A retraction……….

28 02 2017

Catastrophism is popular, but not necessarily right. Debunking the “Hill’s Group” analysis of the future of the oil industry

I have lifted this post by Ugo Bardi straight from his site because, as he did himself, I posted all the info from Louis Arnoux and the Hill’s Group treating it as gospel. As Ugo says, and just like him, I have no time to check all the facts that pass by my ‘desk’, especially when they are as complex as this issue. Another proof we live in a post truth world…. it’s disappointing that I have to retract this issue from my blog, because I still feel it’s ‘correct’ in its assessment, just not correct in its methodology, apparently…. at the very least, enjoy the Trump ‘cartoon’.
“The Hill’s Group” has been arguing for the rapid demise of the world’s oil industry on the basis of a calculation of the entropy of the oil extraction process. While it is true that the oil industry is in trouble, the calculations by the Hill’s group are, at best, irrelevant and probably simply plain wrong. Entropy is an important concept, but it must be correctly understood to be useful. It is no good to use it as an excuse to pander unbridled catastrophism. 

Catastrophism is popular. I can see that with the “Cassandra’s Legacy” blog. Every time I publish something that says that we are all going to die soon, it gets many more hits than when I publish posts arguing that we can do something to avoid the incoming disaster. [I can vouch for this….. the exact same thing happens here at DTM!] The latest confirmation of this trend came from three posts by Louis Arnoux that I published last summer (link to the first one). All three are in the list of the ten most successful posts ever published here.

Arnoux argues that the problems we have today are caused by the diminishing energy yield (or net energy, or EROI) of fossil fuels. This is a correct observation, but Arnoux bases his case on a report released by a rather obscure organization called “The Hill’s Group.” They use calculations based on the evaluation of the entropy of the extraction process in order to predict a dire future for the world’s oil production. And they sell their report for $28 (shipping included).

Neither Arnoux nor the “Hill’s Group” are the first to argue that diminishing EROEI is at the basis of most of our troubles. But the Hill’s report gained a certain popularity and it has been favorably commented on many blogs and websites. It is understandable: the report has an aura of scientific correctness that comes from its use of basic thermodynamic principles and of the concept of entropy, correctly understood as the force behind the depletion problem. There is just a small problem: the report is badly flawed.

When I published Arnoux’s posts on this blog, I thought they were qualitatively correct, and I still think they are. But I didn’t have the time to look at the report of Hill’s group in detail. Now, some people did that and their analysis clearly shows the many fundamental flaws of the treatment. You can read the results in English by Seppo Korpela, and in Spanish by Carlos De Castro and Antonio Turiel.

Entropy is a complex subject and delving into the Hill’s report and into the criticism to it requires a certain effort. I won’t go into details, here. Let me just say that it simply makes no sense to start from the textbook definition of entropy to calculate the net energy of crude oil. The approximations made in the report are so large to make the whole treatment useless (to say nothing of the errors it contains). Using the definition of entropy to analyze oil production is like using quantum mechanics to design a plane. It is true that all the electrons in a plane have to obey Schroedinger’s equation, but that’s not the way engineers design planes.

Of course, the problem of diminishing EROEI exists. The way to study it is based on the “life cycle analysis” (LCA) of the process. This method takes into account entropy indirectly, in terms of heat losses, without attempting the impossible task of calculating it from first principles. By means of this method, we can see that, at present, oil production still provides a reasonable energy return on investment (EROEI) as you can read, for instance, in a recent paper by Brandt et al.

But if producing oil still provides an energy return, why is the oil industry in such dire troubles? (see this post on the SRSrocco report, for instance). Well, let me cite a post by Nate Hagens:

In the last 10 years the global credit market has grown at 12% per year allowing GDP growth of only 3.5% and increasing global crude oil production less than 1% annually. We’re so used to running on various treadmills that the landscape doesn’t look all too scary. But since 2008, despite energies fundamental role in economic growth, it is access to credit that is supporting our economies, in a surreal, permanent, Faustian bargain sort of way. As long as interest rates (govt borrowing costs) are low and market participants accept it, this can go on for quite a long time, all the while burning through the next higher cost tranche of extractable carbon fuel in turn getting reduced benefits from the “Trade” creating other societal pressures.

Society runs on energy, but thinks it runs on money. In such a scenario, there will be some paradoxical results from the end of cheap (to extract) oil. Instead of higher prices, the global economy will first lose the ability to continue to service both the principal and the interest on the large amounts of newly created money/debt, and we will then probably first face deflation. Under this scenario, the casualty will not be higher and higher prices to consumers that most in peak oil community expect, but rather the high and medium cost producers gradually going out of business due to market prices significantly below extraction costs. Peak oil will come about from the high cost tranches of production gradually disappearing.

I don’t expect the government takeover of the credit mechanism to stop, but if it does, both oil production and oil prices will be quite a bit lower. In the long run it’s all about the energy. For the foreseeable future, it’s mostly about the credit

In the end, it is simply dumb to think that the system will automatically collapse when and because the net energy of the oil production process becomes negative (or the EROEI smaller than one). No, it will crash much earlier because of factors correlated to the control system that we call “the economy”. It is a behavior typical of complex adaptative systems that are never understandable in terms of mere energy return considerations. Complex systems always kick back.

The final consideration of this post would simply be to avoid losing time with the Hill’s report (to say nothing about paying $28 for it). But there remains a problem: a report that claims to be based on thermodynamics and uses resounding words such as “entropy” plays into the human tendency of believing what one wants to believe. Catastrophism is popular for various reasons, some perfectly good. Actually, we should all be cautious catastrophists in the sense of being worried about the catastrophes we risk to see as the result of climate change and mineral depletion. But we should also be careful about crying wolf too early. Unfortunately, that’s exactly what Hill&Arnoux did and now they are being debunked, as they should be. That puts in a bad light all the people who are seriously trying to alert the public of the risks ahead.

Catastrophism is the other face of cornucopianism; both are human reactions to a difficult situation. Cornucopianism denies the existence of the problem, catastrophism (in its “hard” form) denies that it can be solved or even just mitigated. Both attitudes lead to inaction. But there exists a middle way in which we don’t exaggerate the problem but we don’t deny it, either, and we do something about it!


The End of the Oilocene

19 02 2017

The Oilocene, if that term ever catches on, will have only lasted 150 years. Which must be the quickest blink in terms of geological eras…… This article was lifted from feasta.org but unfortunately I can’t give writing credits as I could not find the author’s name anywhere. The data showing we’ll be quickly out of viable oil is stacking up at an increasing rate.

Steven Kopits from Douglas-Westwood (whose work I published here three years ago almost to the day) said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programs. Nearly half of the industry needs more than $120,” he said”.

And if you don’t finish reading this admittedly long article, do not exit this blog without first taking THIS on board…….:

What people do not realise is that it takes oil to extract, refine, produce and deliver oil to the end user. The Hills Group calculates that in 2012, the average energy required by the oil production chain had risen so much that it was then equal to the energy contained in the oil delivered to the economy. In other words “In 2012 the oil industry production chain in total used 50% of all the energy contained in the oil delivered to the consumer”. This is trending rapidly to reach 100% early in the next decade.

So there you go…… as I posted earlier this year, do we have five years left…….?


End of the “Oilocene”: The Demise of the Global Oil Industry and of the Global Economic System as we know it.

(A pdf version of this paper is here. Please refer to my presentation for supporting images and comments. )

In 1981 I was sitting on an eroded barren hillside in India, where less than 100 years previously there had been dense forest with tigers. It was now effectively a desert and I was watching villagers scavenging for twigs for fuelwood and pondering their future, thinking about rapidly increasing human population and equally rapid degradation of the global environment. I had recently devoured a copy of The Limits to Growth (LTG) published in 1972, and here it was playing out in front of me. Their Business as Usual (BAU) scenario showed that global economic growth would be over between 2010 -2020; and today 45 years later, that prediction is inexorably becoming true. Since 2008 any semblance of growth has been fuelled by astronomically greater quantities of debt; and all other indicators of overshoot are flashing red.


