“No, Jonny. It consumes them. It eats energy – sunlight, electricity, the energy in a living body – anything it can get.” – Jonny Quest
I went into a room with a negative person in it, and then there were no people in it.
Energy is freedom.
Energy allows one person to do the work of hundreds or thousands. I sit here typing this in Stately Wilder Mansion, it’s near freezing outside, yet a nice and toasty 61°F (43 and 2/3°kiloPEZ®) inside due to natural gas piped directly to my heater. I like it cold in the house, just like my heart.
My computer is running, the television is running, and because I am apparently the only person in the house who knows how to use a light switch, at least 32 lights are on in the house are on. It’s winter, so a light left on is (at worst) a little inefficient heater, so all is not lost. I will tell you that when I die, though, I will walk to the light. And turn it off.
Our energy costs aren’t all that high in winter, especially since I can keep warm by rubbing my thighs together like a cricket. I go and fill my gas tank about every two months, so gasoline isn’t even that much of an issue. When your commute is four miles a day (two miles each way) and takes four minutes (if I get caught at the one traffic light), well, it’s hard to use a lot of gas unless I pour it all over the truck and ignite it to look like a cool meteor while I’m driving. Again.
But energy is freedom.
I started bench pressing again. That’s a huge weight off my chest.
When energy prices are low around the globe, freedom increases. As I’ve discussed in previous posts, high energy costs act like a tax on nearly all physical goods. Sure, it won’t make the cost of a Kindle® e-book go up much, but it will increase the cost of a physical book – that has to be manufactured using energy, moved using energy, and delivered using energy.
So, what’s up? Why are prices where they are? Where are prices going?
I’ll start with “what’s up?”
We can’t create additional energy just by turning a knob: the process is a bit more complicated than one of Joe Biden’s coloring books.
Let’s take oil. In the 1930s, oil in Texas was so plentiful that it crashed the price. Pools of the stuff would show up if you stuck a McDonalds straw too deep into the ground in East Texas. Oil was so plentiful that people could barely tell the difference between water and gasoline. Of course, in Flint, Michigan, you can get the gasoline unleaded.
I hear their swimmers are always in the lead.
What happened then is the Texas Railroad Commission decided it was in charge, and it limited the amount of oil that could be produced. It was OPEC® before OPEC™ was even thought of – their idea was to stabilize the price of a seemingly limitless resource.
It worked.
But the era of oil abundance in the United States ended in 1973, and the Texas Railroad Commission (which still exists but no longer regulates railroads, seriously) ended allocations. Texas could no longer control the price of oil in the United States by restricting sales. The hunt for the next big oilfield was on.
We had then to hunt for oil in more and more distant places.
- Alaska.
- The Middle East.
- Deepwater offshore.
- Johnny Depp’s hair.
Also? When exposed to pollen, bees develop hives.
Then we hit the jackpot – fracking. Fracked oil is different than conventional crude. It’s hidden in tight rocks that aren’t as porous. That’s where the fracking comes in – the rock has to be fractured to let the oil out. To keep the cracks open, high-pressure water and sand (and chemicals) are forced into the cracks. The grains of sand remain and keep the cracks open. There are so many jokes I’m not going to do here.
When this process started, it was inefficient. But smart people spending billions of dollars will tend to make progress over time. Dumb people with billions of dollars? We call that the opposite of progress: Congress.
There are three problems with fracking:
One – fracked wells are most productive in their first year of production. Oil companies often run a rejuvenation process that increases flow after a few years, but mostly the later years are just a trickle in comparison to the initial years of production. So, to have a continuous supply, you have to keep drilling, which is not boring.
Two – you have to keep drilling. If the price drops and drilling stops, then the quantity of oil available drops quickly. Then the price goes up. Then everyone drills. Because everyone is drilling, then the prices drops again. And everyone stops drilling. This acts like a “crack the whip” on the economy, since, as mentioned above, high oil prices act as a tax.
Why fracking? Because I hear drilling is rigged.
Three – there’s more than profitability at stake. Let me give an example: if I have to walk to the grocery store to get food, and then I walk back home, that sounds healthy, right? Sure. I’m burning energy to go to the store.
But what happens if I burn more energy to go to the store than is contained in the food that I buy at the store?
I lose weight. I’m actually spending more energy to get food than the energy in the food I’m consuming. Plus, I’m rubbing my thighs together so I can stay warm.
