#225. Gravitational pull


A new ‘heavenly body’ has entered the cosmology of political and corporate decision. This new influence is the emerging reality that the economy is turning out, after all, to be an energy system, and that long-accepted ideas to the contrary are fallacious.

The concept of limits is replacing the paradigm of ‘infinite growth’.

Where decision-making is concerned, this emerging reality isn’t likely to have an immediately transformational effect. Established nostrums can have a tenacity that long out-lasts the demonstration of their falsity.

We’re not, then, about to see sudden, open and actioned acceptance of the fact that the economy is an energy rather than a monetary system.

Rather, we can expect to see energy reality exert an increasing gravitational pull on the tide of decisions and planning, most obviously in government and business. Policy statements may not change, but the thinking that informs planning and strategy undoubtedly will.

This gravitational effect is starting, as of now, to re-shape perceptions of the present, change ensuing “narratives” of the future, and trigger a process of realignment towards the implications of a world with meaningful constraints.        

The aim here is to examine the practical consequences of a contest of interpretations which, whilst it has already been decided at the theoretical level, leaves ‘everything to play for’ in political and commercial practice.

And then there was one

There are, essentially, two ways in which we can seek to explain the working of the economy.

One of these is the conventional or orthodox school of thought, which presents economics as a process determined by the behaviour of money, and acknowledges no limits to the potential for growth.

For the best part of nine years, this site has endeavoured to encourage, explore, model and quantify the alternative interpretation, which states that prosperity is a product of the use of energy, and that there are very real resource and environmental limits to economic expansion.

There are two ‘adjudicators’ of this debate. One of these is logic, and the other is experience.

Logic has always favoured the energy interpretation. The concept of material constraints is not remotely a new one. A notable milestone in the exploration of this thesis was The Limits To Growth, which was published back in 1972, and is now looking remarkably prescient. Hitherto, though, LtG and similar theses could be, and have been, dismissed as theoretical rather than practical challenges to the orthodoxy. 

What’s different now is that experience is in the process of confirming the verdict of logic.

In fact, the only thing that the orthodox explanation still has going for it is ‘custom and practice’.

Readers will not misunderstand me if I state that, at the purely intellectual level, this contest is ‘all over bar the shouting’ (though there will be plenty of that).

What lies ahead is a process of adjustment – we might call it realignment – to the new reality of an economy in which the scope for expansion is constrained by limits, both to energy value and to environmental tolerance.

Policy-makers and business leaders may have grasped the latter constraint, but have still to discover the reality of the energy limits to prosperity.

So here’s the question. If you were a decision-maker – in government, say, or in business – what would you do if you knew that the consensus “narrative” of our ever-expanding economic and broader future was heading into the blender?

Theory and narrative, #1 – money and myth

In essence, orthodox theory states that the economy can be explained entirely in terms of money.

The “laws” of economics are not, in fact, analogous to the laws of science. Rather, they are observations about the behaviour of money.

The central conclusion of this orthodoxy is that there need be no limits to economic growth, because the driver of expansion is under our control as the creators and managers of money.

Monetary causation enables us to use pricing, incentives and demand to circumvent all material limitations.

A more recent refinement of this theme combines technical innovation with monetary management to assure us that all material limits can be circumvented, through technology and monetary management, such that ‘growth in perpetuity’ is perfectly feasible, and can be used as a reliable forward presumption.

To use the contemporary idiom, what follows from this is a “narrative” of a perpetually-expanding economy.

Where planning and projections are concerned, this narrative is emphatically directional, flowing from assumed growth to everything else that we want to anticipate.  

Here’s what this means in forecasting terms.

Planners and forecasters start with – and tend seldom to question – assumptions about the future size of the economy. If, for instance, we accept a trend real annual rate of growth of 3.5%, simple mathematics tells us that the economy will be twice as big in, say, 2040, as it was in 2020. If we assume trend growth of only 3.0%, growth over that period is 80%. At 4.0%, it will be 120%. 

With this presupposition in place, only then do they calculate what this is going to mean in practical terms. If we know that the economy will be, say, X% larger in 2040 than it is now, it can be calculated that the need for energy, for instance, will have expanded by Y%.

If it is further assumed that we need to reduce our use of fossil fuels by Z% over that same period, what remains is a non-fossil market of predictable size, requiring to be filled, in varying possible proportions, by nuclear power, hydroelectricity and renewable energy sources (REs).

This ‘start with growth’ process of calculation delivers the narrative of seamless energy transformation, ever-expanding prosperity, and a billion vehicles powered by batteries or hydrogen.

Theory and narrative, #2 – resources and reality

The alternative thesis reasons from entirely different predicates. Instead of assuming that future energy requirements are a function of assumed economic expansion, our understanding is that prosperity is a function of the availability of energy value.

If we happen to agree that the availability of energy value might indeed conform to the Y% number calculated by growth-predicated forecasts, we might also agree that the economy will be X% bigger by the target date.

The sequence of reasoning, though, is entirely different. It operates in the opposite direction.  

In the simplest of terms, conventional forecasting assumes that Y (energy demand) is a function of X (economic growth). The alternative is to restate this as X (economic growth) is a function of Y (energy availability).

The energy approach to economics starts with recognition that the economy is an energy system, because nothing that has any economic utility at all can be provided without the use of energy.

Pausing only to dismiss the quaint notion (the “haystack without a needle”) that the economy can somehow be “de-coupled” from the use of energy, we move on to introduce a second predicate, which is ‘the principle of ECoE’.

This recognizes that, whenever energy is accessed for our use, some of this energy is always consumed in the access process. In Surplus Energy Economics (SEE), this ‘consumed in access’ component is known as the Energy Cost of Energy (ECoE), and is expressed as a percentage.

Importantly, energy cannot be used twice. This means that the proportion of total energy supply absorbed as ECoE cannot also be used for any other economic purpose.

This in turn means that material economic prosperity is a function of the availability of surplus (ex-ECoE) energy

This makes it vital that any process of interpretation and projection starts with an examination of the trend in ECoEs from the various sources which constitute energy supply.

We know that ECoEs are shaped by geographic reach, economies of scale and the process of depletion. With the potential of reach and scale now exhausted, depletion has become the factor driving the ECoEs of oil, gas and coal.

To be sure, technology acts favourably, accelerating falls in ECoEs when these are declining, and mitigating rises when trend ECoEs are increasing.

Critically, though, it is self-evident that the potential of technology is circumscribed by the limitations of physics, which in this case means the material characteristics of energy resources. 

This understanding is critical, because it takes the potential of REs out of the realm of wishful thinking, and requires us to accept two limitations to the potential economic value of renewables.

First, we know that the resources required for the creation and maintenance of RE capacity are products of the legacy energy provided by oil, gas and coal. This means that the trajectory of the ECoEs of renewables is linked to that of fossil fuels.

Second, we also know that REs have their own constraints, most obviously the Shockley-Queisser limit to the theoretical maximum efficiency of solar power generation, and the Betz’ law equivalent for wind power.        

We further recognize that ECoEs affect both the delivery costs and the affordability of energy. This means that ECoE trends determine, not just the qualitative nature of available energy, but the quantitative issue of supply.

The last of our three principles – otherwise known as “the trilogy of the blindingly obvious” – is that money has no intrinsic worth, but commands value only as a ‘claim’ on the goods and services made available by the material economy of energy.

Money can be defined as “a human artefact, validated by exchange”.

On this basis, we arrive at the transformative conception that there are two economies. One of these is the proxy or financial economy of money, credit and assets. The other is the material or real economy of goods, services, labour and energy.

With this understood, our ‘control’ over the creation and use of money ceases to endow us with the ability to drive infinite economic growth. It becomes, instead, nothing more than an ability to manage one side (the financial part) of a ‘two economies’ equation determining the relationship between money and material prosperity.

On this basis, the creation of money in its various forms can outgrow the underlying economy, but this process simply creates what are known in SEEDS terminology as “excess claims”.

Much of our recent economic and financial experience can be explained as the creation of ever more abundant excess claims which, by definition, cannot be honoured ‘for value’ by a smaller underlying or ‘real’ economy.

The contemporary financial system is at severe and worsening risk because of the gargantuan scale of the ‘excess claims overhang’ that has been created on the false assumption that the creation of money and credit in their various forms (known to conventional economics as “demand”) can somehow expand the real economy of goods and services.                            

A future redefined

Applied using the SEEDS economic model, these principles point to a very different future, and, for that matter, present a very different past and present, from those described by orthodox economics.

This, of necessity, results in a very different forward “narrative”.

The following charts provide a snapshot of the interpretation provided by SEEDS (the Surplus Energy Economics Data System).

The left-hand chart shows how, as trend ECoEs have risen relentlessly, average world prosperity per person has plateaued, and has now turned downwards.

At the regional level, prior growth in prosperity has long since inflected in the advanced economies of the West, whilst less complex, less ECoE-sensitive EM (emerging market) countries have continued to enjoy improving prosperity, albeit at a steadily decelerating pace.

Meanwhile, and as the middle chart shows, the real cost of essentials has continued to rise, in large part because so many necessities are energy-intensive.

This process has initiated severe compression of the SEEDS metric of prosperity excluding essentials. PXE is a measure of the affordability, in aggregate, of (a) discretionary (ex-essential) consumption, and (b) capital investment in new and replacement productive capacity.    

Finally, where these overview indicators are concerned, an enormous gap has emerged between the financial and the real economies, such that the economy of goods, services and energy is now about 40% smaller than its financial proxy of money, credit and assets.

You will appreciate that, because prices are the interface between the real and the financial economies, inflation is a natural consequence of this divergence or, rather, of the pressures that operate towards the restoration of equilibrium between the two economies.