One of the main factors limiting growth was regarded by the authors of LTG as energy; specifically oil. By mid 1970’s surprisingly, enough was known about accessible oil reserves that not a huge amount has since been added to what is known as reserves of conventional oil. Conventional oil is (or was) the high quality, high net energy, low water content, easy to get stuff. Its multi-decade increasing rate in production came to an end around 2005 (as predicted many years earlier by Campbell and Laherre in 1998). The rate of production peaked in 2011 and has since been in decline (IEA 2016).


The International Energy Agency (IEA) is the pre-eminent global forecaster of oil production and demand. Recently it admitted that its oil production forecasts were based on economic projections rather than geology or cost; ie on the assumption that supply will always meet projected demand.
In its latest annual forecast however (New Policies Scenario 2016) the IEA has also admitted for the first time a future in which total global “all liquids” oil production could start to fall within the next few years.


As Kjell Aklett of Upsala University Global Energy Research Group comments (06-12-16), “In figure 3.16 the IEA shows for the first time what will happen if its unrealistic wishful thinking does not become reality during the next 10 years. Peak Oil will occur even if oil from fracked tight sources, oil sands, and other (unconventional) sources are included”.

In fact – this IEA image clearly shows that the total global rate of production of “all hydrocarbon liquids” could start falling anytime from now on; and this should in itself raise a huge red flag for the Irish Government.

Furthermore, it raises a number of vital questions which are the core subject of this post.
Reserves of conventional “easy” oil have mostly been used up. How likely is it that remaining reserves will be produced at the rate projected? Rapidly diminishing reserves of conventional oil are now increasingly being supplemented by the difficult stuff that Kjell Aklett mentions; including conventional from deep water, polar and other inaccessible regions, very heavy bituminous and high sulphur oil; natural gas liquids and other xtl’s, plus other “unconventional oil” including tar sands and shale oil.

How much will it cost to produce all these various types? How much energy will be required, and crucially how much energy will be left over for use by the economy?

The global industrial economy runs on oil.

Oil is the vital and crucial link in virtually every production chain in the global industrial world economy partly because it supplies over 96% of global transport energy – with no significant non-oil dependent alternative in sight.


Our industrial food production system uses over 10 calories of oil energy to plough, plant, fertilise, harvest, transport, refine, package, store/refrigerate, and deliver 1 calorie of food to the consumer; and imagine trying to build infrastructure; roads, schools, hospitals, industrial facilities, cities, railways, airports without oil, let alone maintain them.

Surprisingly perhaps, oil is also crucial to production of all other forms of energy including renewables. We cannot mine and distribute coal or even drill for gas and install pipelines and gas distribution networks without lots of oil; and you certainly cannot make a nuclear power station or build a hydroelectric dam without oil. But even solar panels, wind and biomass energy are also totally dependent on oil to extract and produce the raw materials; oil is directly or indirectly used in their manufacture (steel, glass, copper, fibreglass/GRP, concrete) and finally to distribute the product to the end user, and install and maintain it.

So it’s not surprising that excluding hydro and nuclear (which mostly require phenomenal amounts of oil to implement), renewables still only constitute about 3% of world energy (BP Energy Outlook 2016). This figure speaks entirely for itself. I am a renewable energy consultant and promoter, but I am also a realist; in practice the world runs on oil.


The economy, Global GDP and oil are therefore mutually dependent and have enjoyed a tightly linked dance over the decades as shown in the following images. Note the connection between oil, total energy, oil price and GDP (clues for later).

Click on image to enlarge

Rising cost of oil production

Since 2005 when the rate of production of conventional oil slowed and peaked, production costs have been rising more rapidly. By 2013, oil industry costs were approaching the level of the global oil price which was more than $100/barrel at that time; and industry insiders were saying that the oil industry was finding it difficult to break even.

Click on image to enlarge

A good example of the time was the following article which is worth quoting in full in the light of the price of oil at the time (~$100/bbl), and the average 2016 sustained low oil price of ~$50/bbl.

Oil and gas company debt soars to danger levels to cover shortfall in cash By Ambrose Evans-Pritchard. Telegraph. 11 Aug 2014

“The world’s leading oil and gas companies are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, calling into question the long-term viability of large parts of the industry. The US Energy Information Administration (EIA) said a review of 127 companies across the globe found that they had increased net debt by $106bn in the year to March, in order to cover the surging costs of machinery and exploration, while still paying generous dividends at the same time. They also sold off a net $73bn of assets.

The EIA said revenues from oil and gas sales have reached a plateau since 2011, stagnating at $568bn over the last year as oil hovers near $100 a barrel. Yet costs have continued to rise relentlessly. Companies have exhausted the low-hanging fruit and are being forced to explore fields in ever more difficult regions.

The EIA said the shortfall between cash earnings from operations and expenditure — mostly CAPEX and dividends — has widened from $18bn in 2010 to $110bn during the past three years. Companies appear to have been borrowing heavily both to keep dividends steady and to buy back their own shares, spending an average of $39bn on repurchases since 2011”.

In another article (my highlights) he wrote

“The major companies are struggling to find viable reserves, forcing them to take on ever more leverage to explore in marginal basins, often gambling that much higher prices in the future will come to the rescue. Global output of conventional oil peaked in 2005 despite huge investment. The cumulative blitz on exploration and production over the past six years has been $5.4 trillion, yet little has come of it. Not a single large project has come on stream at a break-even cost below $80 a barrel for almost three years.

Steven Kopits from Douglas-Westwood said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programmes. Nearly half of the industry needs more than $120,” he said”.

The following images give a good idea of the trend and breakdown in costs of oil production. Getting it out of the ground is just for starters. The images show just how expensive it is becoming to produce – and how far from breakeven the current oil price is.

Click on image to enlarge

It is important to note that the “breakeven cost” is much less than the oil price required to sustain the industry into the future (business as usual).

The following images show that the many different types of oil have (obviously) vastly different production costs. Note the relatively small proportion of conventional reserves (much of it already used), and the substantially higher production cost of all other types of oil. Note also the apt title and date of the Deutsche Bank analysis – production costs have risen substantially since then.



The global oil industry is in deep trouble

You do not need to be an economist to see that the average 2016 price of oil ~ $50/bbl was substantially lower than just the breakeven price of all but a small proportion of global oil reserves. Even before the oil price collapse of 2014-5, the global oil industry was in deep trouble. Debts are rising quickly, and balance sheets are increasingly RED. Earlier this year 2016, Deloitte warned that 35% of oil majors were in danger of bankruptcy, with another 30% to follow in 2017.


Click on image to enlarge

In addition to the oil majors, shrinking oil revenues in oil-producing countries are playing havoc with national economies. Virtually every oil producing country in the world requires a much higher oil price to balance its budget – some of them vastly so (eg Venezuela). Their economies have been designed around oil, which for many of them is their largest source of income. Even Saudi Arabia, the biggest global oil producer with the biggest conventional oil reserves is quickly using up its sovereign wealth fund.


It appears that not a single significant oil-producing country is balancing its budget. Their debts and deficits grow bigger by the day. Everyone is praying for higher oil prices. Who are they kidding? The average BAU oil price going forward for business as usual for the whole global oil industry probably needs to be well over $100/bbl; and the world economy is on its knees even at the present low oil price. Why is this? The indicators all spell huge trouble ahead. Could there be another fundamental oil/energy/financial mechanism operating here?

The Root Cause

The cause is not surprising. All the various new types of oil and a good deal of the conventional stuff that remains require far more energy to produce.

In 2015, The Hills Group (US Oil Engineers) published “Depletion – A Determination of the Worlds Petroleum Reserve”. It is meticulously researched and re-worked with trends double checked against published data. It follows on from the Hills Group 2013 work that accurately predicted the approaching oil price collapse after 2014 (which no-one else did) and calculated that the average oil price of 2016 would be ~$50/bbl. They claim theirs is the most accurate oil price indicator ever produced, with >96% accuracy with published past data. The Hills Group work has somewhat clarified my understanding of the core issues and I will try to summarise two crucial points as follows.

