How is an Oil Fizzle Dragon-King created?

Part 4 of Looking down the barrel — the Tooth Fairy & the Dragon-King

Preamble

This is our sixth GB post on the global demand for “something else”. Our previous posts have led us to provisionally define this demand as multiple means:

To do transactions between anything/anyone and anything/anyone else in secure, safe and resilient ways, that involves the key features of currencies as units of account, exchange, and storage of value;

That would be interoperable between anything and anything else, in real time, with very low latency;

That could scale globally to many billion nodes and able to go well over 70G nodes beyond the 2030 time horizon; and

That would be anchored in, and backed with, sustainable installed power and related energy flows, specifically at the very points where energy is accessed and used, where people live and work and wherever they happen to go; and

Be overlaid onto an Internet that would also be thermodynamically viable;

In such a way as to be immune to the vagaries of the global financial system;

Not just in the short-term but also in the longer-run, well beyond the 2030 time horizon.

We also interpreted the oil price crash of 2014 as being the first strike of what we came to call the Oil Fizzle Dragon-King (OFDK), that is, a very high probability abrupt process of high impact that nonetheless almost no one saw coming because all were blinded by their beliefs, prejudices and short term interests. OFDK is precipitating the end of the Oil Age over the 2012 and 2030 period. Because of this, GB regards OFDK as the defining event of the 21st century. It embodies both the loss of access to oil and to bioenergy that we analysed in earlier posts and much more that we will examine in subsequent posts. OFDK constrains the above generic specifications in ways that few parties have yet realised let alone understand. In short OFDK forces a re-think of everything we do, especially what we take for granted, and most specifically a re-think of money, finance, currencies, investments and cryptocurrencies. The opportunities at the heart of this re-think are simply huge.

In the present post we are going to chiefly consider OFDK’s dynamics. It is vital to understand how an OFDK is formed in order to figure out how to leverage its power. This is not a comment from the sideline. We write about OFDK because we mean business…

Why is everyone concerned?

Figure 1 — What do you do when the needle in on the red band?

In Post 5, The end of the Oil Age as we knew it, we outlined a fuel gauge for net energy delivered to the globalised industrial world (the GIW) in the form of transport fuels derived from global oil production. This fuel gauge is summarised on Figure 1 in the form of a timeline stretching from the origins of the oil industry all the way to the time when no net energy will be available per average barrel of conventional crude. It points at 2022 as marking the limit to the “global fuel tank’s” capacity. Taking into account that 2022 concerns the average barrel of sweet crude and that the PPS will probably continue sputtering till around 2030 on a whole raft of other forms of oil, the Oil Age will have lasted some 285 years to arrive at a rather abrupt end.

This emerging situation raises obviously quite a flurry of interrelated questions. What are the dynamics that brought us to this point? What caused OFDK? What is OFDK made of beside the net energy fizzling out of oil? What are OFDK’s impacts? How de we get out of this situation?

The first question to understand is why is everyone concerned? As shown on Figure 1, since 2012, without noticing it, the GIW has been “running on empty”. Short of rapid strategic responses, by about 2022 the “fuel gauge” will reach the end of the red “empty” bar and the “game” of endless “growth” and “consumption” will be over for most people within the GIW. The chief vector conveying to everyone that matters have become drastically wrong is transport fuel (TF) — TF in all possible forms concerning land, sea and air transport.

Figure 2 — At the crossroads

As Non Sequitur, quoted on Figure 2, reminds us, the matter is not about “running out of oil” but of “gas” in all its forms, gasoline, diesel, jet fuel, marine fuels, etc. It is only when everyone finds themselves on empty that it dawns upon them that there is a crisis and that they are at a crossroad with no clue as to where to go…

This is yet another facet of the global opportunity brought about by OFDK, the opportunity to address the global demand for something else. The common use of the word “gas” in Ethereum technology and concerning transport is not just coincidental or metaphorical. As discussed in Post 2, the Blockchain and crypto technologies have an essential role to play in addressing the threatening “gas crisis” and more to the point OFDK and its impacts.

Most people within the GIW take present mobility for granted. So, for the avoidance of doubt, let’s stress it again, within the GIW, transport is about 95% dependent on Oil. Without Oil’s net transport energy input:

90% of food would not be produced;

About 90% of humankind would not be alive presently;

Most large cities would not exist;

Mobility would be reduced to walking and using horses;

There would not be any significant global goods trade;

There would be no air travel except by balloons;

Health systems would be in disarray;

Other energy and communications infrastructures, e.g. power stations, power grids, TV, telecoms, would struggle to keep functioning; etc…

The Oil fizzle Dragon-King is a matter of the thermodynamics of resource depletion that cannot be addressed through investments in finding more oil since the oil that could be used to supply net energy is almost fully depleted. It is not a matter of increasing efficiencies along supply chains and at end-user levels since those efficiencies are already quire high, close to the thermodynamic maximum achievable with the present technology mix.[1] This is a matter of turning to something else. This is the most challenging issue ever encountered by humankind both in terms of scale and qualitatively. In regard of the short timeframe for the end of the Oil Age, 15 years at most, recall that it normally takes some 50 years to replace a global infrastructure. OFDK “changes everything” concerning also all other issues, notably Climate Change, other ecological issues, food supply chains, health, and all global financial and employment matters. In short, the market for solutions to OFDK is global. It concerns 7.4 billion people and counting.

Forget oil prices, think transport fuels

Figure 3 — While oil prices crash to the floor, TF prices go up and up

All economic activities within the GIW stand to be drastically affected by OFDK albeit at various points in time and in a wide range of differing fashions. Initially the impacts are likely to be financial since we must expect that while oil prices within the Petroleum Production System (PPS) trend down, transport fuel prices within the GIW can be expected to relentlessly increase as scarcity creeps in as the result of the PPS as we presently know it disintegrating (see Post 5, figure 5) and as alternatives are increasingly sought. One can also expect a substantial amount of debt repayment failures.

All transport modes will be impacted; some more than others; some less (e.g. electric railways). Some regions will be impacted sooner while others will manage to keep going for a few more years after 2022. However, no one can escape the price and scarcity impacts of TFs.

Figure 3 illustrates this situation. It shows in blue oil price trends (in $/GJ), in red the shadow price, i.e. the implicit (shadow) price of the net energy per barrel experienced by end-users. This much higher level is in the background of the faltering global economy since 2008. To explain this graph further, in our view, while the oil shadow price eventually must go down along with oil prices and the rapid decline in net energy from oil, actual TF prices are bound to go up for quite some time, combined with erratic TF supply disruptions as the 2022 critical time horizon approaches… short of something else coming onto the scene, i.e. a paradigm change of sorts.

The reasons for such TF price increases are multifaceted. In Post 5 we noted the process of self-cannibalisation underway since the oil price crash of 2014. This process is gaining more and more in importance as the PPS battles for its survival. This self-cannibalisation eventually translates into increasing TF scarcity putting upward pressure on TF prices. Some colleagues expect some three quarters of petrol stations closing in the US over the next ten years with those remaining in operation being within a relatively close radius of a declining number of refineries still able to continue operating on oil supplies with higher net energy (e.g. up to 3M bbl/day from stripper wells).

So, perhaps, in order to grasp more directly what OFDK means in our everyday lives, ask yourself the following question:

“What will you do when, in the near future, fuel supplies are severely disrupted, gasoline, diesel, marine fuels, aviation fuels, all fuels, not just for a few days, as in the case of a strike, or a few weeks, as for a geopolitical event, but month after month, year after year? And what will you pay with if and when by any chance you can get some fuel?”

Self-cannibalisation combines also with other dynamics that involve both the PPS and the GIW. As the critical 2022 time horizon approaches we can expect that obtaining TFs will become a matter of sheer business survival for both the PPS and the GIW. We call this the Big Mad Energy Scramble (BigMES).

Some form of BigMES has been underway since well before 2012. Initially it concerned essentially finding alternatives to oil as sources of TFs in response to high oil prices. Now BigMES is becoming a matter of keeping wheels turning no matter what, and much else beside wheels. Recall that under OFDK, since around 2012, oil is ceasing to be a primary energy source. This means that, in order to keep using high energy density oil-derived molecules or their equivalent from other sources, one must tap into other sources of primary energy. This is taking place on a “everyone to themselves and the devil take the hindmost” mode that is bound to accentuate the chaotic character of OFDK, hence also the “big mess” metaphor.

