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http://energyskeptic.com/2017/we-all-fall-off-the-net-energy-cliff-in-2022-just-6-years-away/

Civilization goes over the net energy cliff in 2022 — just 6 years away

Oil extraction costs have been shooting up and can only become higher as nearly all of the ‘easy oil’ has been found. Once more energy is used than gained, exploration and production end.
For the average barrel of oil this may happen in 2022 — just 6 years away.

So by 2022 half the oil industry is likely to be out of business. Oil production won’t end — there will still be “above average” barrels produced, but dramatically less and less as we fall over the energy cliff, with the tail end around 2095.

The rapid end of the Oil Age began in 2012 and will be over within some 10 years. By 2022 the number of service stations in the US will have shrunk by 75%.

The critical parameter to consider is not the million barrels produced per day, but the net energy from oil per head of global population, since when this gets too close to nil we must expect complete social breakdown, globally.

We are in an unprecedented situation. As stressed by Tainter, no previous civilization has ever managed to survive the kind of predicament we are in. However, the people living in those civilizations were mostly rural and had a safety net, in that their energy source was 100% solar, photosynthesis for food, fiber and timber – they always could keep going even though it may have been under harsh conditions. We no longer have such a safety net; our entire food systems are almost completely dependent on the net energy from oil that is in the process of dropping to the floor and our food supply systems cannot cope without it.

The Hills Group has models that predicted the price of oil going down before it began in 2014, and several other models all arrive at the same conclusion that the end of the age of oil for most of us ends around 2030 — though really 2022 since 2030 assumes total energy efficiency. If you need a kick in the pants to change your life and location, I can’t imagine a more important document to read (ignore the math, the methods and results in the charts are clear). And besides, it’s good brain exercise to prevent Alzheimer’s)

The Hill’s Group. March 1, 2015. Depletion : A determination for the world’s petroleum reserve. A reserve status report # HC3-433 Version 2

Or for an easier read look at this short summary of Dr. Alister Hamilton’s talk “Brexit, Oil and the World Economy” here, and view the hour video here on YouTube.

Alice Friedemann www.energyskeptic.com author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]
Louis Arnoux. July 12, 2016. Some reflections on the Twilight of the Oil Age – part I. cassandralegacy.blogspot.com

Introduction

Since at least the end of 2014 there has been increasing confusions about oil prices, whether so-called “Peak Oil” has already happened, or will happen in the future and when, matters of EROI (or EROEI) values for current energy sources and for alternatives, climate change and the phantasmatic 2oC warming limit, and concerning the feasibility of shifting rapidly to renewables or sustainable sources of energy supply. Overall, it matters a great deal whether a reasonable time horizon to act is say 50 years, i.e. in the main the troubles that we are contemplating are taking place way past 2050, or if we are already in deep trouble and the timeframe to try and extricate ourselves is some 10 years. Answering this kind of question requires paying close attention to system boundary definitions and scrutinizing all matters taken for granted.

It took over 50 years for climatologists to be heard and for politicians to reach the Paris Agreement re climate change (CC) at the close of the COP21, late last year. As you no doubt can gather from the title, I am of the view that we do not have 50 years to agonise about oil. In the three sections of this post I will first briefly take stock of where we are oil wise; I will then consider how this situation calls upon us to do our utter best to extricate ourselves from the current prevailing confusion and think straight about our predicament; and in the third part I will offer a few considerations concerning the near term, the next ten years – how to approach it, what cannot work and what may work, and the urgency to act, without delay.
Part 1 – Alice looking down the end of the barrel

In his recent post, Ugo contrasted the views of the Doomstead Diner‘s readers with that of energy experts regarding the feasibility of replacing fossil fuels within a reasonable timeframe. In my view, the Doomstead’s guests had a much better sense of the situation than the “experts” in Ugo’s survey. To be blunt, along current prevailing lines we are not going to make it. I am not just referring here to “business-as-usual” (BAU) parties holding for dear life onto fossil fuels and nukes. I also include all current efforts at implementing alternatives and combating CC. Here is why.
The energy cost of system replacement

What a great number of energy technology specialists miss are the challenges of whole system replacement – moving from fossil-based to 100% sustainable over a given period of time. Of course, the prior question concerns the necessity or otherwise of whole system replacement. For those of us who have already concluded that this is an urgent necessity, if only due to Climate Change, no need to discuss this matter here. For those who maybe are not yet clear on this point, hopefully, the matter will become a lot clearer a few paragraphs down.