What might be good for me is devastating as an economy. At some point, it will be so difficult to get energy from oil, that, just like my trip to the store, we’ll be spending more energy to get the oil than the oil will provide us. The energy return on energy invested will actually deplete the amount of energy available for us to use.
The more energy we use? The faster we run out of energy.
I spent an hour on the treadmill yesterday. Tomorrow? I might turn it on.
Our primary energy source is that thermonuclear reactor that shows up every morning. Our secondary source is tens of millions of years of stored sunlight from that same reactor, which just happens to show up in the form of oil, natural gas, and coal. But the sunlight striking us every day has a problem: it’s so diffuse that it’s difficult to make profitable use of it. Sure, it warms us, it tans us, it makes the wind for our turbines, the photosynthesis for our corn, and the rain for our hydroelectric. Energy is only useful when it becomes concentrated in some way.
You can’t generate energy with a tan. Unless it’s a really, really good tan.
Are we at the point where it takes more energy than it’s worth to get energy? A wind turbine in a good location will return 10 to 20 times the energy it took to make it, though that’s over the course of 20 years. In a bad location? A wind turbine will never return that energy, though I hear they love music: they’re huge metal fans.
So, are we there yet, where the production of energy costs more than the energy we get?
I don’t think so. Not quite yet. When we do get there, it will become a cascading failure – every bit of energy we produce will actually dig us deeper into a hole. Just like the Red Queen I mentioned last week:
“Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”
Never take a racing snail’s shell. That makes it sluggish.
To keep a world of 8 billion people alive and with enough energy to consume Doritos® and Disney™ and Facebook© takes an ever increasing amount of energy. 2020 was an aberration – people stopped driving and energy prices (temporarily) went down faster than Kamala Harris’ . . . approval rating.
The last question was “what happens next?”
Currently (today) oil is about $70 per barrel. The analysts that JPMorgan® have chained up in the basement of their skyscraper say that oil will jump to an average price of $125 per barrel in 2022, and then pop up further to $150 per barrel in 2023.
Double today’s prices. Yikes!
What about the Energy Information Agency (EIA, a .gov that seems to be actually interested in energy)? They say that in 2022, oil will average about . . . $72 per barrel – nearly the same as today.
It’s funny, because to know the price of oil, you have to know what is happening with economic growth, oil demand, and inflation. If any of us know any of those things with certainty, we could make bets and double our money or better in six months.
Why did Biden win the golf tournament? Because he finished it with one big stroke.
If JPMorgan™ has that genie in a bottle, they certainly wouldn’t be sharing it with mere mortals like you and I on the Internet – they’d make private trades and be zillionaires. The fine folks at the EIA probably don’t make nearly as much as the analysts at JPMorgan©, but they do have the abject despair of working at a government job every single day.
My prediction?
- If the economy crashes and the stock market implodes, oil will follow. People who aren’t working don’t need to go to jobs. Will oil hit $40? Depends on how low the stock market goes.
- But! If inflation spikes and the government keeps shoveling cash like coal into a train firebox, well, $150 per barrel oil might seem like a bargain that would be cheap enough to take a shower in.
Crappy prediction, right?
It is. Because with all of the difficult issues we simply don’t know. The easiest bet is that oil will be more expensive because once inflation is unleashed, it’s hard to put back into the bottle. The 1970s looked like this, so that would be my best bet.
Regardless, expensive energy has almost always been the enemy of freedom.
Prepare accordingly.
At least we aren’t threatening a war with one of the world’s largest oil producers that sits right next to a bunch of the rest of the world’s largest oil producers.
Right! That sounds like it would be folly!
“Crappy prediction, right?”
John, I’ve either been GM of a petroleum marketer or an environmental consultant to the same since 1976. You don’t make big $$$ in a stable market, you make the big $$$ in choppy markets. Drain inventory and hold the pump price up as long as possible when rack price drops. The reverse when rack pricing rises. Grow inventory and raise the pump price ASAP. Econ 101, plain and simple.
Yup, the churn is your friend, same for stock brokers.
Friday night is when I catch up on sundry things and give thought. I’ve appreciated your columns on ZH, so subscribed. BTW, been a donor to Charles Smith for 10+ years. Glad he got out of the Bay Area. Lets talk about the economics of petroleum marketing at the street level.
A client built a C-store last year on the Savannah Hwy (US 17) in Charleston but almost out of town to the west. Cost? $6.75MM. He owns 28 stores. The days of mom ‘n pop are long gone. These were consigned inventory stores, usually served by 2,200 gallon tankwagons, not 8,800 gal transports. As a result, the old bulk plant facilities have been scrapped that provided a buffer inventory.