We will come back to BigMES responses to OFDK in later posts since none of these responses are presently able to actually address OKDK in any durable way. The point of mentioning BigMES now is that it will probably accentuate the pressure on TF prices well beyond the self-cannibalisation effects. We are all aware of alternatives like electric vehicles (EVs) and thus of the pressure on Lithium supplies (it should be clear that there is not enough Li for everyone, for both mobile and stationary applications). Besides EVs and Li, BigMES pressure on TF prices concerns all other alternatives, bio-oils, ethanol, and more generally XTL, that is, Coal to Liquids, Gas to Liquids, Biomass to Liquids, Solar and/or Wind to Liquids, anything X to Liquids, L — all are expensive; all are very inefficient. Along with TF prices, BigMES impacts is probably how most people will forcibly become aware of and be suddenly acutely concerned with OFDK.

The making of…

The BigMES we are in already, unavoidably raises the question of “How, the **** (expletive) did we get into this?” Addressing this question is vital if we wish to avoid repeating the same mistakes as over the last 50 odd years, especially in a situation where the remaining timeframe leaves no room for making more mistakes…

The rise of OFDK is quite a saga. To onlookers it appears very much like one of those big budget Hollywood productions, with tales of heroic feats of technology, huge disasters, oil spills, platforms erupting in flames, drilling in the Arctic where temperatures are so low that usual steel becomes brittle and special materials are required, tales of rebels blowing up pipelines in Africa, Middle East wars, pirated oil tankers, Oil Majors manipulating media, general public opinion and politicians alike, to avoid facing climate change threats, huge fortunes made and lost, and more… Instead, here we are going to glance behind the scene at the making of OFDK.

Figure 4 — From “growth for ever” to “de-growth” as you (probably) never saw it

Figure 4 presents a brief overview of the OFDK saga to this point in time. Since its modest beginnings in north-east France and Ukhta, in the sub-Arctic Komi Republic of Russia, in 1745, the development of the global PPS has been extraordinarily complex and intimately associated with war in multifarious ways. However, viewed from the perspective of thermodynamics, this saga can be analysed in 4 main rather simple phases, each corresponding to a specific model of development dynamics.

The first phase extends roughly from the late 18th century till the early 1970s. It is a rather typical phase of slow initial growth, progressively building momentum, to eventually achieving primary energy dominance over coal. This rise to global prominence enabled the unprecedented economic growth that took place, first in the US from the mid-1930s onward, then in the other older industrialised countries in the aftermath of WWII till the early 1970s, and then to a certain extent worldwide in the so-called “emerging countries”, under the label of “globalisation”… This unprecedented growth supported for a while the myth of “Growth is for ever”… like diamonds — hence the name GB gave to this mythical Model 1 on Figure 4. What enabled Growth is for ever was the relatively easy access to very large oil resources of good quality (the famous sweet crude) at rather low costs. Recall that the first oil shock of 1972 saw the price of oil jump from some $3/bbl to over $10/bbl in dollars of the time, that is, up until the early 1970s oil cost the proverbial “peanuts”.

Figure 5 — Another view of the PPS Saga

However, unseen by most, except by the likes of King Marion Hubert (see Post 5), the thermodynamics of resource depletion relentlessly ticked, just like a clock, slowly decreasing the energy return on energy investments of the growing PPS. Figure 5 illustrates this relentless drop. It is based on the analysis we discussed in Post 5. The consequence is that during the 1980s until about 2012 the PPS and GIW couple surreptitiously transitioned onto Model 2 that GB calls the “Sponge Model”. This is a fluctuating model where the large amounts of oil “sloshing” between wellheads and end-users form a kind of “buffer” between so-called supply and demand. This buffer included the spare “on call” capacity of OPEC, amounts in tank farm storage all around the planet, as well as amounts in pipelines and tankers (recall that in glut time, tankers “in waiting” are used extensively to store oil). This buffer functioned like a kind of huge “sponge” that was pressurised in times when the demand increased ahead of supply (and prices did flare up) so that the sponge dried up somewhat. When supply caught up and overtook demand, the sponge replenished and the cycles could repeat itself — “squish”, reflate, squish, etc… each cycle translating into oil price flares and crashes… translating into successive bouts of recession and growth for the corresponding economies.[2]

