can distract you from the truth about oil, which is that we are constantly 24×7×365 burning it up in greater and greater amounts with every passing year.
Energy is also critically important because it’s tightly linked to economic growth, which is revered and sought by every nation on the planet. Everybody wants growth, especially more economic growth, which means continuously having more things produced and sold this year than last.
But this slavish fixation on economic growth has led us to overlook the reality that, for every additional 1% increase in Gross Domestic Product (GDP), electricity usage increases by roughly 0.5% and oil use increases by roughly 0.25%. So, it’s as simple as this: Growing an economy requires the consumption of energy to grow.
But this is clearly not a reasonable demand to make of a finite planet. While the demand for economic growth is unlimited, there’s a limited amount oil in the ground. The same is true for other fossil fuels such as coal and natural gas.
Centering just on oil, because the world remains so tremendously dependent on it, there are only two things you need to know.
First, the easy stuff is all gone. If there were easy stuff left we would not be drilling in ultra-deep waters, fracking at enormous expense, and boiling tar residue off of Canadian sand. Getting oil out of the ground is undeniably and obviously getting harder and more expensive as time goes on.
Second, there are no viable replacements for cheap oil anywhere on the horizon, at least not at the scales required *. We have no plan B in place for how we are going to transition off of oil. [*Note: the projected contributions from biofuels and electric vehicles are so tiny compared to oil’s stronghold on the transportation sector that they can be all but ignored at the moment.]
So as oil depletes, it becomes more expensive to extract every year, and we have no substitutes for it. Every year those two concepts become just a little bit more obvious.
The insidious part of this story is buried in the ‘more expensive to extract’ statement. Putting aside the additional money involved for a moment, what that really means is that we have to expend more energy to just get the same amount of energy out of the ground.
It takes energy to get energy, and we run both our economy and society on the surplus energy left over after all the energy used to find, extract, refine and distribute that energy has been subtracted.
Imagine for a moment that we were living in 1930 when those famous oil ‘gushers’ were being drilled. Back then we might have expended a single barrel of oil’s worth of energy in order to get 100 barrels out of the ground. That surplus balance of 99 barrels of oil went to market, and the nation used it however it wished.
This oil could have been used frivolously, or to build up the nation’s infrastructure. It could power the plowing of new farmland, or the import of feather boas from Brazil.
The point we’re making here is this: our culture, our economy, our jobs—progress and society itself—all exist due to surplus energy. Whether the world can produce 100 million barrels of oil per day or just 50 million is far less relevant than how much surplus energy there is to support the rest of our complex economy and the way of life we consider to be normal.
Now suppose for a moment that you live 30 years in the future and all new oil discoveries return just 1.5 barrels of oil for every barrel expended to find, produce and deliver that oil to market. What kind of a world do you suppose that would be like? Instead of expending a barrel of oil and getting 99 barrels back like we did in 1930, we’d only get 0.5 barrels back.
What’s the difference between 99 and 0.5? Night and day. Not everything that can be supported on 99 surplus barrels can be supported on a measly 0.5 barrels. In fact, we’d argue that practically everything we hold dear about our modern, comfortable lifestyles would vanish if we were suddenly forced to exist on a paltry 0.5 barrel surplus.
In rough terms, where the energy industry was once using 1% of our total annual energy and leaving 99% for society, it will someday be consuming 67%, leaving the rest of us to fight over the remaining 33%.
For those of us who have studied what life will look and feel like under these conditions, the answer is obvious. We will inherit a future defined by less of everything. The world will be a far less dynamic, less easy place to live with a much-simplified economy, reduced travel, and vastly fewer—or at least very different—opportunities compared to today. Unless you happen to work in the energy extraction business, in which case you may be very busy indeed trying to meet the demands of your increasingly-frustrated customers!
The sober truth is that we are well on that path of diminishing energy returns. The much-vaunted shale plays in the US you’ve seen touted in the media as the savior to the world’s oil needs? Those deliver perhaps 8:1 to 5:1 net energy returns.
Put another way, in the past 85 years of oil production, we now find ourselves getting just one-twentieth the return as when we started. It’s difficult to overstate the importance of this fact. It’s an astonishing development touching on everything we hold dear and you should rightly be wondering why you are reading about it here and not on the front page of every major newspaper.
The trends clearly show that the diminishing energy returns of oil are a permanent feature. Plentiful, cheap oil was a once-in-a-species bonanza. We’ve been blowing through it as if it were a massive and self-replenishing party fund, and we’ve fashioned our entire way of life and all our plans for the future on the comforting but false belief that oil’s age will never end.
The golden age of oil discoveries, you may be surprised to learn, peaked way back in the 1960’s. In 2014, world discoveries of new oil reserves dropped to a 20-year low, marking the fourth consecutive year of discovery declines, and only replaced roughly one-sixth of what we burned during that same year.
At the time of this writing in spring of 2015, there are no serious efforts underway for a smooth transition to a new energy source after the oil is gone.
Should a credible transition plan ever be devised, it will ask much of society. Such an effort will require the sort of dedication brought to the moon project, multiplied by the constructive intensity that gave us the interstate highway system, multiplied by some large whole number like 10. Or maybe 100. The budget and manpower needed will be staggering. But as of now, those in the halls of power are not debating this. It’s not even on their radar.
As for other forms of energy that might ride to the rescue, well, let’s just say that the current levels of investment in alternative energy (solar, wind, hydro, etc) are not yet equal to the task. Although energy production from alternative sources has been advancing nicely, it’s swamped each year by the gross increase in additional fossil fuel use. It’s an unfair race where fossil fuels have a gigantic head start.
More importantly, wind and solar are not replacements for oil. Oil gives us transportation fuels and chemical feed stocks while wind and solar give us electrons. They are not interchangeable inputs given the transportation industrial infrastructure we currently have.
As the surplus energy we receive from oil and other fossil fuels dwindles (the same dynamic is happening in coal and natural gas, too, albeit on a different timeline), we’re going to have to get used to getting by with less, because we will be able to do less. This will impact our lifestyles over the next several decades, affecting some harder and more quickly than others. (As we often say: your local mileage will vary).
But one thing we all care about is extremely vulnerable to a decline in surplus energy: the economy. Remember when we talked earlier about all that economic growth our corporate