When the inevitable disruptions hit, there’s almost zero intermediate inventory outside of the “tank towns”. This inventory allowed some relief during the 1973 & 79 embargoes. No longer.
I have a 270 w/ road diesel (for Cayenne Diesel & 3500 Series Sprinter) at the farm. Hopefully that’ll help. But not much.
We’re really f*ed. No energy, no life. They’ll kill off 50% of us but they’ll lose 90%+, mostly dumass upper middle surburban yankees.
True. And more dark news to come – the end of cheap energy will drive international conflict, too.
More energy facts here in the JP Morgan 2021 Annual Energy Paper than you can shake a stick at. Their overview take on the Texas blackout on pages 37-38 are particularly interesting.
https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/eye-on-the-market/future-shock-amv.pdf
Yeah, but what does all these numbers really mean? To vastly oversimplify a huge topic into a couple of cartoons…
First you gotta understand EROI:
https://srsroccoreport.com/wp-content/uploads/2016/08/Different-EROI-FIgures.png
Which leads to the concept of the “energy cliff”:
https://www.jpods.com/JPods/010Economy/EnergyCliff/EnergyCliffBudget.jpg
And all the evidence indicates that as we use up the easy-to-access energy sources and are forced to go with more expensive, more dilute energy sources (shale oil, renewables like wind and solar) that our average worldwide EROI is now dropping fast and we are going over the energy cliff.
https://thumbor.forbes.com/thumbor/fit-in/1200×0/filters%3Aformat%28jpg%29/https%3A%2F%2Fblogs-images.forbes.com%2Fjamesconca%2Ffiles%2F2015%2F02%2FEROI-Book-Figure.jpg
People die when they splat at the bottoms of cliffs. Lots of people die when civilizations go over really steep cliffs. Help us, Obi-Wan Nuclear, you’re our only hope.
A few final notes. Renewables look like interesting EROI possibilities…until you spend the capital / energy to add-on storage facilities to enable them to supply energy after sundown. The reason natgas, coal and nuclear have such high EROI is they are easily stored forms of fuel – except the first two release CO2 upon use, the dastardly greenhouse gas. And people absolutely do not grasp the concentrated power of nuclear.
https://www.ourworldofenergy.com/images/nuclear-power/vignette_image_3_1.jpg
But, but, but… Three Mile Island, Chernobyl, Fukushima! Our current civilian light water reactor designs all can be traced back to the 1950s race to put nuke reactors on submarines and aircraft carriers. Civilian power reactors based on these designs basically now try to recreate the endless supply of cooling water available to naval boats used to keep these compact reactors from melting. There are much safer and cheaper (and admittedly less thermally efficient, the trade-off) designs that could be used for land-based reactors – pebble bed, for example – if only the effort was made to certify them.
https://www.energy.gov/ne/articles/x-energy-developing-pebble-bed-reactor-they-say-cant-melt-down
Ricky, thanks for the links.
I’ve heard it said that we are in an ages-old struggle on both the physical and spiritual plane. As an agnostic with pretensions of being an intellectual, I sneer at that… but it worries me that such a view is coming to make a lot more sense than any purely rational take on the world’s situation. One of the guys I’m referring to is Horus the Avenger (Tim Murdock post-dox), who observed that one of the fundamental differences between the sides of this struggle is that our special ability is to overcome shortages, while our enemy’s power is in creating shortages to exploit. He was saying this around 10-15 years ago, and it seems more and more true every day.
In other words, it’s probably not a coincidence that nuclear plants have a hard time getting certified, in spite of obviously being the only solution that doesn’t involve releasing weaponized small pox and/or instituting a global Soviet Union.
Thorium . . .
Yes, if we have a future, it is nuclear.
“because I am apparently the only person in the house who knows how to use a light switch, at least 32 lights are on in the house are on”. Pet peeve of mine for a long time. I would go through the house and turn the rest of the lights on just so I could hear the question, did you turn all these lights on? No only the ones not already on. Ha ha ha
1913 very bad year. Income tax and the bubble creator, or should I say the brrrrrrrrrrrrrrrrrrrrrr creator. Thats where inflation comes from along with 71 and going off the gold reserve.
END THE FED and our troubles go away.
It has been Scientifically proven that the ability to turn on a light switch is on the X chromosome, while the ability to turn it off is only found on the Y chromosome.
