Matt I generally agree. All our cheap energy isn’t adding much value to our lives. Cheap energy and cheap food are like drugs. A good energy crisis would be a healthy thing, force us to move back to town, walk, and get along with their neighbors. Sadly, it’s unlikely to happen because we are so energy rich. I live downtown among houses built pre-WWII and pre-common auto and all the homes are all tiny and walkable. Were they any less happy back then?
So why not just change our lifestyles anyway? Walk or bike (our car batteries always die because we never drive), live in a small home (less to clean or heat!), cook from scratch and ditch processed food (yum), hunt and fish (yum), and garden (yum), and live as extended families with lots of kids (much more pleasant and social than a TV or media soaked home)? It’s a far better life, a much healthier life. I don’t call this being Luddite. I call it plain old common sense.
![Federal Funds Interest Rates & CPI Oil Price 1955-2015](http://www.artberman.com/wp-content/uploads/Federal-Funds-Interest-Rates-CPI-Oil-Price-1955-2015-300x205.jpg)
Grover,
I understand your argument. When I say “price” is a good measurement it’s because oil is simply too worldwide a resource for any one nation or currency to control it. And the 3 biggest suppliers (Russia/USA/Saudi) could never conspire for very long anyway. I look at oil versus gold when I say “price” since that’s the only fair way to bypass currency and get a true price. So I think the economic conspiracy meme (gold price, oil price manipulation, whatnot) I hear as of late is just sour grapes and not liking the data which shows we are doing quite well economically due to technology. Hell, even if “they” could manipulate oil and gold prices worldwide, so what? Everything is cheap and we are consuming massive everything. How long could this really happen if it was fake? Not this long.
If and when we get short of oil supply (price maybe $200-$500?) we will merely start to cut back on our waste and start using other sources so will likely never see serious economic crisis due to energy. Maybe Japan or Europe at bit, but not the USA.
For this reason I disagree with CM “oil” is the “master resource” meme. Oil is merely the easiest and cheapest energy resource and people can’t seem to grasp we can change rapidly. Why not just use nuclear and electric cars? Or NG cars? Or just cut back on driving? Man, are Americans greedy, but we could definitely use half our oil with probably twice the lifestyle. The linear graph of GDP and oil is merely “because we can” consume more oil with more GDP, not the other way around, oil causing GDP, like CM thinks. Look at Japan, a massive GDP with no oil at all.
Truth be told, human innovation is the real “master resource”. The stone age didn’t end due to lack of stones, it ended by us finding other useful things to replace the stones with. Rock oil replaced whale oil for lighting, which was then replaced by coal and electric lights, with lighting price falling exponentially even until now. Same way, rock oil will go out of fashion once it gets scarce enough. We just don’t need it when we live smarter, not to mention we have too dang much coal, nuclear, NG, etc. when we finally deplete oil. Which isn’t happening very rapidly…I’m a PE and foolishly guessed peak oil by at least 2020…boy have I proven to be a fool since no way that’s happening. Why did I get fooled? Technology. It’s flat-out amazing how cheap fracking and drilling has become in my career (I remember being all proud when drilling a 27M ft well in the '80s which set a North American record…which is today a pathetic joke, we drill those in our sleep). Technology advances, on all fronts, in drilling, production, and reduced consumption with more efficient consumption, it makes us all richer each day and needing less and less energy for the same quality of life.
I really want to know what kind of engineer you are, because I’ve NEVER heard an engineer talk about any project being easy and quick to accomplish. Probably because they understand that the process of going from idea to implementation takes a whole lot more than a hope, a dream, and a prayer. Keying over our entire travel infrastructure to accommodate anything other than oil is a massive and timely undertaking, and your apparent inability to grasp that indicates you either are not an actual petroleum engineer, or that you are a really, really bad one.
And, nuclear cars? That tech isn’t exactly scalable to automobiles. Are you aware of how many nuclear plants it would take to meet even half worldwide demand for energy?
