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No Easy Solutions to the Coming Energy Crisis

By Gail Tverberg | Wed, 27 April 2011 14:35 | 8

Everyone would like to fix the US energy policy, but doing so is almost impossible, in my view, primarily because we need to be planning for a much bigger change than most people can even imagine.

It seems to me that our international financial system is at this point, inching closer and closer to collapse. It needs growth to operate. Now that world oil supplies are virtually flat (and China and India and oil exporters are getting more of the oil), the financial system can’t get enough growth momentum. The US has applied various sleight of hand techniques to try to cover this problem (see my post What’s Behind US Budget Problems?), but at some time in the not too distant future, the techniques are going to stop working, and there is going to be a major financial crash, with debt defaults. This could happen when QE2 ends, or maybe QE3, QE4, or QE5. The timing may vary by country, with some countries holding out for a while longer.

The reason I point this out is because after such a crash, as far as I can see, everything is going to go downhill quickly. This is a graph of my view of one such scenario of oil supplies, if a country that imports all its oil undergoes such a collapse:

Type of drop in oil consumption that could occur
Figure 1. Type of drop in oil consumption that could occur, if a country gets shut out from buying oil because of debt problems.

The point is that the oil consumption goes down very quickly, not over a period of many years, because the decline in supply is determined by something quite different from what oil is in the ground–it is determined by ability to pay for the oil. A potential buyer can be cut off very quickly, if its credit is no good. We have gotten used to the idea of being able to keep running a tab, but at some point, this whole process is likely to come to a halt–something that can’t go on forever, won’t. Some international trade may continue, especially when a country has goods to trade for oil (rather than an IOU), but the level of free trade we have now can’t be expected to continue indefinitely.

The problem I see with a collapse scenario is that a plan that uses less oil and tries to make it go farther really isn’t helpful. Thus, a gas tax, or cap-and-trade, or fuel-efficient cars, or more fossil fuel extenders like wind and solar PV really aren’t helpful. Instead, we need to put our effort into figuring out how we would get along without fossil fuels and nuclear, rather than get along with less. Arguably, we may have some supply for a while, but if we do, we need to use it to help with the transition, not to expect such supply to continue forever. This is the big problem I have with energy policies and transition plans–they assume we are planning for a slow decline, when it is likely that we will not have such a decline.

In the case of an oil producer rather than an oil importer, perhaps the situation is better, but even here, there is a question of how much will continue to be produced, if there is major political upheaval. We know that the USSR broke up at the time of its collapse. There would seem to be a substantial chance of that happening elsewhere.

Everyone would like to add new and more complex systems to help–for example, more wind with upgraded transmission systems, smart grids, and electric cars. As nice as these might seem, the new systems become more and more complex, and more dependent on everything working together exactly correctly. As we lose ability to import spare parts, they will become very difficult to maintain, and will likely collapse within a few years. While they seem appealing, I don’t think they will add very much for very long.

Moving to a new system will require a lot of other changes:

1. A different financial system, that is not dependent on debt and growth.

2. More even distribution of incomes. With much less wealth, it won’t make sense for a few to have such a disproportionate share.

3. More even distribution of land. Without fossil fuels, it will not be possible to farm nearly as large plots. This also goes with more even distribution of wealth.

Changes such as these would be very difficult to make within our current structure. But without making such changes as well, it is hard to see that the new system would work.

In a post a while ago, I explained some of the things that seem to me to need to be done. I called the post, What President Obama Should Have Said Regarding Energy Policy. I don’t know that there is a real way that we can make major changes, without actually hitting a financial wall first. Perhaps a few people can work on such changes, and implement their own local versions of them.

By. Gail Tverberg

Gail Tverberg is a writer and speaker about energy issues. She is especially known for her work with financial issues associated with peak oil. Prior to getting involved with energy issues, Ms. Tverberg worked as an actuarial consultant. This work involved performing insurance-related analyses and forecasts. Her personal blog is ourfiniteworld.com. She is also an editor of The Oil Drum.

