This War Marks the End of Cheap Resources

It’s time to bust some myths. Ones, like “we have all the natural resources we want” and “we live in an a world of abundance”. Or if something does become unavailable, then surely a replacement will come online and magically scale up to meet everyone’s needs. In the real world however — as we are about to experience it from a front row seat— a long decline of resources awaits; together with a slump in economic output. While some parts of the world might ‘enjoy’ growth in material wealth and energy use for a couple more years to come, the overall (global) trend of the decades ahead will most probably be marked by negative growth, or to put more simply: de-growth. Is it because of the war in Ukraine? Or sanctions? Only partially. In the grand scheme of things these acts of violence will be considered nothing more than a ‘coup de grâce’ — the final blow to the western economy.

Of course, the statements made above presume accepting some basic facts. Most of these facts however — as you will see—would require a paradigm shift well beyond the scope of our current political reality. Thus, I do not expect any of them to burst into mainstream narrative anytime soon… But who knows, maybe Arthur Schopenhauer will prove to be right:

“All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”

Read the following statements (1) in light of the quote above and guess in which stage our “collective consciousness” is in relation to them.

  1. Energy is everything. It’s not a mere cost to be paid, but the “magic ingredient” in everything we do. Without it no work is performed, no material is transformed, no gadget get manufactured or delivered to your doorstep. Without sufficient affordable and readily available energy there is no economy.
  2. Our energy system (not only electricity, but high heat and every other form of energy) is based entirely on finite mineral resources, be it coal, oil, natural gas — or metals needed to build nuclear power plants, fusion reactors, batteries, solar cells and wind turbines.
  3. These mineral resources are unevenly distributed, and can be economically recovered only from deposits with high enough density, purity and size. Hence the fact that some nations are rich in resources while others are not.
  4. Mining and drilling companies knew this for decades, and thus have targeted the highest quality resources first: making the most profit at the lowest cost possible (and all too often to the detriment of local people). As the cheap stuff run out, they had to move down the ladder to gradually poorer and harder to reach deposits, with some occasional good finds being the exception rather than the norm.
  5. Extraction of ever lower quality resources, on the other hand, require disproportionally larger investments on all fronts: not only in financial, but material, technology, complexity and ultimately in energy terms too. Thus mining companies and oil firms had to keep investing ever more money, material, labor and energy to get the same amount of oil, copper or any other commodity… Let alone to grow their “production” to meet ever increasing demand.
  6. By mid 2021 what we have experienced is not only a sudden increase in demand after the pandemic, but an inability to return to or exceed previous levels of production at affordable prices (2). Investments in new mines and wells plummeted well prior to the pandemic, for the very reason laid out above, and now supply and demand have departed seriously as a result.
  7. Alternative forms of energy (hydro, nuclear, wind, solar etc.) on the other hand are still utterly dependent on the availability of fossil fuels, from mining and smelting of metals or making of cement, to manufacturing, delivering and installing panels, turbines and dams — together with the necessary roads, transmission cables, transformer stations and the rest.
  8. For reasons laid out above we still obtain 85% of our primary energy from fossil fuels — just like 50 years ago. Thus the coming downturn in oil, coal and natural gas production (due to depletion of rich deposits) will mark the peak of free energy available to humanity: not only in the form of high heat and electricity, but also in the form of food available to us and our livestock (3).
  9. This is not to say that we are running out of these resources tomorrow or world famine is in short order; in some cases half of the earthly treasures might be still under our feet. This remaining half however will be exponentially harder and harder to get, and with a soon to be declining fossil fuel availability, might be left underground — forever.

Does this mark the end of the world then? Certainly not. Will it mean hardship? Most probably yes, but it will also present itself as an opportunity to do things rather differently, and to take steps into the right direction — at last.

Let’s take sanctions as an example, which were aimed at crippling Russia, but might end up maiming the Global South instead. By further increasing supply issues from oil and gas to nickel and other finite resources, developing nations will be simply priced out of the market. The high cost of liquefied natural gas and oil are already unaffordable to Pakistan, Bangladesh and Sri Lanka, forcing them to use even more dirtier forms of energy, or none at all… leading to rolling blackouts and brownouts. Economists like to call this “demand destruction”, but behind these terms lie soaring inflation, a loss of livelihoods and the destruction of economies.