Oil can only be useful as an energy source if the energy contained in the product (ie transport fuel) is greater than the energy required to extract, refine and deliver the fuel to the end user.

If you electrolyse water, the hydrogen gas produced (when mixed with air and ignited), will explode with a bang (be careful doing this at home!). The hydrogen contained in the world’s water is an enormous potential energy source and contains infinitely more energy (as hydrogen) than humans could ever need. The problem is that it takes far more energy to produce a given amount of hydrogen from water than is available by combusting it. Oil is rapidly going the same way. Only a small proportion of what remains of conventional oil resources can provide an energy surplus for use as a fuel. All the other types of oil require more energy to produce and deliver as fuel to the end user (taking into account the whole oil production chain), than is contained in the fuel itself.

What people do not realise is that it takes oil to extract, refine, produce and deliver oil to the end user. The Hills Group calculates that in 2012, the average energy required by the oil production chain had risen so much that it was then equal to the energy contained in the oil delivered to the economy. In other words “In 2012 the oil industry production chain in total used 50% of all the energy contained in the oil delivered to the consumer”. This is trending rapidly to reach 100% early in the next decade.

At this point – no matter how much oil is left (a lot) and in whatever form (many), oil will be of no use as an energy source for transport fuels, since it will on average require more energy to extract, refine and deliver to the end-user, than the oil itself contains.

Because oil reserves are of decreasing quality and oil is getting more difficult and expensive to produce and transform into transport fuels; the amount of energy required by the whole oil production chain (the global oil industry) is rapidly increasing; leaving less and less left over for the rest of the economy.

In this context and relative to the IEA graph shown earlier, there is a big difference between annual gross oil production, and the amount of energy left in the product available for work as fuel. Whilst total global oil (all liquids) production currently appears to be still growing slowly, the energy required by the global oil industry is growing faster, and the net energy available for work by the end user is decreasing rapidly. This is illustrated by the following figure (Louis Arnoux 2016).


The price of oil cannot exceed the value of the economic activity generated from the amount of energy available to end-users per barrel.

The rapid decline in oil-energy available to the economy is one of the key reasons for the equally rapid rise in global debt.

The global industrial world economy depends on oil as its prime energy source. Increasing growth of the world economy during the oil age has been exactly matched by oil production and use, but as Louis’ image shows, over the last forty years the amount of net energy delivered by the oil industry to the economy has been decreasing.

As a result, the economic value of a barrel of oil is falling fast. “In 1975 one dollar could have bought, on average, 42,348 BTU; by 2010 a dollar would only have bought 6,946 BTU” (The Hills Group 2015).


This has caused a parallel reduction in real economic activity. I say “real” because today the financial world accounts for about 40% of global GDP, and I would like to remind economists and bankers that you cannot eat 0000’s on a computer screen, or use them to put food on the table, heat your house, or make something useful. GDP as an indicator of the global economy is an illusion. If you deduct financial services and account for debt, the real world economy is contracting fast.

To compensate, and continue the fallacy of endless economic growth, we have simply borrowed and borrowed, and borrowed. Huge amounts of additional debt are now required to sustain the “Growth Illusion”.


In 2012 the decreasing ability of oil to power the economy intersected with the increasing cost of oil production at a point The Hills Group refers to as the maximum affordable consumer price (just over $100/bbl) and they calculated that the price of oil must fall soon afterwards. In 2014 much to everyone’s surprise (IEA, EIA, World Bank, Wall St Oil futures etc) the price of oil fell to where it is now. This is clearly illustrated by The Hills Group’s petroleum price curve of 2013 which correctly calculated that the 2016 average price of oil would be ~$50/bbl (Depletion – The Fate of the Oil Age 2013).


In their detailed 2015 study The Hills Group writes (Depletion – A determination of the world’s petroleum reserve 2015);

“To determine the affordability range it is first observed that the price of a unit of petroleum cannot exceed the value of the economic activity (generated by the net energy) it supplies to the end consumer. (Since 2012) more of the energy from petroleum was being committed to the production of petroleum than was delivered to the consumer. This precipitated the 2014 price decline that reduced prices by 50%. The energy delivered to the end consumer will continue to decline and the end consumer maximum affordability will decline with it.

Dr Louis Arnoux explains this as follows: “In 1900 the Global Industrial World received 61% of the gross energy in a barrel of oil. In 2016 this is down to 7%. The global industrial world is being forced to contract because it is being starved of net energy from oil” (Louis Arnoux 2016).

This is reflected in the slowing down of global economic growth and the huge increase in total global debt.

Without noticing it, in 2012 the world entered “Emergency Red Alert”

In the following image, Dr Arnoux has reworked Hills Group petroleum price curve showing the impending collapse of thermodynamically driven oil prices – and the end of the oil age as we know it. This analysis is more than amply reinforced by the dire financial straits of the global oil industry, and the parlous state of the global economy and financial system.


Oil is a finite resource which is subject to the same physical laws as many other commodities. The debate about peak oil has been clouded by the fact that oil consists of many different kinds of hydrocarbons; each of which has its own extraction profile. But conventional oil is the only category of oil that can be extracted with a whole production chain energy surplus. Production of this commodity (conventional oil) has undoubtedly peaked and is now declining. The amount of energy (and cost) required by the global oil industry to produce and deliver much of the remainder of conventional reserves and the many alternative categories of oil to the consumer, is rapidly increasing; and we are equally rapidly heading toward the day when we have used up those reserves of oil which will deliver an energy surplus (taking into account the whole production chain from extraction to delivery of the end product as fuel to the consumer).

The Global Oil Industry is one of the most advanced and efficient in the world and further efficiency gains will be minor compared to the scale of the problem, which is essentially one of oil depletion thermodynamics.

Humans are very good at propping up the unsustainable and this often results in a fast and unexpected collapse (eg Joseph Tainter: The collapse of complex societies). An example of this is the Seneca Curve/Cliff which appears to me to be an often-repeated defining trait of humanity. Our oil/financial system is a perfect illustration.

Debt is being used to extend the unsustainable and it looks as though we are headed for the “Mother of all Seneca Curves” which I have illustrated below:



Because oil is the primary energy resource upon which all other energy sources depend, it is almost certain that a contraction in oil production would be reflected in a parallel reduction in other energy systems; as illustrated rather dramatically in this image by Gail Tverberg (the timing is slightly premature – but probably not by much).


Energy and Money

Fundamental to all energy and economic systems is money. Debt is being used to prop up a contracting oil energy system, and the scale of money created as debt over the last few decades to compensate is truly phenomenal; amounting to hundreds of trillions (excluding “extra-terrestrial” amounts of “financials”), rising exponentially faster. This amount of debt, can never ever be repaid. The on-going contraction of the oil/energy system will exacerbate this trend until the financial system collapses. There is nothing anyone can do about it no matter how much money is printed, NIRP, ZIRP you name it – all the indicators are flashing red. The panacea of indefinite money printing will soon hit the thermodynamic energy wall of reality.


The effects we currently observe such as exponential growth in debt (US Debt alone almost doubled from $10 trillion to nearly $20 trillion during Obama’s tenure), and the financial problems of oil majors and oil producing countries, are clear indicators of the imminent contraction in existing global energy and financial systems.

The coming failure of the global economic system will be a systemic failure. I say “systemic” because for the last 150 years up till now there has always been cheap and abundant oil to power recovery from previous busts. This era is over. Cheap and abundant oil will not be available for recovery from the next crunch, and the world will need to adopt a completely different economic and financial model.

