We are in an energy crisis, we have used all the best oil and what is left is either in politically unstable regions, in deeper and more expensive locations or in less dense less useful deposits.
Energy is essential to our modern society, the Ukrainian crisis has shown us what analysts like me have always been aware of, oil is the most important energy input into our economic and financial system, and the inevitable decline in its availability must bring fundamental change to our, businesses, careers and finances.
Today we consume four times the quantity of oil annually than we discover, the peak in oil discoveries was in the 1960’s, almost all oil wells and fields globally are in permanent decline.
The oil we have left doesn’t have the same level of energy density than that we have already we used, it takes more energy to produce a barrel of oil than in the past and this phenomenon is accelerating, this creates a permanent and increasingly dangerous drag on our economic system.
peak oil
We peaked in conventional oil production in 2006, we will most likely peak in non-conventional oil in 2024, the world relies on the expansion of US Shale production in particular the Permian Basin, but it is increasingly obvious that this field is beginning its terminal decline, whilst output is rising the productivity of these wells is declining.
What this means is it takes more wells and more effort to maintain the same level of production, this is what happens as all oil fields reach their peak and begin their terminal decline. The US Shale revolution has kept the world economy afloat for the last decade it helped us get out of the post 2008 financial crisis but its growth will end over the next year and its decline will begin total global oil production decline.
energy density
We have grown as a civilisation by using ever denser forms of exogenous energy (external energy not consumed as food), from the first fires using biomass to charcoal to coal and then oil, we have always added more dense forms of energy.
Natural gas and Uranium have higher levels of energy density than oil but aren’t as easy to transport and store as oil, biomass and coal have less energy density but are easier to store and simpler to burn. Oil is the primary energy of our global transport systems from diesel for trucks, farm machinery, construction, shipping to mining equipment we depend on oil for our modern standard of living.
Renewables solar and wind are far down the energy density ladder they are not and never can be a substitute for oil, renewables do not have the level of energy density to power our modern globalised economies.
Fossil fuels power our technological civilisation, they give us our modern standard of living, fom transportation, plastics, pharmaceuticals, heating, light this standard of living cannot be be replaced by inferior renewable energy density.
financial crisis
Our globailsed economic system is powered by debt, private, corporate and sovereign, since the financial crisis of 2008 we have added even more debt to the system.
Peak conventional oil occurred globally in 2007 as demand increased and production stopped growing the oil price sky rocketed, this sudden supply demand imbalance pushed already overindebted consumers over the edge.
The financial crisis of 2008 saw a cascade of debt defaults as high energy prices choked off demand and the economic contraction that followed forced banks and financial institutions that had lent consumers too much money to seek bailouts to stay afloat as their balance sheets deteriorated.
The oil price stayed high until the US Shale production increased supply, as price fell so economic activity increased and we began this new debt bubble which is now much larger than 2008. Today as these Shale plays in the US peak, the Bakken and Eagle Ford fields have already peaked all we have left s the Permian Basin which is likely peaking now we have to face the inevitable consequence that this latest debt bubble will have to implode.
The only shale fields that can replace the US are in Argentina and most notably in Russia, the decline in US oil production will hand power back to the Middle East most notably Saudi Arabia and Russia, with that comes a growth in geoploitical tensions we are already seeing.
political crisis
As we face the decline in oil production we will begin to see a series of political crises, advanced economies are awash with not only debt but also huge liabilities from pensions, to welfare, health and education, all of which will become more unaffordable.
Our governments and institutions have promised us much, debt is a claim on future economic activity and all economic activity is dependent on energy mainly fossil fuels.
A decline in fossil fuel production means an inevitable decline in economic activity and a decline in the ability of debtors to repay the interest or the principal, it also means that sovereign nations will be unable to meet the promises they have made to their citizens.
This will lead to a political crisis in many nations, economic and political upheavals will be a hall mark of the next decade as citizens and institutions come to terms with a change in not only current circumstances but also in their future prosperity.
The existential crisis we face in declining oil production is compounded by a political and financial system that is simply not prepared for the consequences.
A contracting economic system is something that we we have no plan for and no political will to deal with, it is as inevitable as the laws of thermodynamics and it cannot be stopped, only mitigated and we do not have systems or leaders of sufficient foresight to guide us through the single most important event of the 21st century.
We have written extensively on this topic and have a RUNNING DAFT of our publication ENERGY CRISIS available FREE TO READ, we welcome any contributions to help IMPROVE OUR FRAMEWORKS FOR SURVIVAL the most important chapter that aims to give the reader ideas on how to mitigate the effects of a collapse in energy density over the coming decades.
We are short on time and in our opinion the only solution is individual action in the face of political and collective apathy, we welcome any help to disseminate our publication to as many as possible, so with that in mind we give you the opportunity to purchase our publication.
This will help us to make more noise to increase public awareness and to get our political class to focus their attention on the most important aspect of human civilisation – energy.
We aim to update our publication every month with the help of your contributions and it will always be free to download, buying a copy gives us the chance to carry out our work of informing knowledge and increasing debate, unless we as individuals put pressure on our politicians and institutions to recognise our predicament then begin to collectively mitigate its worst consequences.
The irony is that as individuals or even as businesses we can make changes to our lives and accept the inevitable changes but on a collective basis this will be bad for the financialised economic system we live under, that is the conundrum our political system faces which is why they will remain paralysed until well afte the time for mitigation has passed.