So coming back for now to whole system replacement, the first challenge most remain blind to is the huge energy cost of whole system replacement in terms of both the 1st principle of thermodynamics (i.e. how much net energy is required to develop and deploy a whole alternative system, while the old one has to be kept going and be progressively replaced) and also concerning the 2nd principle (i.e. the waste heat involved in the whole system substitution process). The implied issues are to figure out first how much total fossil primary energy is required by such a shift, in addition to what is required for ongoing BAU business and until such a time when any sustainable alternative has managed to become self-sustaining, and second to ascertain where this additional fossil energy may come from.
The end of the Oil Age is now

If we had a whole century ahead of us to transition, it would be comparatively easy. Unfortunately, we no longer have that leisure since the second key challenge is the remaining timeframe for whole system replacement. What most people miss is that the rapid end of the Oil Age began in 2012 and will be over within some 10 years. To the best of my knowledge, the most advanced material in this matter is the thermodynamic analysis of the oil industry taken as a whole system (OI) produced by The Hill’s Group (THG) over the last two years or so (http://www.thehillsgroup.org).

THG are seasoned US oil industry engineers led by B.W. Hill. I find its analysis elegant and rock hard. For example, one of its outputs concerns oil prices. Over a 56 year time period, its correlation factor with historical data is 0.995. In consequence, they began to warn in 2013 about the oil price crash that began late 2014 (see: http://www.thehillsgroup.org/depletion2_022.htm). In what follows I rely on THG’s report and my own work.

Three figures summarize the situation we are in rather well, in my view.

Figure 1 – End Game

arnoux-end-game

For purely thermodynamic reasons net energy delivered to the globalized industrial world (GIW) per barrel by the oil industry (OI) is rapidly trending to zero. By net energy we mean here what the OI delivers to the GIW, essentially in the form of transport fuels, after the energy used by the OI for exploration, production, transport, refining and end products delivery have been deducted.

However, things break down well before reaching “ground zero”; i.e. within 10 years the OI as we know it will have disintegrated. Actually, a number of analysts from entities like Deloitte or Chatham House, reading financial tea leaves, are progressively reaching the same kind of conclusions.[1]

The Oil Age is finishing now, not in a slow, smooth, long slide down from “Peak Oil”, but in a rapid fizzling out of net energy. This is now combining with things like climate change and the global debt issues to generate what I call a “Perfect Storm” big enough to bring the GIW to its knees.
In an Alice world

Under the prevailing paradigm, there is no known way to exit from the Perfect Storm within the emerging time constraint (available time has shrunk by one order of magnitude, from 100 to 10 years). This is where I think that Doomstead Diner’s readers are guessing right. Many readers are no doubt familiar with the so-called “Red Queen” effect illustrated in Figure 2 – to have to run fast to stay put, and even faster to be able to move forward. The OI is fully caught in it.

Figure 2 – Stuck on a one track to nowhere

arnoux-red-queen

The top part of Figure 2 highlights that, due to declining net energy per barrel, the OI has to keep running faster and faster (i.e. pumping oil) to keep supplying the GIW with the net energy it requires. What most people miss is that due to that same rapid decline of net energy/barrel towards nil, the OI can’t keep “running” for much more than a few years – e.g. B.W. Hill considers that within 10 years the number of petrol stations in the US will have shrunk by 75%…

What people also neglect, depicted in the bottom part of Figure 2, is what I call the inverse Red Queen effect (1/RQ). Building an alternative whole system takes energy that to a large extent initially has to come from the present fossil-fueled system. If the shift takes place too rapidly, the net energy drain literally kills the existing BAU system.[2] The shorter the transition time the harder is the 1/RQ.