The Economics “profession”

Economists would have us believe it’s just another turn of the credit cycle. This dismal non-science is in the main the lapdog of the establishment, the global financial and corporate interests. They have engineered the “science” to support the myth of perpetual growth to suit the needs of their pay-masters, the financial institutions, corporations and governments (who pay their salaries, fund the universities and research, etc). They have steadfastly ignored all ecological and resource issues and trends and warnings such as LTG, and portrayed themselves as the pre-eminent arbiters of human enterprise. By vehemently supporting the status quo, they of all groups, I hold primarily responsible for the appalling situation the planet faces; the destruction of the natural world, and many other threats to the global environment and its ability to sustain civilisation as we know it.

I have news for the “Economics Profession”. The perpetual growth fantasy financial system based on unlimited cheap energy is now coming to an end. From the planet’s point of view – it simply couldn’t be soon enough. This will mark the end of what I call the “Oilocene”. Human activities are having such an effect on the planet that the present age has been classified by geologists as a new geological era “The Anthropocene”. But although humans had already made a significant impact on natural systems, the Anthropocene has largely been defined by the relatively recent discovery and use of liquid fossil energy reserves amounting to millions of years of stored solar energy. Unlimited cheap oil has fuelled exponential growth in human systems to the point that many of these are now greater than natural planetary ones.
This cannot be sustained without huge amounts of cheap net oil energy, so we are inescapably headed for “the great deceleration”. The situation is very like the fate of the Titanic which I have outlined in my presentation. Of the few who had the courage to face the economic wind of perpetual growth, I salute the authors of LTG and the memory of Richard Douthwaite (The Growth Illusion 1992), and all at FEASTA who are working hard to warn a deaf Ireland of what is to come and why – and have very sensibly been preparing for it! We will all need a lot of courage and resilience to face what is coming down the line.

Ireland has a very short time available to prepare for hard times.

There are many things we could do here to soften the impact if the problem was understood for what it is. FEASTA publications such as the Before The Wells Run Dry and Fleeing Vesuvius; and David Korowicz’s works such as The Tipping Point and of course, The Hills Group 2015 publicationDepletion – a determination of the worlds petroleum reserve , and very many other references, provide background material and should be required urgent reading for all policy makers.

The pre-eminent challenge is energy for transport and agriculture. We could switch to use of compressed natural gas (CNG) as the urgent default transport/motive fuel in the short term since petrol and diesel engines can be converted to dual-fuel use with CNG; supplemented rapidly by biogas (since we are lucky enough to have plenty of agricultural land and water compared to many countries).

We could urgently switch to an organic high labour input agriculture concentrating on local self-sufficiency eliminating chemical inputs such as fertilisers pesticides and herbicides (as Cuba did after the fall of the Soviet Union). We could outlaw the use of oil for heating and switch to biomass.

We could penalise high electricity use and aim to massively cut consumption so that electricity can be supplied by completely renewable means – preserving our natural gas for transport fuel and the rapid transition from oil. The Grid could be urgently reconfigured to enable 100% use of renewable electricity within a few years. We could concentrate on local production of food, goods and services to reduce transport needs.

These measures would create a lot of jobs and improve the balance of payments. They have already been proposed in one form or another by FEASTA over the last 15 years.

Ireland has made a start, but it is insignificant compared to the scale and timescale of the challenge ahead as illustrated by the next image (SEAI: Energy in Ireland – Key Statistics 2015). We urgently need to shrink the oil portion to a small fraction of current use.


Current fossil energy use is very wasteful. By reducing waste and increasing efficiency we can use less. For instance, a large amount of the energy used as transport fuels and for electricity generation is lost to atmosphere as waste heat. New technological solutions include a global initiative to mount an affordable emergency response called nGeni that is solely based on well-known and proven technology components, integrated in a novel way, with a business and financial model enabling it to tap into over €5 trillion/year of funds currently wasted globally as waste heat. This has potential for Ireland, and will be outlined in a subsequent post.

To finance all the changes we need to implement, quickly (and hopefully before the full impact of the oil/financial catastrophe really kicks in), we could for instance create something like a massive multibillion “National Sustainability and Renewable Energy Bond”. Virtually all renewables provide a better (often substantially better) return on investment compared to bank savings, government bonds, etc; especially in the age of zero and negative interest rate policies ZIRP, NIRP etc.

We may need to think about managing this during a contraction in the economy and financial system which could occur at any time. We certainly could do with a new clever breed of “Ecological Economists” to plan for the end of the old system and its replacement by a sustainable new one. There is no shortage of ideas. The disappearance of trillions of fake money and the shrinking of national and local tax income which currently funds the existing system and its social programmes will be a huge challenge to social stability in Ireland and all over the world.

It’s now “Emergency Red Alert”. If we delay, we won’t have the energy or the money to implement even a portion of what is required. We need to drag our politicians and policy makers kicking and screaming to the table, to make them understand the dire nature of the predicament and challenge them to open their eyes to the increasingly obvious, and to take action. We can thank The Hills Group for elucidating so clearly the root causes of the problem, but the indicators of systemic collapse have for many years been frantically jumping up and down, waving at us and shouting LOOK AT ME! Meanwhile the majority of blinkered clueless economists that advise business and government and who plan our future, look the other way.

In 1972 “The Limits to Growth” warned of the consequences of growing reliance on the finite resource called “oil” and of the suicidal economics mantra of endless growth. The challenge Ireland will soon face is managing a fast economic and energy contraction and implementing sustainability on a massive scale whilst maintaining social cohesion. Whatever the outcome (managed or chaotic contraction), we will soon all have to live with a lot less energy and physical resources. That in itself might not necessarily be such a bad thing provided the burden is shared. “Modern citizens today use more energy and physical resources in a month than our great-grandparents used during their whole lifetime” (John Thackera; “From Oil Age to Soil Age”, Doors to Perception; Dec 2016). Were they less happy than us?

PDF of this article
Powerpoint presentation

Featured image: used motor oil. Source: http://www.freeimages.com/photo/stain-1507366

What is this ‘Crisis’ of Modernity?

22 01 2017

But why is the economy failing to generate prosperity as in earlier decades?  Is it mainly down to Greenspan and Bernanke’s monetary excesses?  Certainly, the latter has contributed to our contemporary stagnation, but perhaps if we look a little deeper, we might find an additional explanation. As I noted in a Comment of 6 January 2017, the golden era of US economic expansion was the ‘50s and ‘60s – but that era had begun to unravel somewhat, already, with the economic turbulence of the 70s. However, it was not so much Reagan’s fiscal or monetary policies that rescued a deteriorating situation in that earlier moment, but rather, it was plain old good fortune. The last giant oil fields with greater than 30-to-one, ‘energy-return’ on ‘energy-cost’ of exploitation, came on line in the 1980s: Alaska’s North Slope, Britain and Norway’s North Sea fields, and Siberia. Those events allowed the USA and the West generally to extend their growth another twenty years.

This week, there has been an avalanche of articles on Limits to Growth, just not titled so……. it’s almost as though the term is getting stuck in people’s throats, and are unable to pronounce them….


Alastair Crooke

This article by former British diplomat and MI6 ‘ranking figure’ Alastair Crooke, is an unpublished article I’ve lifted from the Automatic Earth…… as Raul Ilargi succinctly puts it…:


His arguments here are very close to much of what the Automatic Earth has been advocating for years [not to mention DTM’s…], both when it comes to our financial crisis and to our energy crisis. Our Primers section is full of articles on these issues written through the years. It’s a good thing other people pick up too on topics like EROEI, and understand you can’t run our modern, complex society on ‘net energy’ as low as what we get from any of our ‘new’ energy sources. It’s just not going to happen.


Alastair Crooke: We have an economic crisis – centred on the persistent elusiveness of real growth, rather than just monetised debt masquerading as ‘growth’ – and a political crisis, in which even ‘Davos man’, it seems, according to their own World Economic Forum polls, is anxious; losing his faith in ‘the system’ itself, and casting around for an explanation for what is occurring, or what exactly to do about it. Klaus Schwab, the founder of the WEF at Davos remarked  before this year’s session, “People have become very emotionalized, this silent fear of what the new world will bring, we have populists here and we want to listen …”.