You might, indeed, wonder why – more than thirteen years on from the adoption of supposedly “temporary” expedients such as QE and ZIRP – inflation hasn’t accelerated before now.

Part of the answer lies in the systemic understatement of inflation by conventions which, amongst other quirks, exclude asset price rises from a definition of inflation which concentrates on – and, even then, understates – changes in consumer prices.

The SEEDS calculation of the Realised Rate of Comprehensive Inflation (RRCI) indicates that, over the two decades between 2000 and 2020, systemic inflation averaged 3.5% annually, far higher than the official rate of 1.5% over that period.   

Fig. A

“The future’s not what it used to be”

What we have been describing is a process of divergence which has driven a wedge between a ‘real’ economy (shaped by the energy dynamic) and a ‘financial’ economy (whose size is determined by monetary policy).

This explains a great deal that, from an orthodox perspective, seems baffling. It warns us that a major correction looms between the ‘two economies’, a correction that must involve financial ‘value destruction’ as a consequence of the elimination of ‘excess claims’.  

As we have seen, the contemporary consensus narrative rests on the false premise that we can start with assumptions about future growth and then predict what can be expected to happen in numerous categories of forward outcomes.

Uncovering the false premise – and the ensuing fallacious direction of reasoning – of the consensus narrative acts in a way that might be likened to taking out the bottom brick of a speculative wall.

For example, once we know that future prosperity is a function of energy trends rather than the other way around, we know that we cannot assume that the supply of renewable energy somehow ‘must’ expand in conformity with what growth assumptions supposedly tell us about the scale of energy supply in the future.

Reasoning in this opposite direction has a liberating effect on thought processes. This realization enables us to place into the equation factors which conventional thinking has been forced to ignore, or to treat as anomalous and inconvenient.

We are now at liberty to recognise that each rise in the price of fossil fuels, whilst it increases the cost of using conventional cars and commercial vehicles, also raises the price of all of those materials (including steel, concrete, copper, lithium and cobalt) that are required for energy transition.

We can place the undoubted environmental downsides of this transition into a broader context. We can take cognisance of the fact that the ECoEs of renewables are linked to those of fossil fuels through renewables’ reliance on resources which can only be made available by the legacy energy provided by oil, gas and coal.

What had previously been nagging reservations – such as the resource and investment demands of renewables, the Shockley-Queisser limit, Betz’ law, doubts about how “green” renewables really are, and so on – can now find their appropriate places in a broader understanding of energy, the economy and the environment.

Accommodating gravitational effect

What we’ve been doing here is following a logical process to a point at which a raft of consensus assumptions about the future turn out to have been the products of mistaken assumptions.

Though the theoretical approach is essential, what matters in practical terms is that this interpretation is being borne out by the trend of events. Its consequence is an invalidation of all of the preconceptions which inform the “consensus narrative” of our economic, financial, political and broader future.

If you’re in government, it tells you that future resources are going to be far less than you might hitherto have assumed, and that the provision of essentials is set to become the critical battleground between competing priorities.

If you’re in business, it tells you that we cannot rely on growth, least of all in discretionary sectors, and that the scope for capital investment is poised to decrease rather than to expand.

It anticipates the wholesale failure of business models based on false predicates, and suggests that the taxonomy of de-growth – with its emphasis on product and process simplification, on delayering, and on managing utilization and critical mass risks – is the appropriate template for decisions.

This discussion is not, in any sense, intended as any kind of primer for the conduct of business or government in a future that’s not going to conform to a mistaken consensus.

But one issue is of immediate relevance to the theme that interests us here – are governments, businesses and other organizations going to start a process of fundamental re-appraisal?

The view taken here is that these institutions are not about to reveal a Damascene conversion to the realities of a material (and constrained) rather than a monetary (and unlimited) conception of the economy.

Nobody is likely to start telling shareholders, voters, workers, consumers, the markets or anybody else that the consensus narrative is mistaken, and that, in the words of Mickey Newbury, “the future’s not what it used to be”.

Rather, “gravitational effect” is the appropriate analogy here. Any large organization is entitled to operate research units looking into “what if?” scenarios, and is under no obligation to share the results of such evaluation with others.

This is likely to be the way in which new thinking about the economy crosses the boundary from theory into practice.

It seems most unlikely that institutions will ignore the various factors, some of them described here, which put ‘the currently-assumed’ into the category of ‘the speculative and the potentially mistaken’.

Research processes are likely to act on planning in much the same way that a piece of iron, placed on the rim of a binnacle, acts on a magnetic compass.

New economic thinking can be expected to work its way into decision-making processes in a way more akin to gradual absorption than to a flood.

For practical purposes, the revolution in economic thinking “will not be televised”, but neither can it continue to be dismissed as nothing more than ‘inconvenient theory’.   

134 thoughts on “#225. Gravitational pull

  1. Well, Dr Tim, a nicely, coherently argued, written piece from you in my inbox this morning – thank you very much. My ‘gut feeling’ is that individuals and families are now ‘waking up’ to the realities of what you have been writing about for many years. I’m quite sure that, at some not-too-distant point, there will be the much anticipated ‘correction’ to asset prices for the reasons you have set out in such a clear way.
    This will mean, I think, an emphasis on ‘self-reliance’ on an individual level, with people seeking to increase passive income from, for example, pension pots that are not predicated on ever-increasing fund values by insuring their income streams. They will continue to hold equities and/or work as, I think, these are the two fundamental ways in achieving at least some ‘inflation protection’. We shall soon see.

    • Thanks.

      Fortuitously or otherwise, events are now bearing out what I, and we, have been saying for a long time. What I wanted to do here was summarise the intellectual case and point towards the practical.

      I’m now thinking of taking a bit of a rest and deciding what to do next.

  2. Odd that the 50th anniversary of the launch of Limits To Growth (2nd March 1972) passed without any marking of that milestone. Odder that the Smithsonian launch event was presided over by Elliot Richardson, a member of Nixon’s cabinet. The science has gone in one direction, the politics in another…

    • “On this episode, we meet with Professor Emeritus of Systems Management and author, Dennis Meadows.
      Meadows revisits Limits to Growth 50 years after it was published. Looking back, how does Meadows view the book? How much of the response to his description of overshoot was based in fear?

      Meadows offers advice to current leaders based on the models he developed in Limits to Growth. Why is it important to develop success indicators, and how can they be clearly communicated to the public?
      Further, Meadows explores the available leverage points to avoid the worst types of collapse at our current stage of crises.

      Dennis Meadows is the Emeritus Professor of Systems Management at MIT and the co-author of Limits to Growth and Beyond the Limits. ”

      Dennis Meadows: “Limits to Growth turns 50 – Checking In” :

  3. I do a lot of work in market research and one of the big issues coming up now is the impact of rising energy prices on discretionary consumer spending. Pretty well in line with the SEEDS model Tim. I would be interested in your take on the potential for the Ukraine/Russia conflict to ‘accelerate’ some of the trends and projections you have set out so clearly in your posts. My sense is that the wheels are coming off the financial economy through a combination of inflation, interest rates and more importantly exchange rate volatility (especially re status of the dollar and oil). With the result we might have a hard ‘reset’ to align with the energy economy, thereby failing to take the smoother path to adjustment that you have outlined before.

    • With regard to Ukraine, I would emphasise that the trends mentioned here, and in particular the pressure on the affordability of discretionaries, pre-dated the conflict. SEEDS has been showing this pattern for quite some time, incuding downturns in PXE in countries where top-line prosperity is still increasing.

      The wheels coming off the financial economy is a good way of putting it. The whole phenomenon of negative real rates has been a function of trying to stimulate the economy in the face of negative underlying trends.

      I think I’ve said that, while a soft landing is possible for the economy itself, a hard landing for the financial system seems inescapable. The direction of rates – certainly nominal rates, which matter to anyone servicing debts – is clear, whilst the pressures on affordability are evident and real, and cannot be explained away in terms of Ukraine or, for that matter, supply-chain disruption.

      Russia’s demand for energy payments in RUB may be significant for FX, where a comparison between market and PPP rates is suggestive in the new context that we’re discussing here. Even if the Fed responds along expected lines, USD real rates are heading for record lows.

  4. Dr Tim,
    Thanks for yet another highly authoritative resume of the outcome of the last 50 years of energy blindness.
    Enjoy a well earned rest.
    Might I recommend for further reading for yourself and others on this forum the books of Saifedean Ammous on “The Bitcoin Standard” and “The Fiat Standard”.
    These discuss the possibility of “sound money” as opposed to the fiat induced debt we have been existing on for many years and how the economy in all its facets has become bloated as a result.

  5. One minor suggestion, Dr. Tim. In the US and Canada (maybe other places too), assets normally include real property (land- including water sources and minerals, buildings, machinery…) Thus this sentence might be mis-interpreted:
    “One of these is the proxy or financial economy of money, credit and assets.” Maybe add “paper” as a modifier to assets so the distinction is solid.

  6. @Dr. Morgan
    As someone from a very unfashionable and now rapidly diminishing numerical generation, I grew up consuming things pretty close to the primary product. The vast proliferation of different consumer formulations for something as simple as shampoo would have been unthinkable. We were still using “grandma’s lye soap…good for everything on the place”.

    So I realize that I may be predisposed to something that corporations have been trying to get as far away from as possible for the last 75 years. But I suggest that there are a couple of innovations and energy trends which might bring back more prominence for largely undifferentiated staples.
    *Amazon and similar delivery services may be the least energy intensive ways to get staples to consumers. Don’t have to drive a 2 ton SUV or an EV with half a ton of battery to the mall or supermarket.
    *The Amazon marketing platform heavily dependent on the internet may permit customers without a lot of disposable income to select the minimum product which will fit their needs…as opposed to impulse purchases from a bewildering variety of differentiated products.
    *The highly automated Amazon warehouses permit same day or next day delivery in urban and suburban areas.
    *While the overall trend might be toward “more basic”, there is also room for “specific needs”, such as “gluten free” for celiac disease (or just fear of gluten).