Meanwhile the thermodynamic clock kept ticking. As shown on Figure 5, by the late 1970s the GIW as a whole had passed below the bare minimum EROIs threshold of about 3.3:1 (that is for one unit of energy invested a return of 3.3 units was obtained). Let’s stress that by EROIs we mean the ratio of net energy delivered by the PPS to the GIW to the total energy used by the PPS (ED/ETP). In GB’s view this is the most important version of the wide variety of EROI types produced by energy researchers. Along with a number of other researchers we estimate that an EROIs of 3.3:1 is the very bare minimum for an industrialised society to function in a stable enough fashion. Below this level austerity regimes become unavoidable. In fact since the beginning of the 1980s more and more countries have been increasingly “living on credit”, with the total global debt (including households, businesses and governments) being now over €210 trillions. As also shown on Figure 5, by the end of the 20th century the PPS had de facto become an energy sink (EROIs below 1:1). Indirectly, unseen by anyone, it began to rely increasingly on energy inputs from other primary energy sources.

The most critical threshold, in our view, was reached around 2012, when by our estimates the PPS began to use for its own processes more than half of the gross energy in an average barrel. This flipped the PPS x GIW couple into Model 3 on Figure 4, the GIW fizzling out model. This is the situation we are now in. Since about 2012, living on credit no longer “works” as a mythical means of trying to dodge thermodynamics’ dictates.

Figure 6 — The “cost of living” viewed from another angle

Figure 6, derived from similar series produced by Charles Hall and Jessica Lambert, illustrates why we consider that an EROIs of 3.3:1 is the bare minimum viable. Figure 6 discusses EROIp, that is, the energy returned per unit of energy invested at the production level, typically the wellhead (instead of EROIs that encompasses the whole of the PPS x GIW couple). With an EROIp of 1.1:1, that is, getting just a bit more energy out of the well than one has put in to explore, drill the well and extract the oil (casing, water injection, pumping, etc.) is of no use at all. You can only look at the oil you extracted. You have no spare energy to do anything else with it — and oil is not like diamonds; it’s smelly and not pretty to look at. From 1.1:1 to 8:1 things improve but not to the point of enabling what we would call “civilised life”. At the 8:1 stage civilisation required much primary energy from other sources (typically, historically it was coming from wood and coal). We enter industrialised life, as we know it, at an EROIp of 10:1. This is far from a glorious lifestyle though.

Consumerist standards of living require EROIp above 20:1. But this level does not allow for addressing the impacts of consumerist lifestyles — like soil degradation, pollution of air, rivers and seas, endocrine disturbing compounds (EDCs) reducing IQs and sperm counts for large populations, impacts on climate, mass extinction of species, and much more). To be able to address the latter, one needs EROIp above 30:1 whether at the wellhead or in equivalent terms concerning so-called renewables.

Now, an EROIp of 10:1 approximately corresponds to an EROIs of 3.3:1. In terms of living conditions under an EROIs of 3.3:1, think, for example, of rural North Korea, or… live on credit for as long as you can… and then what? Going back to medieval rural living in a not too distant future is not all that “nice”.

The 2007–08 Subprime crisis was the first global manifestation of the kinds of things that happen when living on credit begins to fail and unviable thermodynamics impacts come home to roost. As we all recall, the Subprime crisis rapidly evolved into a full-blown global financial crisis the consequences of which the GIW is still suffering from.

Enter the Oil People

Model 3 is where the “Oil People” come to play a vital role. Obviously, oil does not come out of the ground and get processed into transport fuels and all the other oil-derived products that we all depend on, like plastics, paints, and so on, all by itself — people do it, a lot of them. There are so many people involved in oil that they now form a force of their own, albeit one largely unseen and that is likely to remain unseen until its negative dynamics get more strongly felt by the GIW. GB calls them the Oil People. This is in part in reference to the Sea People that took part in the abrupt end of the Bronze Age civilisations of the eastern Mediterranean around 1200BC. Sea People were bands of destitute migrants moving about the eastern Mediterranean around that time.[3] They were not unlike present-day migrants in that same part of the world. The reference to the abrupt end of the Bronze Age is not coincidental. What we know of the dynamics of the time is strongly reminiscent of a Dragon-King event comparable to OFDK. History does not repeat itself but sometimes dynamics do. There are many lessons to be learned from the Bronze Age DK.