Dmitry Orlov, a Russian who was taken by his parents to the US at an early age, but who has returned regularly to his birthplace, draws on the Russian experience for his book, The Five Stages of Collapse. Orlov suggests that we are not just entering a transient moment of multiple political discontents, but rather that we are already in the early stages of something rather more profound. From his perspective that fuses his American experience with that of post Cold War Russia, he argues, that the five stages would tend to play out in sequence based on the breaching of particular boundaries of consensual faith and trust that groups of human beings vest in the institutions and systems they depend on for daily life. These boundaries run from the least personal (e.g. trust in banks and governments) to the most personal (faith in your local community, neighbours, and kin). It would be hard to avoid the thought – so evident at Davos – that even the elites now accept that Orlov’s first boundary has been breached.

But what is it? What is the deeper economic root to this malaise? The general thrust of Davos was that it was prosperity spread too unfairly that is at the core of the problem. Of course, causality is seldom unitary, or so simple. And no one answer suffices. In earlier Commentaries, I have suggested that global growth is so maddeningly elusive for the elites because the debt-driven ‘growth’ model (if it deserves the name ‘growth’) simply is not working.  Not only is monetary expansion not working, it is actually aggravating the situation: Printing money simply has diluted down the stock of general purchasing power – through the creation of additional new, ‘empty’ money – with the latter being intermediated (i.e. whisked away) into the financial sector, to pump up asset values.

It is time to put away the Keynesian presumed ‘wealth effect’ of high asset prices. It belonged to an earlier era. In fact, high asset prices do trickle down. It is just that they trickle down into into higher cost of living expenditures (through return on capital dictates) for the majority of the population. A population which has seen no increase in their real incomes since 2005 – but which has witnessed higher rents, higher transport costs, higher education costs, higher medical costs; in short, higher prices for everything that has a capital overhead component. QE is eating into peoples’ discretionary income by inflating asset balloons, and is thus depressing growth – not raising it. And zero, and negative interest rates, may be keeping the huge avalanche overhang of debt on ‘life support’, but it is eviscerating savings income, and will do the same to pensions, unless concluded sharpish.

But beyond the spent force of monetary policy, we have noted that developed economies face separate, but equally formidable ‘headwinds’, of a (non-policy and secular) nature, impeding growth – from aging populations in China and the OECD, the winding down of China’s industrial revolution,  and from technical innovation turning job-destructive, rather than job creative as a whole. Connected with this is shrinking world trade.

But why is the economy failing to generate prosperity as in earlier decades?  Is it mainly down to Greenspan and Bernanke’s monetary excesses?  Certainly, the latter has contributed to our contemporary stagnation, but perhaps if we look a little deeper, we might find an additional explanation. As I noted in a Comment of 6 January 2017, the golden era of US economic expansion was the ‘50s and ‘60s – but that era had begun to unravel somewhat, already, with the economic turbulence of the 70s. However, it was not so much Reagan’s fiscal or monetary policies that rescued a deteriorating situation in that earlier moment, but rather, it was plain old good fortune. The last giant oil fields with greater than 30-to-one, ‘energy-return’ on ‘energy-cost’ of exploitation, came on line in the 1980s: Alaska’s North Slope, Britain and Norway’s North Sea fields, and Siberia. Those events allowed the USA and the West generally to extend their growth another twenty years.

And, as that bounty tapered down around the year 2000, the system wobbled again, “and the viziers of the Fed ramped up their magical operations, led by the Grand Vizier (or “Maestro”) Alan Greenspan.”  Some other key things happened though, at this point: firstly the cost of crude, which had been remarkably stable, in real terms, over many years, suddenly started its inexorable real-terms ascent.  And from 2001, in the wake of the dot.com ‘bust’, government and other debt began to soar in a sharp trajectory upwards (now reaching $20 trillion). Also, around this time the US abandoned the gold standard, and the petro-dollar was born.


Source: Get It. Got It. Good, by Grant Williams

Well, the Hill’s Group, who are seasoned US oil industry engineers, led by B.W. Hill, tell us – following their last two years, or so, of research – that for purely thermodynamic reasons net energy delivered to the globalised industrial world (GIW) per barrel, by the oil industry (the IOCs) is rapidly trending to zero. Note that we are talking energy-cost of exploration, extraction and transport for the energy-return at final destination. We are not speaking of dollar costs, and we are speaking in aggregate. So why should this be important at all; and what has this to do with spiraling debt creation by the western Central Banks from around 2001?

The importance? Though we sometimes forget it, for we now are so habituated to it, is that energy is the economy.  All of modernity, from industrial output and transportation, to how we live, derives from energy – and oil remains a key element to it.  What we (the globalized industrial world) experienced in that golden era until the 70s, was economic growth fueled by an unprecedented 321% increase in net energy/head.  The peak of 18GJ/head in around 1973 was actually of the order of some 40GJ/head for those who actually has access to oil at the time, which is to say, the industrialised fraction of the global population. The Hill’s Group research  can be summarized visually as below (recall that these are costs expressed in energy, rather than dollars):


Source: http://cassandralegacy.blogspot.it/2016/07/some-reflections-on-twilight-of-oil-age.html

[This study was also covered here on Damnthematrix starting here…]

But as Steve St Angelo in the SRSrocco Reports states, the important thing to understand from these energy return on energy cost ratios or EROI, is that a minimum ratio value for a modern society is 20:1 (i.e. the net energy surplus available for GDP growth should be twenty times its cost of extraction). For citizens of an advanced society to enjoy a prosperous living, the EROI of energy needs to be much higher, closer to the 30:1 ratio. Well, if we look at the chart below, the U.S. oil and gas industry EROI fell below 30:1 some 46 years ago (after 1970):


Source: https://srsroccoreport.com/the-coming-breakdown-of-u-s-global-markets-explained-what-most-analysts-missed/

“You will notice two important trends in the chart above. When the U.S. EROI ratio was higher than 30:1, prior to 1970, U.S. public debt did not increase all that much.  However, this changed after 1970, as the EROI continued to decline, public debt increased in an exponential fashion”. (St Angelo).

In short, the question begged by the Hill’s Group research is whether the reason for the explosion of government debt since 1970 is that central bankers (unconsciously), were trying to compensate for the lack of GDP stimulus deriving from the earlier net energy surplus.  In effect, they switched from flagging energy-driven growth, to the new debt-driven growth model.

From a peak net surplus of around 40 GJ  (in 1973), by 2012, the IOCs were beginning to consume more energy per barrel, in their own processes (from oil exploration to transport fuel deliveries at the petrol stations), than that which the barrel would deliver net to the globalized industrial world, in aggregate.  We are now down below 4GJ per head, and dropping fast. (The Hill’s Group)

Is this analysis by the Hill’s Group too reductionist in attributing so much of the era of earlier western material prosperity to the big discoveries of ‘cheap’ oil, and the subsequent elusiveness of growth to the decline in net energy per barrel available for GDP growth?  Are we in deep trouble now that the IOCs use more energy in their own processes, than they are able to deliver net to industrialised world? Maybe so. It is a controversial view, but we can see – in plain dollar terms – some tangible evidence fo rthe Hill’s Groups’ assertions:


Source: https://srsroccoreport.com/wp-content/uploads/2016/08/Top-3-U.S.-Oil-Companies-Free-Cash-Flow-Minus-Dividends.png

(The top three U.S. oil companies, ExxonMobil, Chevron and ConocoPhillips: Cash from operations less Capex and dividends)

Briefly, what does this all mean? Well, the business model for the big three US IOCs does not look that great: Energy costs of course, are financial costs, too.  In 2016, according to Yahoo Finance, the U.S. Energy Sector paid 86% of their operating income just to service the interest on the debt (i.e. to pay for those extraction costs). We have not run out of oil. This is not what the Hill’s Group is saying. Quite the reverse. What they are saying is the surplus energy (at a ratio of now less than 10:1) that derives from the oil that we have been using (after the energy-costs expended in retrieving it) – is now at a point that it can barely support our energy-driven ‘modernity’.  Implicit in this analysis, is that our era of plenty was a one time, once off, event.