    My crystal ball is less clear in terms of precision parts. I will observe that people with vintage cars or vacuum tube radios or crank phonographs can now more easily find the parts they need on the internet. And the Amazon and similar package services can get it to them efficiently.

    So, in general, it seems to me that Logistics rather than Marketing may be the emerging wedge technology which enables the delayering and simplification you anticipate. Logistics can even be applied to services such as medical consultations (over the dead bodies of the medical conglomerates which have emerged especially in the last couple of decades). I gave some advice to my sister about resistance exercise and pointed to a book written by a couple of Canadians. She looked at the book, found their web site, and enrolled in a zoom class to fine tune her adherence to the form required for safety and maximum muscle growth. I do note that a doctor stopped doing remote consultations when he was threatened by the hospital that employs him. The Food and Drug Administration in the US may be a giant obstacle to rationality, and the medical conglomerates will be loath to write off their huge investments in buildings.

    Don Stewart

    • “ someone from a very unfashionable and now rapidly diminishing numerical generation”

      Running out of shampoo is the kind of reality that worried only those who got us here in the first place, dear Don.

  7. In the 1870’s a city called Donetsk was built on the Donbas region of Ukraine by a Welshman and many Welsh miners. The Welshman’s name was John Hughes. He was greatly respected by the Ukrainian and Russian workers.
    They all worked together successfully and they built a huge manufacturing area that Is in dispute today by Russia and Ukraine. This was the period when globalisation was in its infancy and the opportunity, supported by cheap fossil fuel, provided the economic growth that was essential for the industrial revolution.
    Today relationships between Russians and Ukrainians have gone sour since manufacturing and mining is difficult and opportunities scarce.
    In many ways it illustrates what can happen anywhere in the world where energy and opportunity is in dispute.

  8. Useful interview on Ukraine and other current events: https://rumble.com/vyt05p-phase-2-of-operations-live.html. He thinks the EU will accept the almost inevitable and start paying for natural gas in rubles.

    He also thinks the clique which has taken charge of the USA is going for ‘regime change’ in the east, to avoid the collapse of the ‘globalist’ system that’s developed above all since ~1991. Or at least, to put off its collapse.

    Or we might just get WWIII. I feel rather gloomy.

  9. My first thought from this fine explanation was to remember a quote from George Orwell: “Orthodoxy means not thinking – not needing to think. Orthodoxy is unconsciousness”.
    While I fear that the future, which will only include me for a very short time, but will compress rather quickly and disconcertingly on my kids and grandkidlettes, will be rather fraught with unforeseen [in the realms of ‘orthodoxy’] consequences stemming from “contraction” rather than, hopefully, “collapse”.
    The past and present systems have served my generation in the so-called ‘developed world’ rather well, and future generations will look at us rather more negatively than we imagine. I do not give up hope though for some sorts of livability, as can be seen in your writing. In this I quote Ilya Prigogine: “When a system is far from equilibrium, small islands of coherence have the capacity to shift the entire system”. I see this in work done on paper by you and many others, but also on the ground by those who are attempting to re-localize life on those “small islands”.

  10. Dear Tim,

    Thank you again for your most enlightening post.

    I take this opportunity to publicly commend the remarkable efforts that you have made during the past few years to explain, both to the academic world and to the layman, the strategic importance of net energy for our « high tech » civilization.

    There is no doubt that the concepts of EROEI and SES are now used in some discrete circles to assess the future, instead of the traditional crystal ball and its equivalent neoclassical economics.

    However, as you readily recognize, it is not easy for a recognized leader to admit to a scared and hungry populace that he was wrong and that, instead of sailing towards paradise, their ship is heading towards the botton of the deep blue sea.

    Meanwhile the wheel of history keeps turning and the FT reports today that the Kremlin’s current master is apparently insisting that european NATO members must now pay for their russian gas imports in rouble while European leaders, in particular the Germain one, reiterate that payments must continue to be made in Euro or USD, in accordance with contractual terms.

    Since you are apparently contemplating taking some rest and a pause in your publications, might I be so bold as to ask what you think will happen if, as a result of this difference of opinion, russian gas shortly stops flowing towards Europe ?

    Would we rapidly be heading in the direction of another historical SHTF event ?

    Best regards,


  11. I do thank you Dr Tim for your marvelously worded series of articles – such a joy to see another one arrive in my inbox which is always the first to be devoured. Your analogy of the the ECoE being the trilogy of the blindingly obvious so aptly illustrates the absurdity of the entire establishment thinking – the emperor indeed has no clothes – and the unwieldy edifice is now, at the 11th hour, inevitably reacting, without acceding or even realising the preposterous fallicy of classic economic thinking of the last 100 years or so.

    It is all a wonderful, if tragic, example of the fatal flaw of humanity – our exhuberance and ability to deny reality until it’s forced upon us. I do thank you again for your wonderul expression and clarity, and hope you enjoy a well earned break.

  12. Excellent as usual, Dr Tim. My concern is that your excellent thesis on the energy/financial system is liable to be drowned out by the noise from the Ukrainian situation. Put simply, sharp rises in the cost of essentials will be blamed on the Ukrainian crisis alone rather than people being able to comprehend that the economy is really an energy system. Of course, readers of your blog will understand that the Ukrainian situation has simply brought forward/exacerbated what you have predicted for some time and, in fact, validates your thesis. Convincing others is, sadly, now likely to be more difficult. Ian

    • Thanks Ian

      There are always reasons, which some might call excuses, for the failure of an economic orthodoxy.

      In recent times we’ve had the GFC, the European banking crisis, ‘austerity’, the pandemic and now Ukraine. The economic and financial reality (as I interpret it) can’t be hidden foreover.

      I don’t, by the way, see any of these crises as part of any Baldrick-style “cunning plan”. Successive crises are symptomatic of a failing system.

      What I do here has never really been about convincing anyone, certainly not in government.

      Rather, I started this on the basis of inquiry, with two main questions for which I wanted answers.

      First, “how far can we develop the thesis of the economy as an energy dynamic (and the associated concept of ‘two economies’)?”

      Second, “can this be modelled effectively?”

  13. @David
    For what it is worth. A retired Diplomat in the US recently retired and moved to my neighborhood. He gave an interview to the neighborhood newsletter. He said that, contrary to popular opinion, diplomats no longer do what they did in the 18th and 19th century. He saw his job mostly as preventing nuclear war. He said that many countries do not understand that it was US leadership which enabled the huge increase in global GDP. Of course, in the short run, we have to deal with Russia and China, but over the long term he is confident that people will understand the necessity for US leadership. So long as everyone obeys, what need is there for nuclear war?

    I took that to mean that he has no clue about the role of fossil fuels and energy, that respect for the Petro-Dollar is non-negotiable, and that individual countries fiscal and monetary policies must be compatible with that of the US. In the case of Russia, I think they do exactly understand the role of energy, that they see that they have no alternative but to disrupt the Petro-Dollar, and that what is best for them in the long term is what used to be called a “sound” fiscal and monetary policy. China I see as understanding the role of energy, would like to see oil sold in Chinese currency, and still following a wildly expansionary monetary policy. Since Russia is behaving in ways quite contrary to US wishes, I am sure somebody in Washington is looking at “shock and awe” along with a short rope and a long drop for Mr. Putin.
    Don Stewart

  14. Hello Dr. Tim,

    Can I ask you what is your take on the future for a country like Singapore (being relatively resource-poor and highly reliant on services)?
    I see such a country pouring an ever higher share of their GDP into importing the commodities they need.
    It seems their so-far success tale has been struggling recently, with difficulty in particular to generate enough high paying jobs for graduates. This is reflected in their tougher policy on immigration policy which became more and more selective.


    • Unfortunately, Singapore is not one of the 30 economies modelled by SEEDS.

      My understanding, though, is that Singapore is essentially a trading economy. This might be categorised as a ‘services’ economy, but it’s really about earning a margin on trade.

      If you’re good at that – as Singapore clearly is – then you can carry on making a living that way. But the implications of the current situation are that global trade contracts, and margins come under relentless downwards pressure.

  15. Ironic title?

    The energy limitations discussed only extend as far as the gravity well of Earth. Gravitational pull is a not impossible constraint to overcome and once we are off planet more energy becomes available. Our planet is struck by only a billionth of total solar energy output and so if raw energy is the limiting factor we are 99.9999999% shy of reaching the hard limit. Doesn’t seem like we need to be stopping our infinite economic growth model quite yet.

    • @Angus Robertson.

      If only someone would hurry up and invent warp drive and teleportation. We could then “Go where no man has gone before”

      If the “financial economy” is out of step with the “real economy”, then so too is the human imagination with the reality of physics!!!!!

  16. British economist Lionel Robbins said “Economics is the study of the use of scarce resources which have alternative uses”

    In relation to scarcity, economist Thomas Sowell believes “It means what everybody wants adds up to more than there is.”

    We always want more than we can afford (except the Rockefellers of the world).

    The west (predominantly Europe & The USA) have always tried to make claims on these scarce resources through their debt based financial system.

    As you alluded to, the debt has reached saturation point where no more debt can be issued due to the fact that there are now too many claims on too few resources.

    You can’t print copper, lithium, oil, pigs, chickens etc.

    Therefore, seismic shifts have to take place in our economies that reflects this reality.

    By the way, I am personally convinced that the economy of goods, services and energy is now way lower than 40% in relation to the financial proxy of money, credit and assets.

    I can’t prove it but due to the shadow banking system and degenerate behaviour through investment banks and hedge funds that it is way way lower.