Anyway, the Oil People are a critical factor in Model 3, the fizzling out of the GIW. To understand who they are, let’s consider first the Kingdom of Saudi Arabia (KSA). KSA is a good place to begin with since nearly its entire livelihood is focused on and dependent on oil, and to some extent natural gas. In 1950 KSA’s population was around 3 million people. It produced oil at less than 1mbbl/day and with costs mostly below $1/bbl in dollars of that time. KSA’s population is now around 27M and it produces oil at between 11Mbbl/day and 12 Mbbl/day. Some 90% of its export revenues and 80% of its GDP are from oil and oil-derived products.

Let’s carry out a little thought experiment and remove all of KSA’s oil. What’s left? Rocks, sand, some oases, camel and sheep farming, and a bit of fishing along the coast. KSA’s population drops back down to about 1M to 2M… Let’s now put the oil back in but not the part of the population that is oil related in one form or another except the very few who are directly involved in the oil export process. The population stays at around 2M and the oil output at what it was in the early 1950s, i.e. around 1Mbbl/day to 2Mbbl/d.

The difference between the early years of oil in KSA and now is that, because of the depletion of oil fields that has happened meanwhile, it has become very hard work to keep production over 10Mbbl/day. Individual items of equipment are of the same kind now as they were in the 50s, simply somewhat improved. The main difference is that keeping production up now requires many more, generally well paid, people. At core, oil production is not a technology thing. It’s a social phenomenon. It’s done by people. The more people it takes the bigger the full-scope society the PPS requires. Oil industry people do need comfortable, air conditioned homes, good general practitioner medics, dentists, hospitals, schools, universities for their offspring, banks, accountants, lawyers, supermarkets, a fully fledged road system made and maintained by people, cars also made and maintained, staffed airports, and many lowly paid immigrants to build the homes, local facilities, do the housework, maintain the gardens, etc., etc. So that nowadays to keep oil production over 10Mbbl/day requires in the order of 27M people in KSA itself plus many more elsewhere to produce the food and all other products that KSA has to import…

Of course, there are probably oil traders within KSA who can still make a nice profit sourcing oil at US$8/bbl and selling it at $30/bbl or even at $15/bbl. However, they are not ruling the show; the House of Saud does and its job is to keep the whole KSA oil producing “machine” as a going concern with its full complement of some 27M Oil People who are now required to keep it going… and this requires oil prices well above current levels.

Let’s now look a little further afield. In the USA, in the order of 6.5M people are directly involved in the oil and oil using industries (oil extraction, transport, refining, car manufacturing, car dealerships, garages, and petrol stations). Considering the families that depend on their income and others also dependent on them indirectly as part of their various support systems, translates into a multiplier of 10 to 20 people indirectly involved per each direct participant in the oil industry. Conservatively, this translates into some 65M people deriving their livelihood from oil. In other words, in the order of 20% of the US population is required to keep the US “oil machine” going at its present rate.

Similarly, as a first approximation, we can estimate that the total population required to keep global oil consumption above 90Mbbl/day is presently in the order of 2 billion people, and increasing every year. These are the Oil People. They do not live within the GIW but in the PPS.

In brief, as EROIs has relentlessly declined with the shift to harder and harder to exploit resources of lesser and lesser quality, more and more people have been drawn into the PPS and in the production of oil using machinery, such as cars, that have had to also become more and more complex (and fragile, resulting in millions of vehicle recalls year after year) as the result of efforts to increase miles per gallon or kilometres per litre while containing air pollution, and indirectly but just as importantly as part of the support systems that are part of the PPS.

This oil dependent population, including masses of extremely lowly paid workers, has been able to be drawn in only because of high oil prices and a measure of “trickle down” effect from higher income to lower income people. They are the Oil People the GIW depends on. Now, most of those oil people who depend on oil for their livelihood simply cannot cope with oil prices staying at current levels or lower for any length of time. For the majority of them, their livelihood can be maintained, mostly at very modest income levels, well below the US average income of $53,000/head, only at oil prices at or above $100/bbl.

We have already noted it, the current situation is clearly one governed by “everyone to themselves and the devil take the hindmost”. No one cares much about the Oil People and yet as depicted on Figure 4 they constitute an essential transmission link in the GIW fizzling out situation we are in. Oil prices staying low for months on end translate in a reduced demand on the part of Oil People for the GIW’s products and services that they need, resulting in turn in the so-called oil demand from the GIW (as relayed by TFs) becoming yet further depressed, resulting in oil prices further declining and so on, with the net effect that the impacts on the Oil People propagate to the 3 billion people or so currently at the heart of the industrialised world, and beyond, to the over 4 billion surviving at its margins. In other words, the Oil People function as a kind of “transmission belt” conveying the fizzling out to the entire GIW.