Oh, and you didn’t get most of what Grover was saying. His was a subtle and nuanced series of points regarding the interplay of energy and the economy. Your response, on the other hand, was like a banner at the head of the technology cheerleader parade.
-S
MKI,
Not to pile on put you really do seem oblivious to basic concepts underpinning peak oil theory and it’s impact on oil based economy ~ EROI, law of diminishing returns, Sunk costs and embodied energy of built infrastructure, Scalability of alternatives, role of debt, and economic constraints. How do we get to $200-500 price point when the economy breaks (demand destruction) closer to $100 oil? How do we fund ever increasing costly oil development that yields lower and lower net energy.
Could we survive on half of our oil budget and triage its use? Absolutely, but it would make the Great Depression look like a party. The notion that we will “never see economic crisis because of energy shortage” is magical thinking of the first order.
I would argue that we are in still in an unfolding economic crisis due to passing conventional oil peak circa 2005 and that the energy dynamics of peak cheap oil are integral to the whole house of cards debt economic bubble monstrosity that has been built and now teeters on the edge of collapse.
You really seem to be approaching this from a preconceived ideological frame of reference, assuming pure free market price signaling and effortlessly perfect substitution that would make Milton Friedman blush. Yet you ignore the centralized price setting, loss leading market share /geopolitical gamesmanship that is happening in the real world and the debt ponzi financing of the “shale miracle” that is a provably time limited production supply spike aberration and uneconomic at any price point that wouldn’t break the economy regardless.
Your testify to a religious like faith in progress and technology which is understandable given that is your entire life’s and vocational frame of reference, but which ignores laws of diminishing returns and history which shows that progress is not linear.
Finally you don’t seem to ever truly address the points you are given. You employ a number of fallacies in your arguments, the primary one being arguments of personal incredulity, i.e., You can’t imagine why something can’t be done therefore it must be doable. You respond to most counter arguments you are presented with by either ignoring them, applying techno worship platitudes, anecdotal non sequiturs or just flat out mindless misstatements of ‘fact’ such as:
“Look at Japan, a massive GDP with no oil at all.”
yeah, unless you count the approx 3.5 million BBL/day they import.
I give you points for consistency though!
Mememonkey
Re-reading my post above I meant '90s not '80s for that 27M ft well. Sry.
Grover,
I appreciate the conversation. You have a good handle on the energy issues unlike most folk not in the industry.
But I would appreciate not turning this convo about me because my personal situation is not relevant. But for transparency sake: I’m recently-retired 20 years oil (currently do investment partnerships & technical writing, like CM I did very well in the 2008 crash & don’t need to work). But yes, walked/biked to work & don’t drive much except to hunt/fish. I also actually own a large house but only live in a small part of it. But again, my personal situation is not relevant.
Regarding a transition out of oil once we hit peak production and costs finally get high? I agree it might be ugly at first (potential war). But I think a good analogy would be the 1920-30 dust bowl era, where while a lot of people got screwed and WWII followed. But a lot of people got rich also & GDP just kept marching up as we transitioned out of farming. Capitalism is always tough during economic transitions. But remember, we are very rich today in comparison to then. We eat, drive, and fly like kings…all due to technological advances. We could live with 1/10 our energy consumption and never notice a loss of GDP “quality of life”. Hell we would probably live better! We are on average what, 30# overweight? How many people are living in non-family situations with a huge housing footprint? This isn’t a high quality of life.