    The scary part of that statement is that it probably won’t surprise me if they don’t even know where half of the dead bodies have been buried (AAA Mortgage Backed Securities anyone?).

    It’s 2008 all over again but on steroids.

    From what I can tell the Russians and Chinese have just about had enough of the west’s ways of doing things where they get the free lunch and the rest of the world does all of the work.

    Tom Luongo explains his view on geopolitical events on this matter in an interesting and extremely insightful way.


    It seems it’s game over. Do not pass go and forget collecting on your stimmy cheques.

  17. I note your reference to a “binnacle”, a word that is in common usage only among those who are familiar with yachts and ships. Perhaps you have a vessel in Marina Port de Mallorca?

    • i don’t have a boat at the moment, though I wish I did.

      I’ve had a fascination with ships and the sea going right back to early childhood. I’ve visited a nuclear submarine, and been at sea in a carrier and an LPD. My ‘other’ book (before LAG) was about ships. I get this from my father, though I’ve also found out more recently that my grandmother ran away to sea (for three years) in her sixties!

      The working title for this article was “The devil to pay, with no pitch hot”. This references the central deck seam (known as “the devil”) on a sailing ship, a seam that is notoriously hard to “pay” (fill) unless ready-heated tar is to hand.

  18. Thanks as always Dr Tim. I appreciate that you cannot offer financial advice, but I am interested in what your other readers/contributers here are doing to prepare in terms of investments, lifestyle, etc?

    • I’m building a small zero-energy cabin and moving closer to my family. I’m also raising cash in investment terms – only staying in very long term positions, hedged equity, and some energy/commodities.

  19. freemarketthinker a good post I was going to add here myself and this one goes a little way to backing up the traps that are set.


    Today, Vladimir Putin gave a speech in which he said the following: “Because you froze our assets illegally, you have defaulted on every obligation you have in regard to Russia. Therefore, Russia will not only never again accept foreign currency, you know, for payment for Russian services or goods, we are going to demand from this moment on that all nations that are on the non-friendly list that is everybody who sanctioned them must now pay in Russian Rubles for natural gas.

    Okay Europe cannot survive! One of the big things that came out of this economic sanctions was that the United States had been promising Europe, “Don’t worry about Russia gas! We have a plan B! We will be able to bring together resources and make sure that you have the gas you need!”

    Well, there is no plan B. There aren’t the resources available. There’s not enough gas. And Europe will shut down immediately.”

    • I read early am that Putin reversed himself on the ruble demand. Their economy is in the crapper. Can’t get microchips. Many factories shut down.

      Sent from my iPhone


    • As a general proposition, countries dependent on resource exports often prefer payment in hard currencies, which helps them to purchase necessary imports. It’s arguable, perhaps, that hard currencies like EUR and USD are in the process of ‘softening’ somewhat…..

      What Russia seems to be aiming at is creating some version of the petro-prop which has long supported USD. Anyone wanting to pay for Russian gas would first have to buy RUB, thereby supporting it in the markets. Clearly Russia has problems both with inflation and with interest rates.

      An interesting point here is the impact that sanctions may be having on Russia’s oil and gas industry. If they can’t buy various specialist supplies and services, their production may decline. That wouldn’t help overseas customers, of course, most obviously Europe.

      I try to remain objective (whilst obviously deploring the hardship caused by war). It seems to me that Mr Putin may have been badly advised, not just on Russia’s military preparedness but also its economic resilience. This said, Europe’s dependency on Russian gas is obviously at least as acute as Russia’s dependency on gas and oil export revenues.

      There’s something to be said for the idea that both Russia and the West are dependent on each other to the point that confrontation makes no sense. The same was said of Britain and Germany – i.e. war would be a disaster for both – in the years before WWI, but it still happened.

    • Putin was also ill advised to not start his war in December. Weather is getting milder now in Europe, and the suffering will be far less if gas is cut off. Also, muddy ground in Ukraine kept his motorized vehicles on roads, easily attacked. If Dec-Feb, ground would have been frozen.

  20. Just saw that Putin signed an exec. order about gas customers needing to open Russian bank accounts (Rubles I assume). Effective tomorrow! Bluff poker?

  21. Sri Lanka unable to purchase diesel because of lack of foreign currency reserves. the government will be seeking an IMF loan. The current state of affairs was exacerbated by pandemic restrictions. According to the Google, in 2019 tourism accounted for 12.6% of Sri Lanka’s GDP, contributing about $3.5 billion. That would purchase a lot of fuel. The situation is pretty dire.

    For us on this site, it provides an important window into how diminishing discretionary expenditures (tourism) can render essentials unaffordable in places that can’t otherwise generate sufficient dollar or Euro reserves with which to purchase oil. I think focusing on hits to discretionary spending without noting collateral consequences maybe sounds a bit too optimistic in the sense that there’s an implication that for a time there’s still enough to purchase essentials, when in fact there is a complicated co-relationship. Depending on the particular nature of a state’s economy, loss of discretionary inflows will lead to an inability to purchase necessities. It’s not a two-tier structure. I don’t suggest that Tim believes or has said otherwise; I point out that we have to keep this in mind. I don’t know how such a thing can be modelled.

  22. To all, Re Putin’s demand (breaking contract) that gas be paid for in Roubles:


    Issued on: 31/03/2022 – 06:54

    Text by:
    FRANCE 24

    Russian President Vladimir Putin announced Thursday that all future EU purchases of Russian gas must be made in roubles, a demand immediately rejected by French and German officials who said both nations were preparing for a possible halt in Russian supplies. Europe will not be “blackmailed” by Putin, Germany’s economy minister said. Follow our live blog for the latest developments. All times are Paris time [GMT+2].

    • I’ll give Scholz and Macron about 2 days to for reality to hit, before they go cap ( filled with with Ruble ) in hand to Vladimir for some more gas, please.

  23. I think you can pat yourself on the back, Dr. Tim.
    World events seem to be playing quite well along with your Seeds model predictions on falling prosperity.
    Of course events like Brexit, Covid, Ukraine, could not have been foreseen per se, but such events do and will happen guided by the invisible hand, or as you put it so well the “Gravitational Pull”.
    The people in government are completely out of their depth. I think that goes for the USA, the UK, Canada, Australia and all of the EU including Switzerland. All of them are clueless, simply because they cannot understand what is going on.
    At this stage in the game it should be clear to everyone, that the Economy is not a financial system but an energy system. Our politicians however still don’t get it.
    The hard part in all of this decline is predicting human nature, and how people actually react to the shrinking economy. It is now painfully obvious that in the western world, decline has set in.
    Many will probably still believe that this is “only temporary”.
    As living standards decline, no doubt some form of rationing will ultimately be introduced and wealth confiscation will be enacted. Canada is leading the way on this latter part, but Europe will follow soon.
    Due to lack of Russian / Ukrainian grain on the market this year, and due to the ban on exporting Russian fertilizers, food shortages is the next stick of dynamite due o go off.

    In today’s world, I think it has been a very serious mistake to alienate Russia.

    • Thanks, though you are too kind.

      At a level of more limited objectives, this article summarizes the theory so far, whilst #222. The Forecast Project did the same for how I believe we can turn this understanding into forecasts.

      I think you are completely correct about this not being understood in government.

      If it was, both policies and politics would already be quite different. The “cost of living crisis” would have been anticipated long in advance, whereas even now I don’t think governments have grasped its real meaning. When millions struggle to afford the basics, and millions more see their ability to afford discretionaries sharply curtailed, the political ‘centre of gravity’ shifts towards new priorities. I see no sign that politicians understand this.

      Moreover, it seems unthinkable that government awareness of what we discuss here would not have been passed on to ‘big business’, and if this had happened then we’d see it in action – corporate investment in discretionary sectors would have pretty much collapsed, for example. This understanding would also have reached, if not the generality of the markets, then at least the smartest and the biggest players.

      The stand-off between the West and Russia is tragic. There are some ways in which these are almost natural partners – at least to the point of needing each other – rather than antagonists.

    • Bluff poker. Spring is here. Putin needs hard currency of any type, and selling energy is his main cash cow. He keeps backtracking on his edict according to Bloomberg TV.

    • @ Steve Kurtz – I read a translation of his remarks. It seems his outcome is intended for countries to open accounts in Russian banks. The ruble purchase would be an instantaneous domestic transaction not an FX market operation? He may indeed accept foreign currency, but not in an account open to sanctions.

  24. About “not being understood in Government”:

    The Overton Window is a model for understanding how ideas in society change over time and influence politics.

    The core concept is that politicians are limited in what policy ideas they can support — they generally only pursue policies that are widely accepted throughout society as legitimate policy options. These policies lie inside the Overton Window.

    Other policy ideas exist, but politicians risk losing popular support if they champion these ideas. These policies lie outside the Overton Window

    The Overton Window provides a nice explanation of why degrowth is politically unacceptable at present. The public is not yet aware that it is how things are. So, the idea is unthinkable.

    It has been postulated that there are six degrees of acceptance of public ideas:


    Maybe we are wasting our time grumbling about the Government, not understanding? Perhaps we should focus on raising public awareness of these “radical” or even “acceptable” ideas?

    I find that the idea of “surplus energy economics” is beyond the ken of most people.

    However, the suggestion that “the economy is shrinking” is an understandable addition to the established growth mindset. Because it is a statement of how things are. Not how they should be.

    A step in the direction of accepting degrowth maybe?

    • The general population may easily understand that “the economy is shrinking”, but without an understanding of the underlying cause they may opt for all sorts of counterproductive policies, mostly attempting to restore economic growth or punish people at the top, who they will blame for their worsening situation. Bring out the guillotines!

  25. Dr Tim.

    Another great article.