De-growth what?

The GIW is now reaching the end of the third phase, under Model 3. As indicated on Figure 5, “de-growth” is what comes next. Most people understand degrowth as some kind of highly unpalatable “shrinking” of everything lifestyle-wise. Many promoters of degrowth see it as absolutely necessary in order to address the nearly endless list of ecological impacts of the GIW and notably global warming. Most “degrowthers” view this “shrinking” of the GIW with relish, as something to celebrate. In both cases, whether as something endured or relished, this view on “de-growth” is highly mistaken.

Certainly, the fizzling out may result in a substantial decrease of “standards of living” for many if not everybody within the GIW. However, this would be only a side effect of the core matter illustrated on Figure 2. Fundamentally, under the inescapable constraints of thermodynamics, Phase 4 is characterised by the end of “growth” as the foundational myth of the GIW since the advent of the first Industrial Revolution. This is why GB calls it de-growth to emphasise that we are facing here the inescapable undoing of all aspects of growth and most specifically the undoing of the body of myths subsumed under the growth label. De-Growth is but another name for the global demand for something else we are progressively exploring. By default, de-growth may well translate into some form of collapse. However, if the demand for something else is addressed, de-growth may actually result into a new era of prosperity, albeit built on other logics, dynamics, and energy sources than growth. As outlined in Posts 2 to 5, this is where a novel technology nexus comes in, involving a new take on accessing and using energy, energy and communications networking, and, at the core of this nexus, novel ways of handling value involving cryptocurrencies based on and backed with sound thermodynamics. This is what GB is about.

Figure 7 — From Adam Smith’s “invisible hand” to the highly tangible but unseen “energy hand”

With the 4 models on Figure 4 and with Figure 5 we have seen how, for decades the industrial world has been living well above its energy means in defiance and/or ignorance of the principles of thermodynamics. We are now beginning to feel the consequences. We are witnessing the triple failure of the GIW under “business-as-usual” (BAU): (1) the BAU development trajectory followed by GIW is failing, (2) the GIW failed to anticipate the present Oil Fizzle DK predicament in spite of over 45 years of warnings, and (3) up to this point the GIW has failed to develop viable, sustainable alternatives.

Figure 7 summarises why moving to something else has become inescapable and why this something else has to fit within the dictates of thermodynamics.

In order to remain viable our world must generate each year energy flows large enough to simultaneously (1) reinvest part of these flows into ensuring further ongoing energy supplies in subsequent years using existing infrastructures, (2) sustain the levels of prosperity expected in industrialised countries, (3) bring more people globally to these levels of prosperity, (4) alleviate and mitigate the ecological consequences of fossil and nuclear fuels use, and (5) develop and deploy alternatives to fossil fuels with EROIp levels high enough to ensure sustainability, that is above 30:1 (while most EROIp are presently below 10:1 in a whole system replacement context).

We all know or have heard of Adam Smith’s “invisible hand”, a metaphor used to signify that markets automatically self-regulate so long as all players follow the “utilitarian logic of self-interest”. Except that Smith, and after him nearly all economists, developed economics as a perpetual motion machine fantasy, in blatant contradiction with thermodynamics, notwithstanding the fact that the initial Industrial Revolution and everything that took place ever since, happened thanks to thermodynamics.

Instead of a mythical “invisible hand”, Figure 7 considers a very tangible “energy hand”. Metaphorically, the above five types of energy flows the GIW lives on fit together like the five fingers of one’s hand — all are necessary, all depend on each other and all stem from the same core. The various data that we have reviewed to this point show inescapably that for decades, the world has been relentlessly losing its “fingers” knuckle by knuckle… The thermodynamic decline at play since the early 1970s has been a kind of insidious, still largely unseen, leprosy of the industrialised world. Now, under OFDK, the crisis is about to burst in the open and become abruptly virulent.

In other words, the demand for something else is actually first and foremost the demand for a new, sustainable energy hand, one able to form the sound basis for a new financial order and one able to hand out renewed prosperity, globally.

On the way to Olduvai?