A older book to read on my economic thinking is “Knowledge and the Wealth of Nations” (Warsh). Many people on this site seem to get trapped in the old “Land, labor, Capital” meme of wealth generation (modified to “Land, Energy, Resources” in a Malthusian flashback). In reality, real wealth is generated by “People, Ideas, and Things” (this was mathematically demonstrated by Roper and others and it really holds true over time. It’s why we won’t notice oil or cars when they go the way of the Dodo. How much energy do we really need for a good life anyway? Look at a chart of the cost of lighting falling exmponentially every year of human history. We’ve just broke the human genome. Life just keeps getting easier for the naked ape as we understand our natural world (if we can just keep from killing each other…). Remember, we are now using less electricity for the first time in our history because we’re getting so efficient and just don’t need the increase anymore. We will not run out of energy. We will run out of work as machines to everything. Look how few people it takes to drill an oil well today. Driverless cars. Solar, Engine efficiency using computers. Communication. Digital revolution. Our problem is what to do when all the machines do our work for us…
MKI,
Your personal information is relevent if you reference your profession and leverage that to buttress your arguments absent actual data to back those arguments up. “I’ve worked as a petroleum engineer” is a statement designed to imply that you know more about the topic than anyone else here, and making such statements opens you up to people demanding to know more details about your supposed expertise. This is especially true when the statements you make run counter to what other experts (who have made the source of their expertise clear by being specific as to their careers, education, etc) are saying. You opened that can of worms. You also started off your comments initially by assaulting the data Chris and Gail discuss by using self-reinforcing fluffy statements rather than actual data. If you don’t back up your arguments with measurable, sourced, verifiable data, I don’t care if you have a red telephone hotline to God and a 175 IQ, and I think you’ll find most members of Peak Prosperity feel the same way. If you don’t back up your statements with actual sourced data, expect to be ignored.
As to your most recent post…I’d love to know where you base the statement “we are now using less electricity for the first time in history” from? Because I’m not seeing that supported by any data I can find. Outside minor fluctuations year to year, electricity and energy consumption in the nation seems around the same, and across the globe seems to be inexorably increasing as a whole.
Please, though, enlighten me. With data. Sourced.
-S
Snydeman: …expect to be ignored.
MKI: Please ignore me. I’ll return the favor. I’m confident you will find someone else to argue with.
Hi MK1,
I’m noticing the lack of something on this thread, and that’s The Crash Course series. It’s central to the tenets of Peak Prosperity - an exponential diagram built upon the physicals. Everybody you’re in conversation with, including a very patient Snydeman, Grover and Mememonkey etal, have digested its depths and studied hard to understand its dynamics.
The original version is the glue that made this site possible back 10 years ago. I note you’ve been a member since January 2009. Could this be something you’ve missed, I wonder?
Chapters 17a 17b and 17c : -
MKI: "In reality, real wealth is generated by “People, Ideas, and Things”
The abstract “idea” is sandwiched between two real items: “people” and “things”
real items… with real limits
MKI: “Life just keeps getting easier for the naked ape”
have you asked the ape? Then ask the other living things on this planet
MKI: “Look how few people it takes to drill an oil well today”
funny, it’s not getting cheaper. There’s more than one way to measure the “human cost”…and this energy has a lot of complex human cost
It’s fascinating that MK1 sees this as an argument, when most of us probably see it as trying to explain the complexity of the universe to an adolescent who sees things in only the most basic ways.
I love technology, until it doesn’t work as good.There’s a hole 6 miles west of me that goes down 1800 meters, angles horizontally over 300 meters and continues another 900 meters laterally. Fracked? yes. Producing? yes.Making good money? Noticed the price of oil today?
Atlantic #3).
Does this graph suggest anything?
It pretty much has to be Seneca Cliff type graph because of the increase in population. The number of people using fossil fuels is not the same at the top of the graph as it was at the beginning of the use in 1850.
Well is Art Berman is the only person you listen to then from everything you are saying you disagree with his point that - Shale oil is a retirement party -
We’ll be recording a podcast interview with Art Berman next week.
Will be released a week from this Sunday.
Figured we could spare folks from speculating on Art’s views and just hear from the man himself…
If ever we cross paths at one of these conferences held by PP, I’m buying you a beer, or the equivalent thereof.
-Snydeman