I estimate the limit growth rate for the alternative whole system at 7% growth per year. So growth rates for solar and wind, well above 20% and in some cases over 60%, are not viable globally. However, the kind of growth rates, in the order of 35%, that are required for a very short transition under the Perfect Storm time frame are even less viable. As the last part of Figure 2 suggests, there is a way out by focusing on current huge energy waste, but presently this is the road not taken.
On the way to Olduvai

In my view, given that nearly everything within the GIW requires transport and that said transport is still about 94% dependent on oil-derived fuels, the rapid fizzling out of net energy from oil must be considered as the defining event of the 21st century – it governs the operation of all other energy sources, as well as that of the entire GIW. Therefore the critical parameter to consider is not that absolute amount of oil mined (as even “peakoilers” do), such as Million barrels produced per year, but net energy from oil per head of global population, since when this gets too close to nil we must expect complete social breakdown, globally.

The overall picture, as depicted ion Figure 3, is that of the “Mother of all Senecas” (to use Ugo’s expression). It presents net energy from oil per head of global population.[3] The Olduvai Gorge as a backdrop is a wink to Dr. Richard Duncan’s scenario (he used barrels of oil equivalent which was a mistake) and to stress the dire consequences if we do reach the “bottom of the Gorge” – a kind of “postmodern hunter-gatherer” fate.

Oil has been in use for thousands of year, in limited fashion at locations where it seeped naturally or where small well could be dug out by hand. Oil sands began to be mined industrially in 1745 at Merkwiller-Pechelbronn in north east France (the birthplace of Schlumberger). From such very modest beginnings to a peak in the early 1970s, the climb took over 220 years. The fall back to nil will have taken about 50 years.

The amazing economic growth in the three post WWII decades was actually fueled by a 321% growth in net energy/head. The peak of 18GJ/head in around 1973, was actually in the order of some 40GJ/head for those who actually has access to oil at the time, i.e. the industrialized fraction of the global population.

Figure 3 – The “Mother of all Senecas”

arnoux-peak-net-end-user-energy-1970sIn 2012 the OI began to use more energy per barrel in its own processes (from oil exploration to transport fuel deliveries at the petrol stations) than what it delivers net to the GIW. We are now down below 4GJ/head and dropping fast.

This is what is now actually driving the oil prices: since 2014, through millions of trade transactions (functioning as the “invisible hand” of the markets), the reality is progressively filtering that the GIW can only afford oil prices in proportion to the amount of GDP growth that can be generated by a rapidly shrinking net energy delivered per barrel, which is no longer much. Soon it will be nil. So oil prices are actually on a downtrend towards nil.

To cope, the OI has been cannibalizing itself since 2012. This trend is accelerating but cannot continue for very long. Even mainstream analysts have begun to recognize that the OI is no longer replenishing its reserves. We have entered fire-sale times (as shown by the recent announcements by Saudi Arabia (whose main field, Ghawar, is probably over 90% depleted) to sell part of Aramco and make a rapid shift out of a near 100% dependence on oil and towards “solar”.

Given what Figure 1 to 3 depict, it should be obvious that resuming growth along BAU lines is no longer doable, and that incurring ever more debt that can never be reimbursed is no longer a solution, not even short-term
Part 2 – Inquiring into the appropriateness of the question

Let’s acknowledge it, the situation we are in, 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, my Part 1 data have indicated that most of what’s left in terms of fossil fuels is likely to stay where it is, underground because this is what thermodynamics dictates.

We can now venture a little bit further if we keep firmly in mind that the globalized 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 mobilized 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 inquiries, 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 inquire into the appropriateness of the question.”

Here it is important, in terms of system analysis, to differentiate between the global energy industry (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 10,700 EJ, while current world energy use is in the order of 554 EJ; it is no longer doable to “mind the gap”).
Crude oil prices are dropping to the floor

Figure 4 – The radar signal for an Oil Pearl Harbor

arnoux-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 within its own production 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.[4] 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 realized 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 Harbor”, 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 defenseless in the face of this threat.
The Oil Fizzle Dragon-King

Figure 5 – The “Energy Hand”

energy-hand-take-5

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 rapid fizzling 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.[5]

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 Harbor 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, globalized set of energy networks. Coal mining, transport, processing, and use depend substantially on oil-derived transport fuels; ditto for gas.[6] 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.”

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 “inquiring into the appropriateness of the question” and for systemic thinking. We are in deep trouble. We can’t afford to get this wrong.
Part 3 – Standing slightly past the edge of the cliff

At least since the early 1970s and the Meadows’ work, we have known that the globalized industrial world (GIW) is on a self-destructive path, aka BAU (Business as usual). We now know that we are living through the tail end of this process, the end of the Oil Age, precipitating what I have called the Oil Fizzle Dragon-King, Seneca style, that is, after a slow, relatively smooth climb (aka “economic growth”) we are at the beginning of an abrupt fall down a thermodynamic cliff.

The chief issue is whole system change. This means thinking in whole systems terms where the thermodynamics of complex systems operating far from equilibrium is the key. Understanding the situation requires moving repeatedly from the particulars, the details, to the whole system, improving our understanding of the whole and from this going back to the particulars, improving our understanding of them, going back to considering the whole, and so on.

Whole system replacement, i.e. going 100% renewable, requires a huge energy embodiment that is not feasible. Having the “Energy Hand” in mind (Figure 5), where does this required energy come from in a context of sharp decline of net energy from oil and the Red Queen effect, and concerning renewable, inverse Red Queen/cannibalization effects?

Solely considering the performances and cost of this or that alternative energy technology won’t suffice. Short of addressing the complexities of whole system replacement, the situation we are in is some kind of “Apocalypse now”. The chief challenge I see is thus how to shift safely, with minimal loss of life (substantial loss of life there will be; this has become unavoidable), from fossil-BAU (and nuclear) …

We currently have some 17 TW of power installed globally (mostly fossil with some nuclear), i.e. about 2.3kW/head, but with some 4 billion people who at best are grossly energy stressed, many who have no access to electricity at all and only limited transport, in a context of an efficiency of global energy systems in the order of 12%.[9]

Going “green” and surviving it (i.e. avoiding the inverse Red Queen effect) means increasing our Energy Hand from 17 TW to 50 TW (as a rough order of magnitude), with efficiencies shifting from 12% to over 80%.

It should be clear that under this predicament something would have to give, i.e. some of us would get even more energy stressed and die, or as the Chinese and Indians have been doing use much more of remaining fossil resources but then this would accelerate global warming and many other nasties.

Whole system replacement (on a “do or die” mode) requires considering whole production chain networks from mining the ores, through making the metals, cement, etc., to making the machines, to using them to produce the stuff we require to go 100% sustainable. Given the very short time window constraint, we can’t afford to get it wrong in terms of how to possibly getting out of there – we have hardly enough time to have one go at it.

Remaining time frame

We no longer have 35 years, (say up to around 2050). We have at best 10 years, not to debate and agonize but to actually do, with the next three years being key. The thermodynamics on this, summarized in Part 1, is rock hard. This time-frame, combined with the Oil Pearl Harbor challenge and the inverse Red Queen constraints, means in my view that none of the current “doings” renewable-wise can cut it.
Weak links

Notwithstanding its apparent power, the GIW is in fact extremely fragile. It embodies a number of very weak links in its networks. I have highlighted the oil issue, an issue that defines the overall time frame for dealing with “Apocalypse now”. In addition to that and to climate change, there are a few other challenges that have been variously put forward by a range of researchers in recent years, such as fresh water availability, massive soil degradation, trace pollutants, degradation of life in oceans (about 99% of life is aquatic), staple food threats (e.g. black stem rust, wheat blast, ground level ozone, etc.), loss of biodiversity and 6th mass extinction, all the way to Joseph Tainter’s work concerning the links between energy flows, power (in TW), complexity and overshoot to collapse.[11]

These weak links are currently in the process of breaking or are about to break, the breaks forming a self-reinforcing avalanche (SOC) or Perfect Storm. All have the same key time-frame of about 10 years as an order of magnitude for acting. All require a fair “whack” of energy as a prerequisite to handling them (the “whack” being a flexible and elastic unit of something substantial that usually one does not have).
Cognitive failure

The “Brexit” saga is perhaps the latest large-scale demonstration of cognitive failure in a very long series. That is to say, the failure on the part of decision-making elites to make use of available knowledge, experience, and expertise to tackle effectively challenges within the time-frame required to do so.

Cognitive failure is probably most blatant, but largely remaining unseen, concerning energy, the Oil Fizzle DK and matters of energy returns on energy investments (EROI or EROEI). What we can observe is a triple failure of BAU, but also of most current “green” alternatives (Figure 7): (1) the BAU development trajectory since the 1950s failed; (2) there has been a failure to take heed of over 40 years of warnings; and (3) there has been a failure to develop viable alternatives.

Figure 8 – The necessity of very high EROIs

With an EROI of 1.1 : 1 at the production well we can pump oil out and look at it…that’s all – there is no spare energy to do anything else with it
1.2 : 1 We can refine crude oil into diesel fuel…and that’s all
1.3 : 1 We can dispatch the diesel to a service station…and that’s all
3 : 1 We can run a truck with it as well as enough spare energy to build and maintain the truck, roads, and bridges…and that’s all
5 : 1 We can put something in the truck and deliver it…and that’s all
8 : 1 We can provide a living to the oil field worker, the refinery worker, the truck driver, and the farmer…and that’s all
10 : 1 You may have minimal health care, some education…and that’s all
20 : 1 You may have the basic set of consumer items such as refrigerators, stoves, radios, TV, a small car…and that’s all
30 : 1 Or higher – you can have a prosperous lifestyle and the spare energy to deal with ecological issues and to invest in a secure energy future

This is expanded from similar attempts by Jessica Lambert et al., to perhaps highlights what sliding down the thermodynamic cliff entails. Charles Hall has shown that a production EROI of 10:1 corresponds roughly to an end-user EROI of 3.3:1 and is the bare minimum for an industrial society to function.[15] In sociological terms, for 10:1 think of North Korea. As shown on Figure 7, currently I know of no alternative, either unconventional fossils based, nuclear or “green” technologies with production EROIs (i.e. equivalent to the well head EROI for oil) above 20:1; most remain below 10:1. I do think it feasible to go back above 30:1, in 100% sustainable fashion, but not along prevalent modes of technology development, social organization, and decision-making.

We are in an unprecedented situation. As stressed by Tainter, no previous civilization has ever managed to survive the kind of predicament we are in. However, the people living in those civilizations were mostly rural and had a safety net, in that their energy source was 100% solar, photosynthesis for food, fiber and timber – they always could keep going even though it may have been under harsh conditions. We no longer have such a safety net; our entire food systems are almost completely dependent on the net energy from oil that is in the process of dropping to the floor and our food supply systems cannot cope without it.

Arnoux responds to readers comments:

It is important to not confuse EROI or EROEI at the well head and for the whole system up to the end-users. The Hill’s Group people have shown that the EROIE as defined by them passed below the critical viability level of 10:1 around 2010 and that along current dynamics by circa 2030 it will be about 6.89:1, by which time no net energy per barrel will reach end-users (assuming there is still an oil industry at this point, which a number of us consider most unlikely, at least not the oil industry as we presently know it). Net energy here means what is available to end-users typically to go from A to B, the energy lost as waste heat (2nd principle) and the energy used by the oil industry having been fully deducted – as such it cannot be directly linked in reverse to evaluate an EROI.

We are considering the whole system, from oil exploration to end-users. The matter is that relative to the early stages in the development of the oil industry, the total energy costs of producing the energy reaching end-users has been increasing steadily barrel after barrel and we are now getting close to a point when no significant energy will reach end-users. We expect that the industry will breakdown well before this critical point is reached.

The idea of collapse remains taboo in numerous circles and understandably is rather unpalatable. However, increasingly the awareness of the dangers appears to be progressing rapidly, all the way notably among very wealthy people who now constitute a booming market segment for underground luxury bunkers where, as the marketing goes, they could survive 5 years without going back to the surface in case of heavy turmoil…

In energy matters inequality is prevalent. Some regions are likely to retain access to residual net energy from oil longer than others and to the detriment of others, and this isn’t shaping up as a nice and smooth affair. Prof Micheal Klare has spoken of a global “30 Year War” (Klare, Michael, 2011, “The New Thirty Years War”, in European Energy Review, 5 September). However, war requires a lot of oil-based energy, so war is likely to accelerate thermodynamic collapse dynamics. For example, in the Middle East a number of researchers have noted the contribution of years of drought and displacement of about 1 million farmers to Syrian cities that has led to the present tragedy. However, few realize that another factor contributing to turmoil in the region is the competition between two sets of pipelines projects and related political and military interests, one focused on Iran and the other on KSA to link those areas to the Mediterranean. It is not possible to read through a crystal ball at the regional level. It is likely that if mistakes can be made and atrocities committed, they will take place… All in all, however, I tend to agree with B. W. Hill that globally the tail end of the Oil Fizzle process is most unlikely to extend beyond 2030.

You ask “how are they to be convinced to abandon their investments prior to catastrophic collapse?” It’s clear to me that they are not going to be convinced and there is no point in trying to and above all not time left to do so. I have come to think that those who cling to BAU for dear life do not have much prospects to last long simply because they are no longer within a viable thermodynamic space. On the other hand there are millions currently innovating and doing their utter best to stay or come back within such a space. They do so mostly flying blind, mostly without enquiring into the appropriateness of the questions they ask, which makes their life a lot harder and riskier. As a result many will end up outside the viable space and vanish, however, given the numbers, I think that statistically quite a number will manage to live within that space and evolve new ways, probably enough for one or more new kind(s) of civilization(s).

For over a century the ratio of gold to oil has remained in a narrow range of 1g to 6g of gold per barrel of sweet crude – gold being an age old monetary means that goes by weight and is not subject to inflation and other vagaries it can be used as a fixed metric not amenable to much manipulations (as fiat currencies and price indices are). This ratio is presently close to 1.04g/bbl. However, as we have seen, the GIW does not “live” on crude but on net energy from crude, essentially in the form of transport fuels. Currently the net energy that reaches end-users is about 16% of the gross energy in an average barrel of sweet crude (it was about 70% in 1920). This gives a present shadow price of about US$277/bbl, a highly unpalatable figure for the GIW’s operations (or 6.5g of gold/bbl). Of course, as net energy keeps dropping, a time will come, very soon, when after a burst the shadow price also drops to the floor (a value of x times zero equals zero). Put in other words, gold and oil have begun to diverge since 2014. All currencies have been dropping against gold since 1971. The stable gold-oil relationship is breaking down because the fundamental was not the crude barrel but the amount of net energy able to “power growth”; since 2012 this is now fizzling out.

I am saying that when 1 barrel of sweet crude is traded at US$44 (actually as I write it’s at about $43 and a bit), the GIW has access to only 16% of the energy it contains, so the net financial impact for the GIW as a whole is yes, $277/bbl equivalent. The GIW can’t make money with the full barrel, only the 16% residual, so it all happens as if it was attempting to “grow” at a basic cost of $277/bbl, which these days is quite a challenge. Even adjusting for inflation, at the time of the 1978-79 crisis (based on BP inflation adjusted price data) with some 56% net energy available to end-users, the shadow price was around US$188/bbl equivalent, and back then the situation was dire. In New Zealand we had carless days… So now at $277/bbl? The main difference I see is that now the GIW lives fully on debt, with central banks “printing money” like there is no tomorrow, which is probably correct – there is no tomorrow for the GIW in this fashion. We are at the stage where thermodynamics comes back home to roost.

In practice, no one but businesses from the oil industry buys oil. End-users buy transport fuels, plastics, etc… Now, in the main transport fuels are used to generate economic activity. No one can generate as much economic activity per barrel now, with only 16% net energy that can be used to do so, as compared to say 1920 when about 70% net energy was available. So after quite a bit of speculation up and down by traders who by and large have not a clue about what is going on, progressively the price of crude adjusts in proportion to the economic activity that can be generated downstream. The globalised industrial world (GIW), taken as a whole, cannot afford to pay more for its fuel than the amount of economic “growth” that it can generate with it, not for a long time any way. The consequence, however, is that the GIW decelerates in proportion, which is what we are observing.