Figure 8 — At the crossroads…

Recall Figure 2, the gas crisis at the crossroad. Figure 8 shows where the crossroad is actually located. It traces our estimate of net energy from oil in Gigajoules (GJ) available per head of global population per year. The amazing economic growth over the three post WWII decades to the peak in 1973 was actually fuelled by a 311% growth in net energy/head from oil. It should be obvious that what matters is not counting barrels of crude in absolute gross energy terms. Instead, what vitally matters to us all is how much net energy is actually available to each of us on average.[4]

The “Peak Oil” that actually matters is not to be found in a mythical future or in the recent past (i.e. the 2005 peaking of conventional oil supplies). The real “Peak Oil” took place a very long time ago, in the early 1970s. Since then the GIW has been in thermodynamic decline. It is now at the crossroads, five years after entering the last phase of the Oil Age and three years after OFDK began to strike in earnest. The Olduvai Gorge as a backdrop is a wink to Dr Richard Duncan’s “Olduvai scenario” (he used barrels of oil equivalent for the whole of energy use per head, which in our view was a mistake). We do so to highlight the present crossroad choice. We may do nothing and continue BAU-wise to slide towards the “bottom of the Gorge” — a kind of “postmodern hunter-gatherer” fate, or to opt for something else. At GB we choose the latter. Here is why.

The “mother of all Senecas”

From modest beginnings in 1745 to a peak in the early 1970s, oil’s climb took over 220 years. The fall back to nil will have taken only about 50 years. This pattern of slow growth followed by a rapid decline is known as a “Seneca” after the Roman philosopher of that name who first talked about it (a label coined by Prof. Ugo Bardi).

The Oil Age forms the unprecedented Seneca shown on Figure 8. In matters of Senecas, the chief point is rather simple: one cannot and must not attempt to run a business, govern a country, develop and market new technology on the down side of a Seneca in the same way as one does on the upside. In short, on the downside, the “old rules of the game” no longer apply and whoever attempts to follow them is bound to fail.

Figure 9 — The “Gold Spot”

Figure 9 translates Figure 8 into business terms. The blue line actually traces the global Industrial Output generated by the Standard Run of the World3 model used by the Meadows and their team to produce their famous Limits to Growth book (LTG).[5] Ever since its publication in 1972, their work has been ruthlessly and totally unscientifically vilified by endless pundits, many of whom had demonstrably never studied it in any depth — a vilification that continues to this day notwithstanding the very fact that statistical data over the last 45 years has relentlessly corroborated their work.[6] The blue line accurately translates at the global aggregate level the per capita Seneca pattern of Figure 8. The red post marks 2015. The GIW has just passed the cusp anticipated by the Standard Run scenario and has begun to slide down a precipitous “thermodynamic cliff”.

Just past the cusp is a “Gold Spot”, just before the situation has become irretrievable. For innovators who can find a way of extricating at least part of the GIW from the dire present situation, the rewards are potentially huge. In addition to the rewards for addressing the demand for something else, while just about everyone else is blind to OFDK, there are the additional rewards accruing to an Initiative going up, when the entire remainder of the GIW is going down. In short, the Gold Spot brings double rewards. Herein lies the opportunity at the heart of OFDK: to produce a revolutionary innovation nexus enabling accessing the solar energy pool in a way that opens a path towards a new sustainable civilisational development. GB’s focus is this Gold Spot, energy-wise and currency-wise.

Having clarified OFDK, its dynamics and where the OFDK opportunity lies, GB’s next post will focus on OFDK’s fundamental causes, the very causes one must absolutely avoid repeating if one is to successfully seize the opportunity for something else concerning new means to access and use energy, new class of networking and new means of transacting value in cryptocurrency mode, all sustainably.

* * * * * *

If you have followed our posts to this point, a reminder:

This series focuses on the emerging global demand for something else than what we currently have concerning energy and all other aspects of living in the globalised industrial world (the GIW). Most importantly it concerns money, the end of fiat currencies over the next few years and their unavoidable replacement with cryptocurrencies backed with sustainable energy supplies.

The posts gradually explain the rationale for the solutions that we are developing to address that global demand for something else. A subsequent series will explain our solutions themselves and our entire approach to creating a sustainable and scalable energy backed cryptocurrency.

GB’s next post will focus on OFDK’s causes and internal dynamics in order to refine further our something else specs concerning new means of access to energy, new class of networking and new means of transacting value.

