustainable rate. Oil extraction did not get cheaper to say the least, so they desperately need high oil prices to keep the country afloat.

As a result energy prices are literally through the roof and rising in Europe and in the UK. The region is absolutely dependent on energy imports and thus totally exposed to the price swings described above. Unfortunately, but not unforeseen “renewables” are making the situation even worse. Everybody knew they are intermittent, and when there is a shortage from coal to natural gas and the wind stops blowing, we first have a price hike in electricity, then blackouts. In good times “renewables”give us the illusion of a green future, but when we need them the most they cannot be relied upon and people start to revolt.

This is not to say that we shouldn’t leave fossil fuels in the ground. I believe we must, if we are to avoid a catastrophic climate change. On the other hand, the reason for oil’s ultimate demise will not come from the direction of “renewables”, but from economic reasons explained above. If we had control over the destiny of humanity (which we don’t) we had started down-sizing the economy a long time ago, using “renewables” as a parachute only to soften our landing in the de-industrial future, and not treating them as the savior of capitalism and this extravagant lifestyle of ours.

Unnerving vibrations

What about minerals and metals, the other key ingredients to a “successful” world economy and the basis of building out a “renewable” infrastructure?

The following dynamic can be observed:

  1. Mining for metals (and other minerals) requires energy — mostly provided by diesel fuel, powering those huge mining machines and electricity required to process (mill and smelt) the minerals.
  2. As rich metal ore deposits deplete lower and lower grades have to be processed. With copper today we are targeting rocks with 0.1% metal content (999kg debris for 1kg copper).
  3. Mining and processing lower grades takes exponentially more energy (more rock has to be hauled uphill from the mining pit, then smashed into ever smaller particles to get to the desired material). This results in exponential amounts of waste and turns valuable drinking water into acid lakes and/or radioactive goo.
  4. Oil, natural gas and coal are no different. As easy to obtain resources slowly wane, ever more energy intense sources have to be tapped. This leaves society with less and less net energy despite an overall growth in its consumption.
  5. Result: increasing energy costs, and exponentially increasing cost of key metals and minerals leading to an ever more volatile boom and bust cycle. This process is on for more than century now, but thanks to the exponential nature of growth (both in population and material consumption) and the resulting depletion of once rich deposits, it started to work against us really hard just recently. (Especially since 2005 when traditional oil extraction has peaked and an ever increasing number of energy intensive sources (like deep sea and fracking) had to be brought online.)

Price-fixated economists like to think none of the above and call this cyclical nature of commodity prices „supercycles”. Here is their reasoning, sorry, their “beliefs” (their words, not mine):

Many economists believe that the upswing phase in super cycles results from a lag between unexpected, persistent, and positive trends to support commodity demand with slow-moving supply, such as the building of a new mine or planting a new crop. Eventually, as adequate supply becomes available and demand growth slows, the cycle enters a downswing phase.

Note how resource depletion and the ever increasing cost of energy is omitted from the discussion, and how the increasing intensity of these cycles has not been explained. Anyway here is the chart:

Supercycles. Image source: Visual Capitalist

I don’t know about you, dear reader, but as an engineer by profession the chart above reminds me eerily of this:

The fall of Galloping Gertie in the Tacoma Narrows, 1940. Image source: Wikipedia

From a physics perspective the pattern of these “supercycles” is a textbook example of a resonance disaster, where ever larger swings up and down or sideways eventually breaks the structure and tears it apart. How? Why this is a problem in the world economy? First, which business owner is willing to accept — let alone accommodate to — ever more volatile price swings during ever shorter time periods…? Not the honest ones for sure. Speculators perhaps, but who is doing business then? Second, the energy predicament (rising energy costs driving the economy into a recession again and again) gives ample explanation for the ups and downs and why this cannot be upheld for too long. Sooner or later something got to give.

Maybe I’m wrong, but a self-reinforcing oscillation rarely ends well. Good old denial can of course always be trusted to save the day, hoping that a few new fields will save the oil industry… but for how long and to what end? To delay their inevitable demise? To pay dividends for few more quarters before climate change bites us all in the ass?

Until next time,


As you might have noticed I usually post on Tuesdays (CET, Mondays EST). These recent developments though in the world economy could not be left without comments… The information I presented here might become outdated by next week — so I decided to make an exception and break the pattern this time.




A critic of modern times - offering ideas for honest contemplation. Also on Substack: