Its the net energy, stupid!

Recall Bill Clinton's famous rejoinder to George Bush the Elder? "It's the economy, stupid". Well, it is the economy, but the economy is based on net energy flow for the production of all things important to human existence*.

A few blogs back I wrote about the computer model I've been developing with Charlie Hall, here at SUNY-ESF. In it, I mentioned the fact that net energy is the stuff that drives our economy, not the gross energy such as barrels of oil. Except for heating oil, which isn't actually the stuff out of the ground, we refine oil to usable forms like diesel and gasoline. It is those products that we use and it still takes some energy to transport them to the points of use. So it is the net of the gross energy (e.g. barrels of oil, or tons of coal) minus the energy invested in extraction, refinement, and transportation that really counts as usable in the economy.

As I worked more on the paper that Hall and I will co-produce, I began realizing that this is much more significant than anybody seems to have realized. As I outlined in that prior blog, if gross energy is near or at peak (and some say it may be past a theoretical peak; that we are in a bumpy plateau due to the fluctuations in the financial markets) then this means that we are already passed peak net energy. Moreover we long ago passed the point of inflection where net energy ceased to be rising exponentially fast and started to decelerate (the curve transitions from always going up faster in each time increment to going up more slowly in each time increment). It was that point of onset of deceleration that was the beginning of the end of the party, the energy consumption binge. That point appears to have been about 40 to 50 years ago in my model. Even accounting for some increases in energy efficiency due to improved technology, that probably translates into more than 30 years since the onset of the decline in net energy.

If this proves to be the case we are in very serious trouble (unless someone discovers some new magical source of energy like cold fusion). The problem is compounded by the fact that we haven't actually been paying attention to net energy available per unit time. We count barrels of oil and tons of coal and cubic feet of natural gas, all measures of gross energy, and have obsessed on the peaks of production of these, since they are finite resources. It should be obvious to all that peaks of production of raw (gross) energy are extremely worrisome since over 80% of global energy use comes from fossil fuels. As I have noted many times, the build-out and scale up of alternative energy capital equipment and supporting infrastructure, to replace fossil fuels in the time remaining before the law of diminishing returns catches up to us, is, for all practical purposes, infeasible (I note that I see more similar sentiments being expressed in the press these days as more scientists are coming to similar conclusions). 

But focusing on gross energy fails to recognize and detect the impact of what is happening with net energy flow. That is what really impacts the economy. And if my model is even a little bit right on this, then my suppositions about reduced energy flow being the root cause of all the economic shifts we've been witness to for the last several decades is greatly strengthened. Globalization, for example, was more about finding cheap labor to replace expensive energy for machines and expensive American labor that needed to be supported in energy-hungry lifestyles than finding new markets. The current housing bubble fiasco and Wall Street excesses, as well as so many corporate frauds being foisted on the American and world's working class are nothing more than attempts to hide the fact that it is increasingly hard to produce real assets because the net energy is diminishing! The growing disparity between the richest 1% and everybody else is not just due to greed. It is also a result of the pie shrinking.

So-called "green jobs" can't be counted on to actually reverse this situation even if implemented in a new jobs stimulus program. No one is going to get rich or make a great living doing green work or producing green products unless they magically figure out how to beat the 2nd Law of Thermodynamics. Going green will, at best, partially stanch the blood loss. But with net energy going into decline (if we have already passed peak net energy) there is no physical way to make more wealth tomorrow than we made today. We cannot grow the asset base any more. Period.

The point of this research is that we had better, start to focus on measuring net energy flow to the economy as a function of time to see if we are approaching, at, or passed the peak of production. We need to know and we need to know now. The policies we adopt are critically dependent on knowing the situation.

But, you say, George, don't be naive. Our leaders don't do anything right now even knowing that peak oil is upon us. Why would you expect them to do the right things knowing peak net is passed? And of course this is the real fly in the ointment. Political will is weak. Political wisdom is absent without leave. Political hope trumps science even while the head politico of the country promises us science will lead policy (evidence against him is the continued hope that 'clean coal' will save the day). Even so, I will pursue understanding. Who knows, maybe when the SHTF for real (look for the next even deeper recession coming soon to an economy near you), then TPTB will realize the errors in their ways and start listening to us scientist in earnest. Right. And monkeys will start to fly out of my behind (thanks to Mike Meyers for that disturbing vision).

[*Edit note: In my haste I forgot to tie the title into the text! So the first paragraph attempts to rectify that oversight. Apologies to all readers who have already visited here.]

Comments

[Jason]

"Globalization, for example, was more about finding cheap labor to replace expensive energy for machines and expensive American labor that needed to be supported in energy-hungry lifestyles than finding new markets."

Did you ever read Hornborg's 'The Power of the Machine'? Made that point very well.

I agree it is worth pursuing understanding. Get it on paper for the future even if it can't change the present.

You should know that here in the uk (and I'm sure the us will follow before long) fringe dictator-wannabes are already onto energy shortage. The BNP ("British National Party") is just waiting for the mainstream parties to look utterly foolish and for people to get as angry as possible about the economy, so they will be willing to go for a nastier alternative.

As you say, the mainstream parties cannot tell they're killing themselves with their indecision; the entire system can't turn around now so is destined to split apart I believe. Reading posts about 'sapient governance' is beginning to feel dispiriting compared with what we have, but still, I'm enjoying catching up with your earlier series. Thanks for the work.

[zhando]

Plenty of clean, net energy here:

http://thoriumenergy.blogspot.com/2009/11/dr-mitch-jacoby-introduces-thorium-to.html

No carbon emmissions. Very little waste and what there is is quite manageable.

The only obstacles are political.

[Chris Dollard]

it seems to me that all this talk about cap & trade, and the looming Copenhagen wealth transfer, er, I mean climate change agreement is really moot in the growing obviousness of past-the-peak oil and net energy as you discuss. This matches exactly with Jeff Rubin's book, Why Your World is About to Get a Whole Lot Smaller. Oil will simply become too expensive because of economics/supply & demand, not because of some painful carbon-offset/world government bureaucracy initiative. The temporary lull in oil prices also complicates the future supply matter because suddenly it's not economically feasible to invest in new refineries or oil sands monstrosities. So is Mike Ruppert (Collapse movie) right? If the party's over, do we head for the hills?

[George Mobus]

Jason,

Thanks for the tip on Hornborg.

Sapient governance is an idea whose time is yet to come -- after the crash of what currently passes for governance.

Zhando,

If you read further in my work on biophysical economics you will get the drift of why I don't think there are ANY magic bullets, ANYWHERE.

Chris D.,

Haven't seen the Collapse movie, but have heard about it. Will try to see it. As for personal preparations for a "likely" collapse, I have no advice other than be flexible and 'adapt or die'.

George

[Dan Conine]

You're wrong.
It's the Net Usefulness that matters.
Any species survives based on the amount of Net Usefulness that they provide for their future offspring. Net Usefulness is the amount of usefulness over and above what they consume in resources. Breaking even isn't enough, either. Randomness requires some extra usefulness by all species to overcome setbacks.
Sorry, but energy is not the root issue. Usefulness is. If we had all of the free energy available, we would still go extinct if our net activity remains consumptive.

[George Mobus]

Dan,

Would you kindly quantify "usefulness". And I would recommend basic courses in physics and biology to boot.