    Kinda sums it all up nicely.

    Where do you see the end game with a rising ECoE?

    I think the only truly renewable energy source is wood.

    What level of available energy do you envisage once de-growth has bottomed out and what would that look like? (Solar, wind, nuclear……..?)
    For me, this is the ultimate question if we are trying to predict what the future may look like.

    I can see the electricity distribution network being unsustainable/unmaintainable. Too energy input heavy.
    Mining needs lots of diesel.
    What will transport look like?
    So much of the infrastructure that we have become accustomed to relies on a low ECoE.

    • I think the only truly renewable energy source is wood.

      There are definitely a few others, but like wood, they are all derivatives of solar energy. There’s wind. Sailing ships and even sail windmills have been around for millennia. There’s grass. Gaining mechanical power using draft animals that mostly feed on grass has been a source of renewable power for millennia, too. One of the most common uses of that energy was for transport. There’s water. Overshot and undershot waterwheels have been in use for a long time. There’s edible biomass. Food supplies the energy required to power human and animal muscle. Fats from multiple sources can be used for light.

      I think all you need to know to see the future of energy use is that it will all be derivatives of solar energy. All of the fossil, nuclear and geothermal energy will disappear, as will the electric grid. We will be left with living the same kind of lives and using the same kinds of energy as was common for all of human history up until the last few hundred years.

      How long it will take to transition from modern levels and types of energy consumption to sustainable levels and types of energy consumption is unknown. What’s frightening is that timespans ranging from a few months to a few centuries are all quite plausible. In my view, simple prudence suggests preparing for a worst-case scenario. A few family lineages are going to survive to the bottoming of degrowth. Why shouldn’t one of them be yours?

    • @Joe Clarkson.

      I think I’ve come to the same conclusions as you.

      I can’t see any other alternatives.

      All the tech/knowledge we have accumulated over the last 200 years will all go too, I fear.
      How can you study quantum or astro physics without energy inputs? Or understand electricity if it can’t be created any more?

      I wonder if people will find the time to learn to even read.
      Food production may be a more pressing activity.
      Can’t see many new books being mass produced. I guess there may be an administrative elite that will still read and write in order to govern.

      All very different to the world we inhabit today!

      (I get your point on other energy sources. I was really thinking of for heating/cooking purposes regarding wood)

    • Yes.
      I am expecting Apple stock price to tank in the coming years.
      Not many people are going to spend $1,000 on a phone when energy costs are going through the roof.
      Should be interesting.

    • Obviously I can’t comment on Apple or its stock price, but $1000 phones seem pretty discretionary.

      At the BBC website, a member of the public asked whether people can offset surging energy bills by “giving up Netflix, Amazon Prime, alcohol and mobile phones”.

      The answer was as follows:

      “The average UK household spends about £916 on alcohol each year.

      “The cheapest Netflix plan costs £84 a year, while Amazon Prime costs £96.

      “Some mobile phone deals exceed £80 a month but, depending on your contract, you may be able to switch to a SIM-only deal for as little as £36 a year.

      “Giving up all of these costs could save between £1,132 and £2,056 a year.

      “A 54% rise in the energy price cap means a household using a typical amount of gas and electricity will now pay £1,971 per year.

      “So, going without could make a difference.

      “But even then, a further rise pushing the annual bill up to £2,600 should be expected in October, analysts have told the BBC”.

      The questionner could have included, say, satellite TV subscriptions, foreign holidays and many other non-essentials in his/her question. The broader situation might have been stated as ‘cutting back on non-essential spending’.

      The definition of “essential” obviously varies between people.

      But my view, set out here over a long period, is that this isn’t looking good for discretionaries.

    • Dr. Tim,
      Regarding the approximate 2000 Br.Pounds you mention as average gas and electric charges, that seems low. I suppose it includes apartments/flats.
      https://ipropertymanagement.com/research/average-electric-bill (last year)
      “The average U.S. household spends $1,409.52 on electricity each year.”
      and the bills increased as of January by 20-25% due to the rise in natural gas and oil. States grant utilities increases periodically, often every 6 months. Rates can decline, but that is rare.

      N. gas has approximately doubled in price, and it is still decent value, but it isn’t piped everywhere

      Heating oil (diesel) has increased from around $2.50 gallon to over $4.00 now, some places $5.00
      “In the U.S., the average household that uses oil for heat uses about 500 gallons between October and March (182 days).” (includes the south and west coast; Northern areas colder and longer season )

      I have neighbors in chilly Massachusetts who use 3 times that amount in older homes. We retrofitted with best available insulation and poly carbonate interior storm windows, and our large older home uses 800 gallons(includes domestic hot water) plus 4 cord of firewood burned in wood stoves. I pre-bought at 2.69. Won’t be so lucky for next July’s contract.

      I expect US costs will average double what you quote for the UK. Homes are larger, and many places have Canadian like conditions,

    • Thank you – that’s certainly my intention

      In this article, we look at Principle. Article #22 was about Projections. Logically, Prognosisis might be next.

    • What about ‘Reality’?

      What are the tips & trics the powers that be are using to make up our new and improved minds?

  26. Having followed this blog on and off for the last 9 years, I’d like to say a huge thank you Dr Morgan for sharing your thoughts in such a clear and logical way – and for free. (Also to other contributors for sharing their interesting thoughts). The ideas have refined very elegantly in articulation over time, let’s hope someone somewhere involved in steering our joint futures is reading and understanding what needs to be done to help us through it at national levels. Whatever ‘it’ turns out to be! There are few like-minded people near me, so it’s been good to have a virtual community to help focus thoughts on what can be done at an individual and local level to prepare for a reckoning that has always seemed – to all of us here I think – inevitable, even if uncertain in eventual scope. Not expecting a calamity, just saying thank you while it’s still calm and ‘normal’ on the surface, and in case I never get to say it because other priorities (on the spectrum of impending disorder possibilities in a complex system) take over while you’re having a well-deserved rest.

    • I remember my astonishment at the fruits of globalization when DVD player prices dropped from $250 to $50 dollars in one year. The cheaper players came from China of course.

      Since shipping manufactured items and bulk cargo by sea is extremely inexpensive compared with all other forms of freight, ocean freight made the global search for the cheapest resources and the cheapest labor possible and economically sensible. It allowed globalized supply chains and dropped the unit price of everything, making globalization profoundly anti-inflationary. This has always been the case, sea-born trade has existed for thousands of years, but in the last 20-30 years it has expanded at “warp speed”. Reversing globalization will be very inflationary, but I think it’s something that we’ll all have to get used to.

  27. Renewables cannot support 8 billion hungry apes much less the predicted 10 billion we are predicted to hit eventually. Perhaps Bitcoin can produce resources out of thin air like it produces itself.

    • Right, Sisyfuss, MMT wackos are in the same boat as crypto nuts. Let them eat digits, tokens, and credits.

    • I was a young man back in the early 1970s when the world population was less than 4 billion (it seemed a lot). For the last 50 years I have been hearing that the world population was going to level off and then decline. It was going to be at about 7 or 8 billion, then later it was 9 billion, then 10 billion. I see that the UN now thinks it will be 11 billion. And the politicians of most countries seem to think that the answer to all our woes is boosting GDP by increasing their populations. I don’t see it working somehow.

    • 🙂
      “Currently, the tool estimates that Bitcoin is using around seven gigawatts of electricity, equal to 0.21% of the world’s supply.
      That is as much power as would be generated by seven Dungeness nuclear power plants at once.
      Over the course of a year, this equates to roughly the same power consumption as Switzerland.” ?


  28. Pingback: #225. Gravitational pull – Olduvai.ca

  29. To think we’re all now going to suffer the consequences of following a religion (yes, it’s a religion) the basic doctrines of which were dictated by a bunch of misguided buffoons from the Western world — known otherwise as the founding fathers of the ‘science’ of economics — who all so often fancied themselves the most enlightened and educated of all humanity. Amazing how they (the said buffoons) could have been so utterly blind to the constraints imposed by physical reality — and often CHOSEN to REMAIN blind. And having kicked the bucket, most of them aren’t going to have to answer for the terrible eventualities to which their now near-universally accepted faith will lead.

    There’s something to be said about Western civilization.

  30. i think while the general public may not know the exact reason for things deteriorating, they understand all is not well and is changing whether we like it or not far better than the politicians do. We just sold our motorhome because of this and other blogs insight. Not because we wanted to, but because we could see it was the prudent thing to do. I suspect many around the world are doing simiiar things. Great read, only wish our leaders could fathom it.

    • Thanks George and, as I think this is your first comment here, welcome to SEE.

      We can’t necessarily know what political leaders make of the situation, but I’m as sure as I can be that they really don’t understand the situation as we interpret it here. This is hardly surprising, given the pace of change, and the sheer scale of the departure from received ideas about the economy and related issues.

  31. Limits to Growth becomes more apparent throughout the world’s economies, first by slamming Growth to a reversing the entire train.

  32. are we beginning to see a post fiat, post growth, commodity based currency system starting to gel?


    this piece by Alastair Crooke manages to begin sketching out the possible new emergent reality, it’s quite understandable why the Western Washington consensus zone is having such conniption fits over current events, their free lunch is slipping away,

    I’ve held back on commenting because the situation has been so fluid but I think we’re starting to see form emerging from the fog.

    once we have exited the fiat model it is a lot easier to have a degrowth situation, commodities which are finite become the money and they are denominated in various currencies to facilitate exchange,
    the currency itself is no longer the value, it’s the commodity.

    it’s rather like going back onto gold but it isn’t just gold and or silver that are the commodities, it’s hydrocarbons, industrial metals, minerals, lumber, agricultural output, a basket of commodities that can be translated into any of a basket of currencies to enable exchange,

    inter state trade becomes a barter, “you want my wheat, well what have you got that I might need?”
    running trade deficits just doesn’t work in this climate, printing currency only devalues it, you can’t buy other peoples commodities with promisary notes, bits of paper,

    a resource/commodity based economy, to me, seems the closest you’ll ever get to an energy based economy, all resources and commodities are integrally linked to the energy required to produce or extract them,
    all wealth is in the form of physical stuff, it’s a real economy of real things bound by physical limits and realities,

    • Well put Matt and seems a fair assessment of the situation on the ground. Expect the conniption fits to grow in intensity and number. Reality of the situation should reach a new height next fall as it hits the collective west in the face like a cinder block.