Exactly right. XX types can turn ’em on, but not off. We XY types? We’re versatile; we can do both. Each at the proper and logical time, of course.
Well, ending the Fed is a great first step. Then? Let’s build those nukes.
I’ve long been interested in environmental history. Not the history of the environmental movement, but how history has been influenced (controlled?) by environmental factors. I read a book awhile ago claiming that the rise and fall of empires is largely to do with energy. The Roman Empire rose when the jet stream was over it, moderating climate so crops would grow better. Jet stream moved north, and Europe began to rise.
Another example he used was how the Dutch were a massively powerful nation out of all proportion to its size. While it rose up it had huge supplies of peat that it could use to make trade goods, especially goods involving glass. When the easy to get peat was used up, the energy available decreased and so too did Dutch influence and power in the world.
This is similar to a theory that says the advancement of humanity is nothing more than increasing our ability to harness energy. Bipedalism uses less energy than quadripedalism. Hunting/ gathering to farming is just a more efficient means of harvesting the suns’ energy. Domesticated draft animals greatly increase the amount of energy each human. etc. etc.
https://www.betaglyph.com/energy-and-civilization/
Dyson spheres when?
One of the deepest thinkers on the dark, dark place we are headed on energy are Gail Tverberg, who wrote her most recent must-read musings on this topic just last week.
https://ourfiniteworld.com/2021/12/03/is-it-possible-that-the-world-is-approaching-end-times/
When she got into a discussion on energy a few years ago with Dr. Charles Hall, the guy who invented the EROI concept, friendly sparks flew…
https://ourfiniteworld.com/2018/04/12/energy-return-on-energy-invested-prof-charles-halls-comments/
A conspiracy-minded person with little trust for the government would find a lot of nightmare fuel in that top link…
I disagree with what she seems to be saying about energy running out. Partly due to my optimistic belief that human ingenuity will continue to defeat Malthusian math **, but mostly due to my cynical realization that nature isn’t the limiting factor. Human greed is.
Virtually every resource shortage of the past few hundred years was due to 1 group of humans trying to advantage themselves at the expense of another group of people. Many shortages before that also appear to have been intentional, although it’s hard to tell from the sources. During the potato famine Ireland was exporting more than enough food to feed the country, but there was more money in selling it to the urban hordes in England. Many Indian famines also happened at a time when food was being exported to England. The Great Depression was engineered and intentionally exacerbated; it would hold the record for largest transfer of wealth in recorded history until covid lockdowns. Oil “shortages” were always due to guys in turbans and/or cowboy hats getting together and making an agreement.
We are going to have even more shortages than we have now, but not because we are running short on resources, but because those in power feel it is to their personal advantage to create shortages. At the intermediate level they might only be thinking of profits, but at the highest level our enemy will be using it to increase their power.
Gail Tverberg from Ricky’s link:
“The unhappiness of workers leads to the election of increasingly radical politicians, in the hope that something can be done to fix the problems.”
“As energy supplies get scarce, the rich tend to become richer and the poor tend to become poorer.”
Sounds like all the incentive for the elites is to make things worse… What a coincidence that they always seem to make things worse.
**My environmental stance in meme form:
https://media.gab.com/system/media_attachments/files/092/637/452/original/a267340262e94d65.jpeg
addendum:
“The share of wealth owned by the world’s super-rich soared during the coronavirus pandemic, while 100 million people sank into extreme poverty, a major study has found.
According to the World Inequality Report, released on Tuesday, the top 1% took 38% of all additional wealth accumulated since the mid-1990s, whereas the bottom 50% captured just 2% of it.
It also said that the world’s 2,755 billionaires collectively own 3.5% of global household wealth this year, up from slightly above 2% at the start of the pandemic in early 2020.”
https://www.rt.com/business/542477-super-rich-wealth-growth-pandemic/
Thank you for that link to the book.
I have to wonder how these predictions will be affected by peoples’ choices in an energy-expensive environment.
Down-sizing cars is a good first step, as is switching from leasing them to owning them for 6-10 years. Both use considerably less energy.
I’m pretty sure that many people, over the last couple of years, went to a more low-consumption lifestyle. More eating at home, fewer trips to the store. So, long-term, there may be some reductions in use.
Similarly, the energy-sucking appliances you might use at home are getting more efficient over time. Many of them can be put away, and not used, should the cost of energy skyrocket.
If we bring back manufacturing to the USA, that puts energy use in our hands – and, we are a lot more efficient in using it than China is.