This is not to say that all this was inevitable. Instead of letting prices shot through the roof, governments of the overdeveloped world might as well have announced long term rationing plans for fossil fuels at home, simultaneously helping materially poorer nations and saving the climate.

I know, it would have meant killing the sacred cow — growth — but why not try and demonstrate for something like this for a difference, instead of more weapons or more “renewables”…? Why there isn’t any democratic debate on what we want to do with whatever resources left for us to use? Why do so many of us still believe — contrary to hard evidence — that we live on an infinitely abundant planet?

What has been proposed by the luckier half of Europe (doubling down on renewables) will almost certainly bring about even higher oil and gas prices, and even higher costs for copper, nickel, aluminum and other metals… As all of these materials are essential to build those solar panels and wind turbines so craved by the West.

Demand destruction as a result would kick into an even higher gear: pricing out all other nations in this final race for the last economically extractable resources of this tiny planet… Presuming that the world economy will not crash under the enormous pressure generated by the soaring cost of everything…

Fast forward a couple of years, and the looming peak in global energy production will mark a turning point in the human endeavor… from where it will be physically impossible to return. Whether we want it or not, global high-tech civilization will slowly become unaffordable to maintain and uneconomic to continue. Such a twist of fate: the same force— capitalism — killing and overheating our planet will be the reason behind the gradual demise of this civilization as well.

Wars and sanctions are just accelerating the process.

The only way forward from here is a long descent in energy use, and as a result: a gradual decrease in technological complexity. Whether this de-industrial revolution will be performed voluntarily and equitably, or “managed” through wars and power struggles is yet to be seen.

This is nothing new however. As Sir Fred Hoyle observed in 1964 already:

“With coal gone, oil gone, high-grade metallic ores gone, no species however competent can make the long climb from primitive conditions to high-level technology. This is a one-shot affair. If we fail, this planetary system fails so far as intelligence is concerned. The same will be true of other planetary systems. On each of them there will be one chance, and one chance only.”

There is one quibble though, a sliver of hope if you like: intelligent life developing a rich culture, science and large, complex societies is not entirely impossible once these materials are gone. High tech civilization will be impossible to maintain or rebuild without them — there is no question about it — but this doesn’t necessarily mean an impoverished, “short, nasty and brutish” life, or “going back to the caves”.

Quite the contrary: combining our inherent creativity with our immense knowledge on the natural world, this time of down-scaling of human activities would give us a great opportunity to rediscover our rich cultural heritage and the many nurturing ways of life. In the centuries ahead we might be forced to leave crumbling skyscrapers and their suburbs behind, but we might as well be building new cities of stone and clay with elaborate woodwork again, featuring baths and bustling social life, exotic goods coming via long forgotten trade routes, and perhaps experiment with much more democratic ways of organizing life. We have been here before and it was remarkable period in human history: free of algorithms, oppression, wars or dictators.

Until next time,

B

Notes:

(1) Should you disagree with the statements laid out above, I encourage you to do more research on the topic in scientific journals of ecology, geology and physics, as all of these processes are well documented and researched. Please refrain from sources referring to human ingenuity and how we have solved all issues in the past. These sources rarely take into account how these prior successes were due to us discovering a second Hemisphere (the Americas and later on Australia with their untapped resources) and how we have started to use previously unused minerals, which are themselves now well into the process of depletion. If this alone weren’t enough, the planet is now in the process of crossing multiple tipping points both in ecological and climate terms, something unprecedented in human history. Human creativity needs new ways of expressing itself — like how to get by with less, rather than how to plunder the planet for more finite resources.

(2) The price increase of these materials — going on for almost a year already — marks a definitive shift in their value in relation to the cost of human labor. Simply put: as they become harder to come by, they become less and less affordable for the average consumer.

(3) Fertilizers are made from mineral phosphate and natural gas — both being one-time, finite and thus depleting resources. A reduction in their use, and as result meat consumption (in order to preserve food for humans instead) seems to be inevitable at this point.

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