    • @Matt.

      Thanks for the link. Interesting stuff.

      That is perhaps why the US is talking “regime change”?

      The world is shifting and the US isn’t going to go down without a fight.

      It feels like a scary moment. I wonder how far the US is prepared to go?

    • “It feels like a scary moment. I wonder how far the US is prepared to go?”
      Using significant force will not be acceptable to allies.
      Sanctions already look like hurting other countries more than Russia, as well as altering the global money system in a direction away from USD.
      Short of the option no sane people would consider, what can they really do?
      I think Putin has waited patiently and lined up all his ducks.

    • @Martyn.

      I guess, as you say, the US won’t be able to engage Russia via Western Europe if the rest of NATO isn’t keen in the idea.

      But Europe is going to be hit hardest by the newly evolving shift in global power.

      The European public are being readied for confrontation, with all the talk of war crimes and atrocities. Lots of “Something has to be done!” talk on the BBC yesterday.

      The US has always used force when there has been a threat to it’s access to resources.

      Are the Hawks in Washington crazy enough to have one more roll of the dice against a nuclear power?????

      Gives new understanding to why the US wants to develope an anti ballistic missile system. It’s not to protect against a Russian first strike. It’s to allow the US to use conventional forces and nullify a Russian nuclear response. Hypersonic missiles are a response to anti missile systems.

      Putin putting the Russian nukes on high alert, was a reminder to NATO not to get involved.

      We are in scary times.
      I fear that the US will go for “shit or bust”.

    • “But Europe is going to be hit hardest by the newly evolving shift in global power.
      The European public are being readied for confrontation, with all the talk of war crimes and atrocities. Lots of “Something has to be done!” talk on the BBC yesterday.”

      The U.S. government and related interests have always wanted direct access to Russian resources, particularly oil and gas, and have continuously applied pressure to that end since before WW2. This is at the bottom of every situation which has vilified Russia.
      It was at the bottom of the Berlin Wall, cold war, spying, “Better dead than red”, missile crisis, etc ad nauseam – and the present situation. It’s hard to overstate this!

      Yet Russia is no longer an evil communist state (it’s funny that China is apparently still communist and is ripping through its own oil which the U.S. also wanted to get its hands on).

      Eastern Europe consists of a number of ethnicities and many of them are uncomfortable in the nation state (an artificial construct) they were born in.
      What does the typical Western European really think about Eastern Europeans?
      They know they have been depending on Russian energy; the cold war must seem increasingly meaningless, especially to new generations.
      Does Western Europe really have anything to fear from the East?

      “Something has to be done!” is the war-cry of the old alliance, trying to create unnecessary conflict.
      As the status and value of the USD declines, at what point does the deficit make its owner bankrupt?
      I guess that’s where things get desperate, and I can understand, John, why that is scary, even though I don’t reside on the big continents.

    • @ Martyn.

      “The U.S. government and related interests have always wanted direct access to Russian resources, particularly oil and gas, and have continuously applied pressure to that end since before WW2. This is at the bottom of every situation which has vilified Russia.
      It was at the bottom of the Berlin Wall, cold war, spying, “Better dead than red”, missile crisis, etc ad nauseam – and the present situation. It’s hard to overstate this!”.

      It took reading Chomsky, for the “penny to dropped” for me. All of a sudden the world started to make sense.

      All those people who extol the virtues of Capitalism, fail to mention that it is all only possible with (cheap) access to the world resources. Both in materials and labour.
      Capitalism can not exist without the C.I.A.

      On a slight tangent, I read that Sri Lanka are looking to do a straight swap with Iran. Oil for tea. Sri Lanka can’t get the US$s to buy oil through the normal channels. Feels like the petrodollar is starting to being circumvented.

    • “It feels like a scary moment. I wonder how far the US is prepared to go?”
      IF ‘this’ is still the policy?
      “By the time you got to the first Bush administration, after the collapse of the Soviet Union, they came out with a national defense policy and strategic policy. What they basically said is that we’re going to have wars against what they called much weaker enemies and these have to be carried out quickly and decisively or else there will be embarrassment—a way of saying that popular reaction is going to set in. And that’s the way it’s been. It’s not pretty, but it’s some kind of constraint.”

    • @Postkey.

      I think the difference this time is that the resources the US wants/needs are in a country with Nukes and it’s own military industrial complex.

      It’s a very different proposition, to say, Iraq.

      At some point the US has to make a move for those resources as other options run out.

  33. Z/H posts an article by Mish Shedlock explaining how supply chain changes due to the response to Russia! will create “inflation.” I think inflation is somewhat of a misnomer here. What he is talking about are increased shipping costs due to rerouting of supplies from the current relatively monolithic but efficient lines to more fractured and longer supply chains. Yes, it will be price inflation, not because of money printing, but actual increased transportation costs. Thus the political reshaping of the economy is materially increasing costs on top of rising ECoE. More complexity with less efficiency.

    “Credit Suisse economics contributor, Zoltan Pozsar, discusses supply chain disruptions in Money, Commodities, and Bretton Woods III

    The bottom line is that it will take months longer for oil to get where its headed. And that does not eliminate Europe’s need for oil.

    The details are quite amazing.

    Zoltan notes that as Russian oil gets diverted to China, China will then buy less oil from the Middle East and then Middle Eastern oil will now have to be shipped to Europe with the same loss of efficiency as the shipment of Baltic oil to China.

    But heaver ships cannot fit through the Suez Canal so they have to unload oil from the tankers, pipe it around the canal, then get it bank on the tanker to head to Europe.

    De-globalization will add to inflation. Here is the key paragraph from Pozsar.

    Bretton Woods
    Bretton Woods II served up a deflationary impulse (globalization, open trade, just-in-time supply chains, and only one supply chain [Foxconn], not many), and Bretton Woods III will serve up an inflationary impulse (de-globalization, autarky, just-in-case hoarding of commodities and duplication of supply chains, and more military spending to be able to protect whatever seaborne trade is left).”


  34. Politicians will never accept blame for bad decisions. For years, those on the Left have done everything in their power to stand in the way of fossil fuel development. Pipelines were cancelled, government land was declared off limits and companies were sued for producing too much oil and gas, out of fear that the CO2 effluent would add to atmospheric CO2 concentration. Oil companies got the message. They cut exploration budgets, scaled back drilling and poured billions of dollars into wind and solar power projects.

    Now we have an oil and gas crisis. Spare capacity is at record lows. Diesel shortages threaten supply chain disruptions. Who do they blame? Apparently it is the oil companies fault for profiteering from high prices and failing to produce more.

    These people are outraged with an oil industry that is doing exactly what they told it to do. It is comical that they cannot see this as a result of their own actions.

    • @TonyH

      Even if the fossil fuel companies had gone “hell for leather” and invested heavily in new infrastructure and wells, we would all still be in the position we find ourselves.
      It may have deferred the inevitable for a few years, but a falling EROI is inescapable.

    • Reality is very complex and I know that the answer is not *that* easy but the main reason why CEOs of oil and gas companies are not developing is not because of some leftists but because it doesn’t make sense economically. Just looking at the volatility of energy prices alone makes a sane person try to move away from investing in it. That without energy our civilization is going to end is obvious and I guess this is why our esteemed host think that energy companies will get nationalized. If this would successfully delay the inevitable is questionable to me but it makes sense that it could be tried.

    • And even if EROI remained a constant 50 (i.e. ECoE = 2%) – a hypothetical impossibility – the peaking of oil was always going to happen, with consequent peak energy and peak economic output.

    • All agreed regarding the inevitability of oil supply deficits. It is just disappointing that the political creatures that aggravated the problem did not have: (1) The foresight to see it coming; (2) The humility to admit that their previous policies were a mistake and accept responsibility like grown ups. They have come full circle in less than a year, from penalising oil production, to blaming the companies for not producing enough. Their is no acknowledgement that cancellation of the keystone pipeline was a mistake for example. They are blaming oil companies for having done exactly what they told them to do until just a few months ago. There is no attempt at constructive dialogue or understanding the science and economic incentives behind stagnating production. Just blame and finger pointing like a bunch of kids. If these people admitted they had been wrong and started looking at constructive ways of dealing with the problem, I think the public would have more respect for them. But that doesn’t seem to be in their nature.

    • I share your sense of frustration.

      Here at SEE, we (1) have developed a coherent interpretation of the economy as an energy system, and (2) have modelled this interpretation to the point where we can make informed projections about the future. I’m not sure what else we can contribute.

      These may be the limits of what we can realistically expect to accomplish. From here on, what happens is in the hands of decision-makers in government and business, and of the general public.

    • @TonyH.

      I hold my hand up. ✋.

      I used to think (hope) that renewables was the answer.

      Then I read Small Farm Future and everything changed.

      I have since found blogs like this one and now understand far better, the predicament we are all in.

      It’s not been an easy journey. A road to nowhere.

      But I don’t hold any grudge against those that haven’t come to my conclusions as of yet. (But they will. Or at least they will experience the effects of a falling EROI even if they don’t understand it.) The Green movement mean well, even if they are “pissing in the wind”.

