Gail Tverberg shares some of the most insightful observations about the connection between economic growth and energy. In an article posted at her website several weeks, she raised issues which are too often shunted aside in the primary debate of “not enough” versus “all we need” fossil fuel supplies in the years to come. They’re too important to continuously skip past.
I’d like to focus on just a couple of the (as usual) excellent points she raised.
We do not have an alternate fuel supply that will allow the economy to continue to grow, regardless of fossil fuel consumption. The published reserves include large amounts of oil in the ground that are not of the very cheap to extract type. Extracting such oil will be impossible if oil prices are very low, or if credit availability is lacking. It is tempting for observers to look at oil reserves and assume that all is well, but this is definitely not the case….
Likewise, substitution is possible among energy products, if it is possible to overcome the many hurdles involved in doing this. There are two cost hurdles: the higher ongoing cost of the substitute and the transition cost. The transition cost gets to be very high if there are a lot of ‘sunk costs’ that are lost–for example, if citizens are forced to quickly change from gasoline powered cars to electric cars, so that the resale value of their gasoline powered cars drops precipitously. There is also a technology hurdle: we need to have the technology to enable using the different energy source.
The Happy Talk from the fossil fuel industry “all is well” crowd likes to point out the “vast” and “abundant” reserves identified on a routine basis. It’s assumed that this becomes the definitive and official Rebuttal to the doom-and-gloom scenarios offered by those of us who are quite certain that “all is well” is an analysis limited only to the industry’s bottom line.
What the cheerleaders just as routinely neglect to mention is anything about how (or even if) oil producers deliver the reserves from there to your gas tank. Gail goes a step further by linking not just the necessity of high prices to support oil exploration and production of the more expensive and difficult-to-extract shale and deep-water reserves now relied upon. She also points out the significant credit and debt issues which industry executives and their investors are now paying much closer attention to.
Too often now, and for too many oil producers and their investors, the narrowing profit margins do not justify continuing exploration and production. Guess who else won’t enjoy the results?
There’s another unpleasant reality tied to both continuing investments in fossil fuel production rather than alternative/renewable energy sources: what must be addressed whenever and however the transition away from fossil fuel reliance takes place.
Can any of us even begin to imagine what would be involved in re-casting our entire infrastructure to accommodate and respond to energy supplies which are not fossil-fuel based or derived? (This of course presumes that we would first be able to devote the resources to design, engineer, develop, manufacture, transport, test, supply, and replace seamlessly everything in our society currently dependent in one form or another on the affordable and extremely energy-efficient fossil fuels we’ve all relied upon for a century-plus. Piece of cake, right?)
What would we in fact do with gasoline-powered products, for example? How quickly might our major regional areas effectively embrace, enhance and expand mass transit to meet the needs of tens of millions of us? (Quite the “for example” isn’t it?)
Let’s not forget that our elected officials—one party much more so than the other—sees little or no reason to expand investments in science and research, or public transportation, or government involvement in anything at all. That may play well to minority of supporters seemingly incapable of envisioning life beyond next week, but for the rest—their supporters, too—shortsightedness will exact a very high cost.
So while we may not even come close to being able to imagine what that kind of transition entails, we ought to start soon.
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