They are also saying that this implies that as modernity enters on a more severe energy ‘diet’, less surplus calories for their dollars – barely enough to keep the growth engine idling – then global demand for oil will decline, and the price will fall (quite the opposite of mainstream analysis which sees demand for oil growing. It is a vicious circle. If Hills are correct, a key balance has tipped. We may soon be spending more energy on getting the energy that is required to keep the cogs and wheels of modernity turning, than that same energy delivers in terms of calorie-equivalence.  There is not much that either Mr Trump or the Europeans can do about this – other than seize the entire Persian Gulf.  Transiting to renewables now, is perhaps too little, too late.

And America and Europe, no longer have the balance sheet ‘room’, for much further fiscal or monetary stimulus; and, in any event, the efficacy of such measures as drivers of ‘real economy’ growth, is open to question. It may mitigate the problem, but not solve it. No, the headwinds of net energy per barrel trending to zero, plus the other ‘secular’ dynamics mentioned above (demography, China slowing and technology turning job-destructive), form a formidable impediment – and therefore a huge political time bomb.

Back to Davos, and the question of ‘what to do’. Jamie Dimon, the CEO of  JPMorgan Chase, warned  that Europe needs to address disagreements spurring the rise of nationalist leaders. Dimon said he hoped European Union leaders would examine what caused the U.K. to vote to leave and then make changes. That hasn’t happened, and if nationalist politicians including France’s Marine Le Pen rise to power in elections across the region, “the euro zone may not survive”. “The bottom line is the region must become more competitive, Dimon said, which in simple economic terms means accept even lower wages. It also means major political overhauls: “I say this out of respect for the European people, but they’re going to have to change,” he said. “They may be forced by politics, they may be forced by new leadership.”

A race to the bottom in pay levels?  Italy should undercut Romanian salaries?  Maybe Chinese pay scales, too? This is politically naïve, and the globalist Establishment has only itself to blame for their conviction that there are no real options – save to divert more of the diminished prosperity towards the middle classes (Christine Lagarde), and to impose further austerity (Dimon). As we have tried to show, the era of prosperity for all, began to waver in the 70s in America, and started its more serious stall from 2001 onwards. The Establishment approach to this faltering of growth has been to kick the can down the road: ‘extend and pretend’ – monetised debt, zero, or negative, interest rates and the unceasing refrain that ‘recovery’ is around the corner.

It is precisely their ‘kicking the can’ of inflated asset values, reaching into every corner of life, hiking the cost of living, that has contributed to making Europe the leveraged, ‘high cost’, uncompetitive environment, that it now is.  There is no practical way for Italians, for example, to compete with ‘low cost’ East Europe, or  Asia, through a devaluation of the internal Italian price level without provoking major political push-back.  This is the price of ‘extend and pretend’.

It has been claimed at Davos that the much derided ‘populists’ provide no real solutions. But, crucially, they do offer, firstly, the hope for ‘regime change’ – and, who knows, enough Europeans may be willing to take a punt on leaving the Euro, and accepting the consequences, whatever they may be. Would they be worse off? No one really knows. But at least the ‘populists’ can claim, secondly, that such a dramatic act would serve to escape from the suffocation of the status quo. ‘Davos man’ and woman disdain this particular appeal of ‘the populists’ at their peril.

Making America great again, and other bullshit……

21 01 2017

nafeezIt appears Nafeez Mosaddeq Ahmed has been making lots of waves lately…. The New York Observer has just run his warning of the probability of a converging oil, food and financial crash in or shortly after 2018 which I discussed here on DTM a few days ago. Not only that, it went viral, hitting the top 20 stories on Medium for several days (at one point hitting number one), and giving him ‘Top Writer’ status on ‘energy’ and ‘climate change’ there….. is the word finally getting out…..?

It gets better….. Nafeez then wrote this via Insurge intelligence in solidarity with the arising people’s movement in the form of the worldwide women’s marches, tying together how the Trumpian inauguration represents at once the culmination of a global war on women, while simultaneously starting a war on the planet.

Nafeez thinks “there is a deep, fundamental but little-understood connection between white supremacist patriarchy and misogyny, and the interlinked environment-economic crisis.” This piece is perhaps the most important – because it highlights the real symbolic meaning of the women’s marches: a planetary declaration of intent to build bridges, not walls.

Then yesterday, Nafeez  wrote another piece for VICE anticipating the Great Orange Face’s ‘America First Energy Plan’, bringing together cutting edge science on why Trump’s fossil fuel madness is doomed to kill the economy.

It simply won’t work, cannot work….. It will backfire. Big time. And it will backfire economically before it even has time to “backfire planetarily” as he so well puts it…… We are already hearing a lot of outrage, rightly so, about the cleansing of the Wipe House website of climate information, and the promotion of this madcap anti-science scheme to burn our planet to hell. We’ll hear less about the science of global net energy decline, which proves decisively that this scheme can simply never work – but you’ll find it here: 

Nafeez begins…..:

As President-elect Trump spearheads plans to boost oil, coal and gas, a major new study by one of the world’s foremost energy experts shows just how dangerous this path would be—not just for the planet, but for the economy.

The new study, just published in January as part of the SpringerBriefs in Energy series, suggests that as long we remain dependent on fossil fuels, economic contraction is inevitable. And while renewable energy offers the only potentially viable future, it is also unlikely to sustain the sort of mass consumerism we are accustomed to—like three or more cars per household, SUVS or massive military projects like aircraft carriers.

The bottom line is that we can’t sustain our present rate of consumption no matter what energy source we rely on. And clinging to oil, gas and coal in the hopes of keeping the endless growth machine alive will be even worse: leading to a spiral of debt and economic recession that has already begun.

Nafeez then introduces his readers to the concept of thermodynamics….. yes, really…!

It all comes down to physics: the laws of thermodynamics. Economies need energy to function. And to grow, they need extra energy to fuel that growth in production and consumption. But as more energy is required just to extract new energy from fossil fuels, there is less “energy surplus” available to continue driving economic growth—to ramp up even more production and consumption. And increasingly, more and more energy is being used just to maintain the existing infrastructure of society as it is, leaving less room for further growth.

“Of perhaps greater concern than the quantity of oil and other energy sources is their declining EROI [energy return on investment]”, writes study author Charles Hall, ESF Foundation Distinguished Professor of Environment Science at the State University of New York. Hall is the founder of the concept of EROI.

Hall’s ground-breaking methodology is now used by scientists around the world to measure the total value of energy a resource can generate. It works by comparing the quantity of energy extracted to the quantity of energy inputted to enable the extraction.

He points out that throughout the energy literature “there is widespread concern that net energy returns (e.g. EROI) for oil and gas are declining and likely to continue declining.” This has economic implications:

We (as in DTM followers) all knew that of course, but it’s interesting that this stuff is actually starting to go viral…..


Yes indeed, where did all the growth go…… down the Limits to Growth plughole, that’s where…..

Charlie Hall’s study, Energy Return on Investment: A Unifying Principle for Biology, Economics halleroeibookand Sustainability, clearly shows a correlation between the declining abundance of resources, “as reflected in lower production and EROI for oil and other important fuels”, and the decline of economic growth.

And that gets to the crux of the problem. We need more energy to get more stuff to grow the economy. So what happens when we can’t get as much energy as before? Growth slows.

That’s why Hall fingers the declining EROI of fossil fuels as the key culprit in decreasing rates of production, which in turn has played a key role in the economic slowdown: “Past investments— over the past century— were made at a time when the production of high quality fossil fuels was increasing at rates as high as 5% a year. At the time of this writing they have declined to no more than 1% a year, and the US (and global) economies show similar pattern.”

Hall argues that modern developed economies, with their enormous infrastructures, roads and cities, are rapidly approaching “a stage where all of the available energy is used in ‘maintenance metabolism’ to support the infrastructure that exists.” This leaves less and less energy “available for net growth.”