      But I still don’t think that the Keystone pipeline is an answer.

      Burning fossil fuels. “We are damned if we do and we are damned if we don’t.”

    • Regarding further work with SEEDS: wouldn’t it be interesting to publish analyses for certain countries or regions/groups of countries and look for differences and explain what the reasons of such differences may be? Perhaps the 30 or so countries in SEEDS form certain types or cases (even beyond industrialized countries vs. emerging economies)? And another question or task could be the continuing comparison of SEEDS results with real data (and with “official” data published by governments) so that a more realistic interpretation of economic outlooks or projections published by governments could be offered, at a higher resolution (almost in real-time?) than what has been offered so far? A third question concerns the empirical basis for the ECoE calculations: are there newer data on FF availability and extraction and distribution cost that may make an update of the ECoE data necessary? Does the rearrangement of FF supply chains that is happening now influence the ECoE?

    • Thanks Martin. I’ll leave the ECoE question for now, as there’s no brief way of discussing this.

      With the 30 economies covered by the model – effectively 29, as there are gaps in the data one can get for Iran – SEEDS can already compare its own with official data and forecasts, having been designed from the start on the basis of the parallel “two economies” of money and energy.

      There probably are a lot of additional things that the model can do, and what readers see here, in data terms, is hardly even ‘the tip of the iceberg’ of what SEEDS produces.

      But there is a process of diminishing returns (a lot of extra effort for not much incremental insight) and resources are limited (I don’t have the research capabilities of a large organization).

      I started this project to answer two questions, and I like to think that a lot of people are interested in the answers to these questions:

      Q1. Can we develop a comprehensive interpretation of the economy, based on energy principles, and superior to conventional explanations?

      Q2. Can we model the economy on this basis, giving us better-than-conventional insights into current and future trends?

      In my own opinion – though readers are entitled to differ! – these questions have now been answered. The philosophical conclusions are summarised in this article, and matters of practicality and projection were set out in #222. The Forecast Project.

      There’s always more that can be done, but- given resource issues and the law of diminishing returns on efforts – I may be near the limits of what I can accomplish. I feel that I’ve answered the questions I set myself at the start.

      With so much new data arriving in April, the next iteration will be completed (this is “SEEDS 23”), but let’s just say that the broader outlook is discouraging.

  35. Fossil Fuels…Get Over It
    The guy from Sri Lanka posts quite a few observations that merit some attention. His take on fossil fuels is very much informed by a small, poor, third world perspective. It’s first about being left alone by the Big Guys. Second is adjusting one’s expectations. Third is mastering new techniques, or relearning old ones.


    I do want to comment on “relearning old ones”. With the loss of air conditioning in the hottest time of the year, the family tried sleeping outside…only to be eaten by swarms of mosquitos. Not too many decades ago the family would have routine stocked mosquito netting, for just such usage. It depends, of course, on where one lives. I grew up in a hot place and routinely slept outside on a pallet with almost all of my body exposed to the dark and cold of outer space. Somebody (a school teacher?) explained that I got cool and then cold at night because of radiation between my warm body and cold outer space. If I slept under a tree, I wouldn’t get as much radiative cooling. If I explain this to people now, where I live, I get blank stares. We will figure this out the hard way, I suppose.

    Don Stewart

    • @Don Stewart.

      In theory what Indi says is true. Though, I’m not convinced that renewables are viable or feasible without fossil fuels to make and maintain them.

      It was a misconception that I once held. That renewables where the answer to all our problems.

      The situation in Sri Lanka looks pretty dire. Those on the periphery, will feel the squeeze first.

  36. Energy Skeptic on WHAT is Happening?; What THEY know?; WHY DON’T THEY ACT?

    I will note that she makes thermodynamics the base for her argument: demand and supply have no intersection which can be called equilibrium. This argument was the basis for ShortOnOil’s model (which was roundly denounced by everyone), is what Gail Tverberg talks about a lot, and is my own viewpoint (up to a point). What is the “up to a point”? If we actually do what our correspondent in Sri Lanka suggests, then we would move the demand curve in ways where a temporarily stable intersection with supply might be possible. But we would have to keep on moving the demand curve as the supply is subjected to the laws of depletion. It’s hard to imagine a financial system that has such flexibility.

    Don Stewart

  37. @John Adams
    I don’t know exactly how Indi defines “renewables”, so I will probably color outside some lines. In a country with a distinct wet season and dry season, sunshine is pretty reliable during the dry season, and fruit is pretty reliable during the wet season. One adaptation is to use a solar cooker to cook food during the sunny, dry season. And then to eat lots of fruit during the wet season. It turns out that humans are about twice as responsive to the fructose content of fruit than other of our close relatives, which makes us particularly susceptible to developing Metabolic Syndrome in a world awash in industrial food laced with high-fructose corn syrup. But the mutation which makes us twice as responsive saved our race around 20 million years ago during an ice age. We were able to eat enough fruit to make us fat enough to get through the increasingly harsh winters. So my (wild) speculation is that if we break everything down to basics we can probably reassemble some survival plan which accords with our biology and the environment of the particular place we live.

    My suspicions, of course, aren’t guaranteed to work, and are quite unlike the factories we have become accustomed to. It’s also true that we numbered less than a billion back in those culturally distant days.

    My grandchildren will live in interesting times. I hope they are not just uniformly awful.
    Don Stewart
    PS. If you are interested in the role of fructose, I suggest the 3 video series on YouTube that Dr. Richard Johnson is doing for Low Carb Down Under.

  38. The Russian issue made a lot more sense to me when I learned that eastern Ukraine is sitting on the 3rd largest Natural Gas reserve in Europe.
    Number 23 in the world.

    Thanks for all your work on SEEDS Tim. I have followed your work since you wrote papers at TB.
    The steep part of the energy cliff seems to be underway, along with the associated symptoms of resource wars, currency failures, and governmental confusion.
    The challenge for the individual is calculating how to prepare and navigate what comes next.
    Of course for each individual in each jurisdiction the challenges will differ.
    There are however some common threads around “prepping” for next decade.
    I’m not talking about the radical guns, ammo, and bug-out home in the woods, but rather practical lifestyle and financial changes in advance of de-growth. Things that my lessen the hardship.
    I see that as a useful forum topic. However, I do realize that it may not fit the theme of this theater.

    • There are however some common threads around “prepping” for next decade.

      The most important thread is reducing your dependency on things that are outside your control. The closer you live to the center of a modern city, the more utterly dependent you are on the functionality of all the modern systems that keep cities going. Regardless of your lifestyle or financial situation, if the lights go out, or the gas runs out, or the shelves go bare in your local grocery, you’re not going to be able to provide for your needs.

      Just keep Maslow’s hierarchy of needs in mind at all times: if shelter, water and food are lacking, your life is at risk. Up until a 100 years ago the vast majority of the world’s population were gathering what they needed from their surroundings at very low energy cost (just enough energy to cover their metabolism). Now, the vast majority of people in modern countries require huge amounts of surplus energy to keep them alive in their urban homes. As Dr Morgan has so clearly described, energy is at the core of everything that happens, including your daily life. As energy supplies become more expensive and less reliable, the more precarious your life will be. And, like rust, energy depletion never sleeps.

      If they are lucky, everyone who stays in a modern city long enough is destined to become a refugee. If they are unlucky and they can’t become a refugee from the city, they’ll die there. The best time to get out was twenty years ago. The next best time is now.

  39. @ Joe Clarkson

    You make some good points.
    I wonder, there may be too many variables to simply say “get out of a city”.
    As an example, for a 75 year old person, the best place to be for the next 10 years may be a city in a country with ample energy reserves and current reliable rule of law. (and a strong military doesn’t hurt ).
    Fernando Ferfal, author of “Surviving the economic collapse”, lived through 2 currency/government collapses in Argentina. He stated that in many cases, the people in suburbs and countryside fared worse than those in medium sized cities due to robbery, torture, rape and lack nearby help. Both seem to have their pros and con’s. I suggest that each situation has to be assessed based on a list of possible threats, the age, financial position, and current location of the person or family.
    According to his experiences, medium sized cities fared ok. I fully agree that Mega-cities will have a serious challenge.
    Granted, the difference now is the relentless (and increasing) downward trajectory of the energy cliff which will effect each country at different rates. The collapse rate may be decided by whether a country is a net energy exporter or a net energy importer.

    • Well, if you’re as old as I am (73), there is no real danger. I will have lived a long and rewarding life even if I die tomorrow. For me, it’s all about my descendants and my community.

      As for cities, in the future there may be what we would now call towns, but there will be no real cities, at least not for many centuries after our current cities are abandoned. The only uncertainty is how long it will be before cities meet their demise. My guess is that it will be well before my 7-year-old grandson is my age.

      One other consideration is that cities are more likely targets for nuclear weapons than sparsely populated countrysides. Even so, fallout patterns should be part of every prepper’s decision-making process.

    • @GLister

      I think anyone who isn’t already living a lifestyle that has very low energy inputs is going to struggle in the (near) future.

      I can’t see people being able to provision for themselves, (food, fibre, medicine, shelter) without prior experience. I include farmers in that group. I’d like to see how a UK farmer copes without deisel!!!!

      Those that already practice those skills will be overwhelmed by those who can’t/don’t

      Here, in the UK, there is no large expanses of wilderness that people can escape to. If the State fails to maintain “Law and Order” then things will get very ugly. There’s nowhere else to go.

      In a European context, I think the only people who may be able to survive a total decline in fossil fuels are Sumi reindeer herders in Lapland. It’s remote and harsh enough to prevent an influx of “refugees” and the Sumi know how to do it already.

      In the late bronze age collapse, the survivors knew how to still provision for themselves even if the city states we unsustainable. Most people today, don’t have those skills/knowledge.

