![]() With all this complexity, plus the energy needed to support the complexity, the economy is structured in a very different way than it would be without fossil fuels. Storage systems for electricity, food, and fossil fuels are all part of complexity. Wind turbines and solar panels are only possible because of complexity and the availability of fossil fuels. The internet system and cloud storage are part of complexity. Roads, railroads, and pipelines are part of complexity. The electrical system, with all its transmission needs, is part of complexity. ![]() The financial system, with its money and debt, is part of complexity. International trade is part of complexity. The educational system is part of complexity. It includes any form of government or laws. In this post, I will try to explain a few of the issues involved.Ĭomplexity is anything that gives structure or organization to the overall economic system. Economic growth slows and turns to economic contraction, creating huge strains for the financial system. ![]() Without enough energy products to go around, conflict tends to rise. There are many other changes, as well, as fossil fuel energy per capita falls. This dynamic tends to push the economy downward. On average, they don’t satisfy either the oil producers or the consumers. In practice, oil prices tend to rise and fall, and rise again. From the consumer’s point of view, the price of oil needs to be sufficiently low that food and other goods manufactured using oil products are affordable. From the producer’s point of view, the price for oil needs to be high enough that new oil fields can be profitably developed. When people forecast ever-rising energy prices, they miss the fact that market fossil fuel prices consider both oil producers and consumers. Eventually, major parts of the world’s economy start failing completely. These little problems build on one another to become bigger problems. Long waits for replacement parts become common. It becomes too expensive to properly maintain roads, electrical services become increasingly intermittent, and trade is reduced. When energy per capita falls, it becomes increasingly difficult to maintain the complexity that has been put in place. Complexity, itself, requires energy consumption, but its energy consumption is difficult to measure. ![]() Chart by author pointing out that energy consumption and complexity are complementary. For example, roads, electricity transmission lines, and long-distance trade are forms of complexity that can be added to the economy using fossil fuels.įigure 1. One of the major uses for fossil fuel energy is to add complexity to the system. The question becomes: What happens to an economy beginning its path toward full collapse? History shows that such collapses take place over a period of years. The underlying problem is that the population tends to grow too rapidly relative to the energy supplies necessary to support that population. Such economies grow for many years, but ultimately, they collapse. The insight people tend to miss is the fact that the world’s economy is a physics-based, self-organizing system. They also believe that wind turbines, solar panels and other so-called renewables can be made with these fossil fuels, perhaps extending the life of the system further. With these higher prices, producers will be able to extract more fossil fuels so the system can go on as before. Most people have a simple, but wrong, idea about how the world economy will respond to “not enough energy to go around.” They expect that oil prices will rise. ![]()
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