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Leave a comment

  • Anonymous on April 28 2011 said:
    There is a couple of solutions on the way.Goole Rossi E-Cat or PlasmERG's Noble Gas Engine.
  • Anonymous on April 28 2011 said:
    There may not be easy solutions, Gail, but there are solutions. President Obama is a blundering amateur, and on the basis of the speech by Dr Bernanke yesterday, his ignorant backing of the venture in Libya is not going to cost the U.S. the billions that I said it would cost, but tens of billions.Please note my lingo. Instead of telling his ignorant spokesperson at the US to call Colonel Qaddafi delusional, he should have told her to veto that war. Pope Benedict was right: THE SOLUTION IN LIBYA IS DIPLOMACY AND DIALOGUE.
  • Anonymous on April 28 2011 said:
    I guess that is what blogging accomplishes. It allows people that don't know all the details to criticise the decisions of those that are on the spot and have to make decisions.Gail, the views you postulated in this post are getting close to communistic. Fred, Bush is still thankful that Pres. Obama is taking the blame. It's funny that this time it appears other countries talked us into joining them, instead of the other way around. I disagree with attacks on any other sovereign nation. I know, most people in the USA believe that the whole world should have the same values and morals as they THINK we have. Crazy, eh?
  • Anonymous on April 28 2011 said:
    The problem in the ME is that Iran is manipulating on 3 fronts. Its longestterm destabilsation strategy is in the Gulf, where the sheikdoms are very delicate and Saudi not as strong as she's like us to think. The Iranians will use the gulf as the anvil.The hammer is what they do in Egypt, where the Egyptians are becoming increasingly 'hostile' to Israel, in covert ways, and in Syria. Iran, Assad, Jerusalem and Washington may be facing off in Syria. Not conventionally but through surrogates. Iran may end up taking over Syria de facto. A reverse regime change that would thoroughly endanger Israel. Israel may try to bring Assad down to break Syria as an Iran-Hezxbollah transit point.
  • Anonymous on April 28 2011 said:
    continued...Libya is a symptom of all these movements and actors and theior agendas. And the oil supply is where the symptoms 'bleed' onto the world stage. Noone except perhaps Tehran has any real idea where it might all end. So oil = a perpetuating angst, an unfolding neurotic state... an abyss?
  • Anonymous on April 28 2011 said:
    Gentlemen, and ladies, this is the way it should be. If dumb Sarkozy and dumb Cameron, and the moronic UK Foreign Secretary Hague want to go to war, tell them that they should give deplomacy, discourse and creative intelligence a chance. If they can't understand that, then let them carry the can. The US had no business joining in a venture that is going to cost the US tens of billions of dollars. In this particular situation the US should play the role of the voice of reason.Tens of billions of dollars? What are you talking about, Fred? Fred is talking about the price of oil, which is not going to fall when the shooting stops in Libya. The US joined that war because Mr Obama read a CIA or ignorant academic memorandum about the oil in Libya, and how to get a higher output from that country, but those fine folks forgot about what that oil would cost. Do the math! Read Helicopter Ben Bernanke's talk the other night. Didn't he say something about oil and ..
  • Anonymous on April 29 2011 said:
    Again I agree with Fred mostly. The price of oil is going to stay high because thereis so much uncertainty in the ME right now and noone, not all the intelligence services in the west have the first idea where its heading or where it will end. Assuming that modern ME history began roughly after WW1 with the fall of the Ottomans and the use of oil as the drving force for war and industry, then we are at a monumental turning point right now.
  • Anonymous on April 29 2011 said:
    continued...The price of oil will probably never be the same again because the ME is changing, transfiormingout of all recognition. The West, Fred's dumb Sarkozy and Cameron and moronic Hague and all their advisors are without answers or options. We arein free fall.Iran is doing far more to alter the price of oil by her manipulations than the West could ever have managed by bombing Iran. Iran has true power projections in the ME.The West is merely huffing and puffing and without options or even ideas for options.

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