As I have been saying for a very long time now, the 20th Century was built one brick at a time, as and when it was required, using very cheap and very dense fossil fuels with very high ERoEI. Now we have to replace all the old stuff, more or less all at once (it is getting old now…), and simultaneously build all the new stuff, with low ERoEI energy that is literally costing the Earth.

Make no mistake, America will never be great again………. Trump or no Trump.

Do we have five years left…….?

23 10 2016

You may remember the articles I recently published about the twilight of the age of oil by Louis Arnoux….. well Raul Ilargi from the Automatic Earth has published them too, and this time, there’s a video to go with them. It’s very informative, and led me to understand all sorts of things, not least why the price of oil can never go back up. Basically, as less and less net energy is present in each new barrel of oil extracted, it’s simply worth less….

I was getting very enthusiastic about this presentation, right up until the end when Arnoux starts pushing this ‘green box’ of his, the logo for which appears (I now realise) in the bottom corner of all his slides. It’s called the nGeni. And it all sounds too good to be true, especially after telling us all that the economy probably has just five years left, and will grind to a halt…..

Here’s the video

After watching it, I then googled nGeni, and found this website trying to crowdfund it. I’d love to know what DTM readers think of this, because it all sounds like snake oil to me…..

On the Thermodynamic Black Hole…..

23 09 2016

I recently heard Dmitry Orlov speaking to Jim Kunstler regarding the Dunbar Number in which he came up with the term ‘Thermodynamic Trap’. As the ERoEI of every energy source known to humanity starts collapsing over the energy cliff, I thought it was more like a thermodynamic black hole, sucking all the energy into itself at an accelerating pace… and if you ever needed proof of this blackhole, then Alice Friedemann’s latest book, “When the trucks stop running” should do the trick.


Alice Friedemann

Chris Martenson interviewed Alice in August 2016 about the future of the trucking industry in the face of Peak Oil, especially now the giant Bakken shale oil field in the US has peaked, joining the conventional oil sources. This podcast is available for download here.trucks_stop_running

Alice sees no solutions through running trucks with alternative energy sources or fuels. I see an increasing number of stories about electric trucks, but none of them make any sense because the weight of the batteries needed to move such large vehicles, especially the long haul variety, is so great it hardly leaves space for freight.

A semi trailer hauling 40 tonnes 1000km needs 1000L of liquid fuel to achieve the task. That’s 10,000kWh of electric energy equivalent. Just going by the Tesla Wall data sheet, a 6.4kWh battery pack weighs in at 97kg. So at this rate, 10,000kWh would weigh 150 tonnes….. so even to reduce the weight of the battery bank down to the 40 tonne carrying capacity of the truck, efficiency would have to be improved four fold, and you still wouldn’t have space for freight..

There are not enough materials on the entire planet to make enough battery storage to replace oil, except for Sodium Sulfur batteries, a technology I had never heard of before. A quick Google found this…..:

The active materials in a Na/S battery are molten sulfur as the positive electrode and molten sodium as the negative. The electrodes are separated by a solid ceramic, sodium alumina, which also serves as the electrolyte. This ceramic allows only positively charged sodium-ions to pass through. During discharge electrons are stripped off the sodium metal (one negatively charged electron for every sodium atom) leading to formation of the sodium-ions that then move through the electrolyte to the positive electrode compartment. The electrons that are stripped off the sodium metal move through the circuit and then back into the battery at the positive electrode, where they are taken up by the molten sulfur to form polysulfide. The positively charged sodium-ions moving into the positive electrode compartment balance the electron charge flow. During charge this process is reversed. The battery must be kept hot (typically > 300 ºC) to facilitate the process (i.e., independent heaters are part of the battery system). In general Na/S cells are highly efficient (typically 89%).


Na/S battery technology has been demonstrated at over 190 sites in Japan. More than 270 MW of stored energy suitable for 6 hours of daily peak shaving have been installed. The largest Na/S installation is a 34-MW, 245-MWh unit for wind stabilization in Northern Japan. The demand for Na/S batteries as an effective means of stabilizing renewable energy output and providing ancillary services is expanding. U.S. utilities have deployed 9 MW for peak shaving, backup power, firming windcapacity, and other applications. Projections indicate that development of an additional 9 MW is in-progress.

I immediately see a problem with keeping batteries at over 300° in a post fossil fuel era… but there’s more….

Alice has worked out that Na/S battery storage for just one day of US electricity generation would weigh 450 million tons, cover 923 square miles (2390km², or roughly the area of the whole of the Australian Capital Territory!), and cost 41 trillion dollars….. and according to European authorities, 6 to 30 days of storage is what would be required in the real world.

The disruption to the supply lines of our ‘just in time’ world caused by trucks no longer running is too much to even think about.

Empty supermarket shelves, petrol stations with no petrol, even ATMs with no money and pubs with no beer come to mind. I remember seeing signs on the Bruce highway back in Queensland stating “Trucks keep Australia going”.  Well, oil keeps trucks running; for how much longer is the real question.


Some reflections on the Twilight of the Oil Age (Part II)

17 07 2016

Guest Post by Louis Arnoux, republished from Ugo Bardi’s Cassandra’s Legacy blog…..

(Part I here)

Part 2 – Enquiring into the appropriateness of the question

Let’s acknowledge it, the situation we are in, as depicted summarily in Part 1, is complex.  As many commentators like to state, there is still plenty of oil, coal, and gas left “in the ground”.  Since 2014, debates have been raging, concerning the assumed “oil glut”, concerning how low oil prices may go down, how high prices may rebound as demand possibly picks up and the “glut” vanishes, and, in the face of all this, what may or may not happen regarding “renewables”.  However, in my view, the situation is not impossible to analyse rigorously, away from what may appear as common sense but that may not withstand scrutiny.  For example, Part 1 data have indicated,that most of what’s left in terms of fossil fuels is likely to stay where it is, underground, without this requiring the implementation of  difficult to agree upon resource management policies, simply because this is what thermodynamics dictates.

We can now venture a little bit further if we keep firmly in mind that the globalised industrial world (GIW), and by extension all of us, do not “live” on fossil resources but on net energy delivered by the global energy system; and if we also keep in mind that, in this matter, oil-derived transport fuels are the key since, without them, none of the other fossil and nuclear resources can be mobilised and the GIW itself can’t function.

In my experience, most often, when faced with such a broad spectrum of conflicting views, especially involving matters pertaining to physics and the social sciences, the lack of agreement is indicative that the core questions are not well formulated.  Physicist David Bohm liked to stress: “In scientific enquiries, a crucial step is to ask the right question. Indeed each question contains presuppositions, largely implicit.  If these presuppositions are wrong or confused, the question itself is wrong, in the sense that to try to answer it has no meaning.  One has thus to enquire into the appropriateness of the question.”

Here it is important, in terms of system analysis, to differentiate between the global energy industry (say, GEI) and the GIW. The GEI bears the brunt of thermodynamics directly, and within the GEI, the oil industry (OI) is key since, as seen in Part 1, it is the first to reach the thermodynamics limit of resource extraction and, since it conditions the viability of the GEI’s other components – in their present state and within the remaining timeframe, they can’t survive the OI’s eventual collapse.  On the other hand, the GIW is impacted by thermodynamic decline with a lag, in the main because it is buffered by debt – so that by the time the impact of the thermodynamic collapse of the OI becomes undeniable it’s too late to do much about it.

At the micro level, debt can be “good” – e.g. a company borrows to expand and then reimburses its debt, etc…  At the macro level, it can be, and has now become, lethal, as the global debt can no longer be reimbursed (I estimate the energy equivalent of current global debt, from states, businesses, and households to be in the order of some 10,700EJ, while current world energy use is in the order of 554EJ; it is no longer doable to “mind the gap”). [ED: for some forty years, debt has been growing exponentially four times as fast as the GDP. Source: Chris Martenson]

Crude oil prices are dropping to the floor


Figure 4 – The radar signal for an Oil Pearl Harbor

In brief, the GIW has been living on ever growing total debt since around the time net energy from oil per head peaked in the early 1970s.  The 2007-08 crisis was a warning shot.  Since 2012, we have entered the last stage of this sad saga – when the OI began to use more energy (one should talk in fact of exergy) within its own productions chains than what it delivers to the GIW.  From this point onwards retrieving the present financial fiat system is no longer doable.

