Tag Archives: complexity

The Fed Cannot Fix Today’s Energy Inflation Problem

Posted on April 5, 2023 by Gail Tverberg

I expect that the rich countries of the world, including the US, Europe, and Japan, are in line to be adversely affected by high interest rates this time. With their high levels of complexity, they are among the most vulnerable to disruption when there is not enough oil to go around.
The problem I see is that rich countries expect to maintain service economies that are fed by huge streams of manufactured goods and raw materials from poorer countries. This pattern appears unsustainable to me, in a world with falling exports because of energy problems.
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Posted in Financial Implications, News Related Post, oil shortages | Tagged , , , , | 4,007 Comments

When the Economy Gets Squeezed by Too Little Energy

Posted on March 5, 2023 by Gail Tverberg

When people forecast ever-rising energy prices, they miss the fact that market fossil fuel prices consider both oil producers and consumers. From the producer’s point of view, the price for oil needs to be high enough that new oil fields can be profitably developed. From the consumer’s point of view, the price of oil needs to be sufficiently low that food and other goods manufactured using oil products are affordable. In practice, oil prices tend to rise and fall, and rise again. On average, they don’t satisfy either the oil producers or the consumers. This dynamic tends to push the economy downward. Continue reading →

Posted in Financial Implications, oil shortages | Tagged , , , | 4,563 Comments

Ramping up wind turbines, solar panels and electric vehicles can’t solve our energy problem

Posted on February 3, 2023 by Gail Tverberg

Many people believe that installing more wind turbines and solar panels and manufacturing more electric vehicles can solve our energy problem, but I don’t agree with them. These devices, plus the batteries, charging stations, transmission lines and many other structures necessary to make them work represent a high level of complexity.

A relatively low level of complexity, such as the complexity embodied in a new hydroelectric dam, can sometimes be used to solve energy problems, but we cannot expect ever-higher levels of complexity to always be achievable.

According to the anthropologist Joseph Tainter, in his well-known book, The Collapse of Complex Societies, there are diminishing returns to added complexity. In other words, the most beneficial innovations tend to be found first. Later innovations tend to be less helpful. Eventually the energy cost of added complexity becomes too high, relative to the benefit provided. Continue reading →

Posted in Financial Implications | Tagged , , , , | 3,434 Comments

Spike in energy prices suggests that sharp changes are ahead

Posted on October 18, 2021 by Gail Tverberg

Now, through several iterations, the economy has become increasingly complex, with less and less redundancy to provide stability. The energy price spike that is being experienced today is a warning that something is very, very wrong. As I see the situation, the trend toward complexity has gone too far; the economic system is starting to break down. Sharp changes appear to be ahead. The world economy is shifting into contraction mode, with more and more parts of the system failing. Continue reading →

Posted in Financial Implications | Tagged , , , , , | 4,474 Comments

Where Energy Modeling Goes Wrong

Posted on February 3, 2021 by Gail Tverberg

There are a huge number of people doing energy modeling. In my opinion, nearly all of them are going astray in their modeling because they don’t understand how the economy really operates. The modeling that comes closest to being correct … Continue reading →

Posted in Financial Implications | Tagged , , , , | 3,331 Comments