Great link. Yup – the story of freedom is the story of better energy use. Dyson spheres are nice . . . but we’ve never seen a signature. Maybe have to start with a Ringworld?
expensive energyGovernment has almost always been the enemy of freedom.FIFY
But notice how one leads to the other. It’s not coincidence.
Government has almost always been the enemy of freedom.
Limited government is like limited pregnancy: either you’re 100% governed or 100% free, and that it starts out small doesn’t mean it will stay small.
But you want an iron curtain.
It is not a coincidence – and governments LOVE expensive energy.
A few details for anyone still harboring any optimism. Right now, the fracking still taking place is largely using holes already drilled back in the boom times ( think of the gold mine piling up ore to be processed when the gold price decreases, and that lowers their current costs ). This will largely all be used up next year. Saudi Arabia is no longer our colony, as she now has Russia as a protectorate. Officially ( it started awhile ago when Saudi Arabia started accepting Chinese currency along with dollars ). The bankers are no longer bailing out the frackers, and the PetroDollar is dead. You do the math. Good coverage, Mr. Wilder. Thank you.
I hear a lot of different things about fracking. Is it possible to let drilled well sit for a few years, then start harvesting again? My understanding is that oil well is like a well drawing up groundwater, just a lot slower in filling back up.
Nah, it just produces very slowly.
Yup – they are still bringing those holes online. And don’t forget, they always drill the best places first. Law of declining returns . . .
EROEI is the biggie. From what I read fracking was never that great. Alberta tar sands? Fargheddaboudit! The other issue you didn’t mention with fracking is ground water contamination. Once you turn the tap on and you can light on fire what comes out there’s no stuffing that genie back in the bottle.
Also seems like 1st world economies grind to a halt about US$140/barrel, which would be interesting considering they’ve been deliberately idled for the last 2 years.
I think we’re close to the SHTF stage of the controlled demolition of our societies/economies.
I didn’t mention groundwater contamination, nor earthquakes – those are both issues (and groundwater is mainly for shallow fracking).
Yes – $140 oil kills the economy – maybe for good this time.
“If the price drops and drilling stops, then the quantity of oil available drops quickly. Then the price goes up. Then everyone drills. Because everyone is drilling, then the prices drops again. And everyone stops drilling. This acts like a “crack the whip” on the economy, since, as mentioned above, high oil prices act as a tax.”
And that is, in the engineering sense, the proper way to run a stable system: negative feedback. And it’s not an ON/OFF switch; it’s a dial. When the price drops, it doesn’t drop overnight to zero. It starts declining, and not everyone who drills stops doing so. It’s the marginal wells that drop off, leading to a small drop in supply, exerting a modest upward pressure on price, which in turn makes marginal wells worth operating again.
Similarly, the nonsense about atmospheric CO2. Plant life, when it photosynthesizes, turns CO2 and sunlight and water into sugar and cellulose and oxygen, the O2 of which goes into the atmosphere. But then there’s walking-around life, like us and many others, which breathes in that oxygen (and, in many cases, eats that cellulose) and produces … CO2, along with some poop and pee and pretty rank farts sometimes. Increase the CO2, and favor plant life, which in turn increases O2, favoring animals. Negative feedback, and a stable system.
Want to screw either system up, or both? That takes a lot of humanities majors, or preferably Poli Sci types. In other words, government. And we gots lots-o-that.
And we’ve screwed up our energy system. Part of it is that the numbers are so big, and the costs are similarly huge. Investments might need decades to pay out . . .
Energy is a construct of the white male capitalist patriarchy and wayciss!
Everything will be free in Wakanda and the glow from the halo of the messiah bathhouse Barry will power the economy just fine.
The NYC to Hawaii high speed rail or AOCTRAK will be engineered by Choo Choo Brandon but deplorable kulak untermschen or whitey crackas will be allowed.
Jo Jo Magoo is planting the trees for all the free stuff to grow on the WH lawn right now in December because he be like all smart and stuff.
Energy is freedom is a great one and added to the lexicon as the CPUSA hates all freedom and free market (not crony) capitalism and they will continue the controlled demolition of the former USA until it goes uncontrolled.
By then rickshaw cart duty at the Sino-American Friendship Center for a half a cup of lentils will be mandatory for all comrades of the glorious Wakanda unity collective.
Forward! Yes we can!
Ahh, yes, energy is a social construct.
I LOVE IT!
We can just wish our way out of crisis . . . hopefully cold winters and night are social constructs, too.