This 2012 point marked a radical shift in price drivers.[1]  Figure 4 combines the analyses of TGH (The Hills Group) and mine. In late 2014 I saw the beginning of the oil price crash as a signal of a radar screen.  Being well aware that EROIs for oil and gas combined had already passed below the minimum threshold of 10:1, I understood that this crash was different from previous ones: prices were on their way right down to the floor.  I then realised what TGH had anticipated this trend months earlier, that their analysis was robust and was being corroborated by the market there and then.

Until 2012, the determining price driver was the total energy cost incurred by the OI.  Until then the GIW could more or less happily sustain the translation of these costs into high oil prices, around or above $100/bbl.  This is no longer the case.  Since 2012, the determining oil price driver is what the GIW can afford to pay in order to still be able to generate residual GDP growth (on borrowed time) under the sway of a Red Queen that is running out of thermodynamic “breath”. I call the process we are in an “Oil Pearl Harbour”, taking place in a kind of eerie slow motion. This is no longer retrievable.  Within roughly ten years the oil industry as we know it will have disintegrated.  The GIW is presently defenceless in the face of this threat.

The Oil Fizzle Dragon-King


Figure 5 – The “Energy Hand”

To illustrate how the GEI works I often compare its energy flows to the five fingers of the one hand: all are necessary and all are linked (Figure 5). Under the Red Queen, the GEI is progressively loosing its “knuckles” one by one like a kind of unseen leprosy – unseen yet because of the debt “veil” that hides the progressive losses and more fundamentally because of what I refer to at the bottom of Figure 5, namely were are in what I call Oil Fizzle Dragon-King.

A Dragon-King (DK) is a statistical concept developed by Didier Sornette of the Swiss Federal Institute of Technology, Zurich, and a few others to differentiate high probability and high impact processes and events from Black Swans, i.e. events that are of low probability and high impact.  I call it the Oil Fizzle because what is triggering it is the very rapidfizzling out of net energy per barrel.  It is a DK, i.e. a high probability, high impact unexpected process, purely because almost none of the decision-making elites is familiar with the thermodynamics of complex systems operating far from equilibrium; nor are they familiar with the actual social workings of the societies they live in.  Researchers have been warning about the high likelihood of something like this at least since the works of the Meadows in the early 1970s.[2]

The Oil Fizzle DK is the result of the interaction between this net energy fizzling out, climate change, debt and the full spectrum of ecological and social issues that have been mounting since the early 1970s – as I noted on Figure 1, the Oil Fizzle DK is in the process of whipping up a “Perfect Storm” strong enough to bring the GIW to its knees.  The Oil Pearl Harbour marks the Oil Fizzle DK getting into full swing.

To explain this further, with reference to Figure 5, oil represents some 33% of global primary energy use (BP data). Fossil fuels represented some 86% of total primary energy in 2014.  However, coal, oil, and gas are not like three boxes neatly set side by side from which energy is supplied magically, as most economists would have it.

In the real world (i.e. outside the world economists live in), energy supply chains form networks, rather complex ones.  For example, it takes electricity to produce many products derived from oil, coal, and gas, while electricity is generated substantially from coal and gas, and so on.  More to the point, as noted earlier, because 94% of all transport is oil-based, oil stands at the root of the entire, complex, globalised set of energy networks.  Coal mining, transport, processing, and use depend substantially on oil-derived transport fuels; ditto for gas.[3]   The same applies to nuclear plants.  So the thermodynamic collapse of the oil industry, that is now underway, not only is likely to be completed within some 10 years but is also in the process of triggering a falling domino effect (aka an avalanche, or in systemic terms, a self-organising criticality, a SOC).

Presently, and for the foreseeable future, we do not have substitutes for oil derived transport fuels that can be deployed within the required time frame and that would be affordable to the GIW.  In other words, the GIW is falling into a thermodynamic trap, right now. As B. W. Hill recently noted, “The world is now spending $2.3 trillion per year more to produce oil than what is received when it is sold. The world is now losing a great deal of money to maintain its dependence on oil.”

The Tooth Fairy Syndrome

To come back to David Bohm’s “question about the question”, in my view, we are in this situation fundamentally because of what I call the “Tooth Fairy Syndrome”, after a pointed remark by B.W. Hill in an Internet debate early last year: “It is interesting that not one analyst has yet come to the very obvious conclusion that it requires oil to produce oil. Perhaps they think it is delivered by the Tooth Fairy?”  This remark vividly characterised for me the prevalence of a fair amount of magical thinking at the heart of decision-making within both the GEI and the GIW, aka economics as a perpetual motion machine fantasy.  Unquestioned delusional beliefs lead to wrong conclusions.

This is not new.  Here are a few words of explanation.  In 1981, I met US anthropologist Laura Nader at the Australia New Zealand Association of the Advancement of Science (ANZAAS) Congress held that year at University of Queensland in Brisbane.  We were both guest speakers at seminars focusing on Energy and Equity, and in particular on how societies actually deal with energy matters, energy crises and decide about courses of action.  The title of her paper was “Energy and Equity, Magic, Science, and Religion Revisited”.

In recent years, Nader had become part of US bodies overseeing responses to the first and second oil shocks and the US nuclear energy industry (she was a member of the National Academy of Science’s Committee on Nuclear and Alternative Energy Systems, CONAES). As an anthropologist, she was initially taken aback by what she observed and proceeded to apply her anthropological skills to try and understand the weird “tribes” she had landed into.  The title of her paper was a wink at Malinowski’s famous work on the Trobriands in 1925.

Malinowski had pointed out that: “There are no people, however primitive without religion or magic.  Nor are there… any savage races [sic] lacking either in the scientific attitude or in science though this lack has been frequently attributed to them.”

Nader had observed that prevailing decision-making in the industrialised world she was living in was also the outcome of a weird mix of “Magic, Science, and Religion” with magical and mythical, quasi religious, thinking predominating among people who were viewed and who viewed themselves as rational and making scientifically grounded decisions.  At the time I was engaged in very similar research, had observed exactly the same kind of phenomena in my own Australasian fieldwork and had reached similar conclusions.

In my observations, since the 1970s the prevalence of this syndrome has considerably worsened. This is what I seek to encapsulate as the Tooth Fairy Syndrome.  With the Oil Peal harbour, the unquestioned sway of the Tooth Fairy is coming to an end.  However, the imprint of Tooth Fairy thinking remains so strong that most discussions and analyses remain highly confused, even within scientific circles still taking economic notions for granted.

In the longer run, the end effect of the Oil Fizzle DK is likely to be an abrupt decline of GHG emissions.  However, the danger I see is that meanwhile the GEI, and most notably the OI, is not going to just “curl up and die”.  I think we are in a“die hard” situation.  Since 2012, we are already seeing what I call a Big Mad Scramble (BMS) by a wide range of GEI actors that try to keep going while they still can, flying blind into the ground.  The eventual outcome is hard to avoid with a GEI operating with only about 12% energy efficiency, i.e. some 88% wasteful current primary energy use.  The GIW’s agony is likely to result in a big burst of GHG emissions while net energy fizzles out.  The high danger is that the old quip will eventuate on a planetary scale: “the operation was successful but the patient died”…  Hence my call for “enquiring into the appropriateness of the question” and for systemic thinking.  We are in deep trouble.  We can’t afford to get this wrong.

Next: Part 3 – Standing slightly past the edge of the cliff


Bio: Dr Louis Arnoux is a scientist, engineer, and entrepreneur committed to the development of sustainable ways of living and doing business.  His profile is available on Google+  at: https://plus.google.com/u/0/115895160299982053493/about/p/pub