GB’s previous posts in the demand for something else series are:

Post 1: Hello, this is GB…

Post 2: Elephants in the cryptocurrency room — current fiat currencies have no future; however, cryptocurrencies can’t scale to the global demand for something else; in particular they require far too much energy and are overlaid on top of an Internet also requiring far too much energy; and, like fiat currencies, they are disconnected from the sole reliable and necessary anchor of value into the thermodynamics of any social activity.

Post 3: Looking down the barrel — the Tooth Fairy and the Dragon-King; Part 1: Loss of access — humankind is rapidly losing access to all the sources of energy it depends on; the threats are dual, loss of access to bioenergy and loss of access to net energy in oil; those losses translate into loss of access to all other energy forms; Post 3 focuses on the loss of access to bioenergy; this loss will be complete by about 2030; this loss frames in stringent ways how to address the demand for something else.

Post 4: Looking down the barrel — Part 2 — The threat of an Oil Pearl Harbor — the oil price crash of late 2014 onwards marks the entry on the world scene of the Oil Fizzle Dragon-King (OFDK), a high probability, high impact process that almost no one saw coming; at the heart of OFDK is the rapid fizzling out of net energy from oil; net energy in the form of transport fuels is what enables the entire economic activity of the globalised industrial world (GIW); by about 2022 net energy per average barrel is expected to be about nil — zero net energy means zero value; in consequence oil prices are highly unlikely to ever recover durably; instead they are in the process of crashing to the floor — a kind of protracted Oil Pearl Harbor heralding the disintegration of the oil industry as we know it; which sets out the time frame for addressing the demand for something else.

Post 5: Looking down the barrel — Part 3 — The end of the Oil Age, as we knew it — this post examines the dynamics of the oil industry and of OFDK; it explains how and why the GIW entered the end of the Oil Age in about 2012 and how this process will be complete by about 2030; it then shows that an increasing number of industry and finance players have begun to intuit the dire situation and what are the implications for the GIW at large; it concludes in stressing that the oil industry is not going to vanish, as the GIW will keep requiring high energy density molecules for transport, and instead will have to transform drastically; which frames further the demand for something else. We also noted that under OFDK we cannot see how fiat currencies as we know them could survive much beyond 2022, which translates into a huge demand for cryptocurrencies able to scale past the size of fiat ones.

[1] Hence, for example, the recent spate of diesel engine frauds. In many countries pollution standards are reaching beyond what is physically achievable at prices affordable to most end-users. Manufacturers are running out of options, bar cheating in one way or another, or eventually realising the global demand for something else. However, at present none of them is cognitively in a position to satisfy that demand.

[2] Various authors, in particular Gail Tverberg and Steven Kopits, have produced similar perspectives, including highlighting how when oil price go up above certain thresholds, in older industrialised countries or in Asia, recessions ensue.

[3] See Cline, Eric, 2014, 1177BC, The year civilisation collapsed, Princeton University Press.

[4] And yes, we are far from equal energy-wise — a few get much more than the average while most get much less; we will examine this matter in a subsequent post.

[5] Meadows, Donella H., Meadows, Dennis L., Randers, Jørgen, and Behrens, William W. III, 1972, The Limits to Growth, Universe Books.

[6] See for example, Donella Meadows, Jorgen Randers, and Dennis Meadows, 2004, A Synopsis: Limits to Growth: The 30-Year Update, The Donella Meadows Institute; Turner, Graham, 2008, A Comparison of the Limits to Growth with Thirty Years of Reality, Socio-Economics and the Environment in Discussion, CSIRO Working Paper Series 2008–09; Hall, Charles A. S. and Day, John W, Jr, 2009, “Revisiting the Limits to Growth After Peak Oil” in American Scientist, May-June; Vuuren, D.P. van and Faber, Albert, 2009, Growing within Limits, A Report to the Global Assembly 2009 of the Club of Rome, Netherlands Environmental Assessment Agency; and Turner, Graham, M., 2014, Is Global Collapse Imminent? An Updated Comparison of The Limits to Growth with Historical Data, MSSI Research Paper №4, Melbourne Sustainable Society Institute, The University of Melbourne; Butler, Colin D., 2016, Planetary Overload, Limits to Growth and Health, Curr Envir Health Rpt. DOI 10.1007/s40572–016–0110–3; Jackson, Tim and Webster, Robin, 2016, Limits Revisited, A review of the limits to growth debate. UK All-Party Parliamentary Group (APPG) on Limits to Growth. http://limits2growth.org.uk/revisited.