A Forecast of Our Energy Future; Why Common Solutions Don’t Work

In order to understand what solutions to our energy predicament will or won’t work, it is necessary to understand the true nature of our energy predicament. Most solutions fail because analysts assume that the nature of our energy problem is quite different from what it really is. Analysts assume that our problem is a slowly developing long-term problem, when in fact, it is a problem that is at our door step right now.

The point that most analysts miss is that our energy problem behaves very much like a near-term financial problem. We will discuss why this happens. This near-term financial problem is bound to work itself out in a way that leads to huge job losses and governmental changes in the near term. Our mitigation strategies need to be considered in this context. Strategies aimed simply at relieving energy shortages with high priced fuels and high-tech equipment are bound to be short lived solutions, if they are solutions at all.

OUR ENERGY PREDICAMENT

1. Our number one energy problem is a rapidly rising need for investment capital, just to maintain a fixed level of resource extraction. This investment capital is physical “stuff” like oil, coal, and metals.

We pulled out the “easy to extract” oil, gas, and coal first. As we move on to the difficult to extract resources, we find that the need for investment capital escalates rapidly. According to Mark Lewis writing in the Financial Times, “upstream capital expenditures” for oil and gas amounted to  nearly $700 billion in 2012, compared to $350 billion in 2005, both in 2012 dollars. This corresponds to an inflation-adjusted annual increase of 10% per year for the seven year period. (If you have problems viewing the images, attached is a PDF of the article, including images: A Forecast of Our Energy Future; Why Common Solutions Don’t Work | Our Finite World)

Figure 1. The way would expect the cost of the extraction of energy supplies to rise, as finite supplies deplete.

Figure 1. The way would expect the cost of the extraction of energy supplies to rise, as finite supplies deplete.

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