  40. The Limits to Modeling
    Various people are promoting the idea that the world has entered a 30 Year Supercycle in which natural resources, and especially fuels, will be the financial assets to own. I find it useful to think about the geopolitical trajectory over the next 30 years to give some perhaps more nuanced view of the subject.

    In 1492 Columbus came back to Spain and gave a glowing report of the “new world”. The rivers were full of gold and there were abundant natives who could be enslaved. (In the American South before the Civil War, slaves were a much larger financial asset than the land they worked. Wealth was about the number of slaves owned.)

    So if we think about the Native Americans in 1492, they controlled vast natural resources. Did controlling those resources give them wealth? No, it got them decimated and impoverished. As I have said here recently, my own suspicion is that we are at the serious stage in a struggle between those with fiat wealth but very expensive habits to maintain and with great military power and those who are relatively poor and live low on the resource scale and who, mostly, don’t have much in the way of military might. If the Americas in 1492 are a preview of coming attractions, an individual might be much better off trying to ensure their own ability to feed themselves than to count on investments in whoever currently owns the resources. Partly it depends on whether the global oil companies control the military, or whether the military control the global oil companies, or whether the nation-states control both. If I had to vote, it would be a weakly confident bet on the military/ industrial complex.

    Don Stewart
    PS. The king and queen of Spain were devout enough Catholics to seek papal assurance that enslaving the Native Americans (as well as Africans) was OK with God. The pope responded affirmatively. Curiously, the US Supreme Court used that ruling to justify the treatment of the Native Americans in the US.

  41. more on Ukraine’s energy reserves:


    The Forgotten Potential of Ukraine’s Energy Reserves

    ….Excluding Russia’s gas reserves in Asia, Ukraine today holds the second biggest known gas reserves in Europe. As of late 2019, known Ukrainian reserves amounted to 1.09 trillion cubic meters of natural gas, second only to Norway’s known resources of 1.53 trillion cubic meters. Yet, these enormous reserves of energy remain largely untapped. Today, Ukraine has a low annual reserve usage rate of about 2 percent. Moreover, more active exploration may yield previously undiscovered gas fields, which would further increase the overall volume of Ukraine’s deposits….
    continues, open access

  42. Dr Morgan said, “I started this project to answer two questions, and I like to think that a lot of people are interested in the answers to these questions:

    Q1. Can we develop a comprehensive interpretation of the economy, based on energy principles, and superior to conventional explanations?
    Q2. Can we model the economy on this basis, giving us better-than-conventional insights into current and future trends?

    In my own opinion – though readers are entitled to differ! – these questions have now been answered. The philosophical conclusions are summarized in this article, and matters of practicality and projection were set out in #222. The Forecast Project.”

    I can say that after reading you for several years (since the beginning actually) that you have definitely answered the two questions, and that you succeeded wonderfully in modeling the economy on the only realistic basis giving much better insight than conventional economists. Given that, I have chosen to not comment for the past few days. I have been torn because your accomplishments are plain for all to see and I have the greatest respect for your interpretation of the economy and the explanations that come from SEEDS. However, the projections in #222, in my opinion, are ridiculous.

    The projections in #222 are profoundly over optimistic. The only way that the lines can be as flat as you project is if ALL of the following are true:

    1. The amount of energy used by the world economy must remain essentially flat for the next 20 years. This isn’t something I am guessing at, in one of your prior posts you indicated that that was in fact one of your basic assumptions. What about de-growth, planned or otherwise?
    2. You model 30 countries. I googled it just now, and apparently, there are195 countries total (not including i assume the two that Putin invented last week). Those ignored 165 countries must remain stable. No mass migrations, none of them can get the bomb, or go to war with their neighbor in such a way that the violence spills over, none of the other problems that countries always have – always have had – can occur.
    3. The food supply has to remain stable for the next 20 years. For example the FAO food price index cannot go to … F%^$ING 159.3! The last time it went to 120 the “Arab spring” happened.
    4. Anthropogenic Global Warming must be a myth. Perhaps something invented by the Chinese to hurt US corporations profitability. All I have to do is step out my front door to see that global warming is real, and already cataclysmic. Some of your readers deny its existence, or claim that it wont affect anything for many decades yet. (More on that later.)
    5. There has to be stable supplies of rare earths, iron, copper, lithium, phosphorus, natural gas (for nitrogen fertilizers), helium, etc. etc for the next 20 years.
    6. No major wars, and certainly no nuclear holocaust. I read that smart people were guessing that we just went through a period where the odds of that went to 1:3.

    You created projections that are absurdly optimistic. Why?

    My guess … It is really hard to face reality. I read a book just a few years ago “Engaging with Climate Change”, Sally Weintrobe (editor). Many of the articles made the case that people deny climate change and, of course, will deny what your work indicates simply because they cant face the loss that is implicit in understanding the truth. They are too sensitive to the impending loss.

    “Global warming is something that will make a difference only after at least 40 years.” LOL … sure Steve, sure. For those that are stuck at the denial stage in the grieving process all that I can say is, “OK, fine, live a good life and all the best to you.”

    A good book for working through one’s grief is, “Collapsing Consciously”, Caroline Baker.

    Finally, a little glimpse into climate catastrophe as it really exists right now:


    • Thanks Pintada. I’m grateful for your comments on what has been achieved here, and happy to respond to the points you make.

      On the former, my view is simply that, with enormously helpful inputs from readers, we’ve reached a point where we understand the principles, and hence the operative processes, of the economy, and have a methodology and model of forecasting that’s probably about as good as we can make it.

      Most of the lines are anything but flat:

      Prosperity per person may be declining fairly gradually at the moment, but you will see in the SEEDS charts that the rate of deterioration is accelerating. We might call this ‘compounding effects’ or, slightly more technically, ‘fade rates’.

      At the same time, SEEDS shows very rapid falls in PXE (prosperity excluding essentials), caused by a combination of falls in top-line prosperity and rapid increases in the real cost of necessities. Charts show sharp falls in discretionary consumption, and in the affordability of capital investment.

      SEEDS does show/assume flat energy supply over the next twenty years, in contradiction to a consensus view that projects growth of about 20% between now and 2040. Within this, though, SEEDS also shows rapid falls in the supply of fossil fuels.

      The authorities are clearly determined to push ahead with rapid expansion of renewables, just as they’re prepared to bet the house on EVs. This much determination is likely to be reflected in top-line RE capacity growth. But you’ll see that SEEDS projections show ever less economic prosperity per unit of energy supplied. The operative processes are declines in unit energy value and rises in ECoE costs.

      SEEDS does model 30 countries, out of 195, but these account for about 80% of the global economy.

      Food supply is a big part of what are called here “essentials”. SEEDS shows crossovers between falling top-line prosperity and rising costs of essentials. At points in the future which vary between countries, but which occur in all instances, the prosperity of the average person falls below the same person’s cost of essentials.

      I very much accept anthropogenic climate change, but believe that deteriorating economic output will be the main factor operating to contain this process.

      I do assume no nuclear conflagration, in the sense that this is one of those ‘low probability, high impact’ contingencies that no model can incorporate.

      Following principle (#225) and projections (#222), I’m planning to move on to prognosis.

      It seems to me that the appropriate comparisons for what has been accomplished here are with (a) orthodox economic methodology, and (b) consensus expectations for the future. The aim here has been to put principle, process and projection onto as realistic a basis as possible.

      Everything from official policy and corporate strategy to market valuations and popular opinion continues to be based on orthodox economics and the assumption of continuity. It’s never, for me, been enough simply to state that this consensus is mistaken. Rather, the aim has been to explore principles and put them into practice.

    • Thank you Dr. Morgan for replying and providing more insight regarding SEEDS and your process. Thanks for giving me something to think about over the next few days. “Prognosis”, hmmmm.

    • I originally raised several issues (or personal miss understandings) with you projections, but I think they should be broken down and considered individually. The first issue that I raised above is the most important, and the most fraught. Can you please expand on your explanation of your motivations, and thought process for assuming a flat energy supply for the next 20 years. Specifically:

      Dr Morgan says, “SEEDS does show/assume flat energy supply over the next twenty years,”

      This is the crux of my confusion/dismay. I cannot understand it. How many times have you said something to the effect that, “Because of the inevitable rise in EROI de-growth* (whether planned or unplanned) will occur.” Perhaps I have misunderstood every post from the very beginning. Do you in fact not believe that increasing EROI will cause de-growth?

      Dr Morgan says, “in contradiction to a consensus view that projects growth of about 20% between now and 2040.”

      This is not an argument. We all know that the so called consensus is wrong and therefore meaningless.

      Dr Morgan says, “Within this, though, SEEDS also shows rapid falls in the supply of fossil fuels.”

      Indeed, the use of fossil fuels drops, but is completely offset by the construction of nuclear generating stations. How much nuclear power is needed? Which countries have plans to build this huge new capacity? How many nuclear plants are under construction currently? How does nuclear electrical energy replace diesel? From where will the fissile material come? Are you advocating some type of (what originally was called a) breeder reactor program/industry?

      * I assume that since all wealth in a society comes from the consumption of energy that flat energy consumption is not de-growth, but flat growth. It doesn’t matter what the mix of essentials vs luxury items is, and it doesn’t matter what happens to individual prosperity. If the amount of energy used does not go down, no de-growth has occurred.

    • The point I have to make here is that prosperity is determined by the supply (quantity), value and cost of energy. There is no simple linkage between energy quantity alone and prosperity.

      The authorities are determined on a dramatic expansion of RE capability. I think this will fall a long way short of their aims, but will still be reflected in a lot more RE supply. The problem is that the value of this new RE supply will be too low, and its cost too high, to do much to stem de-growth.

      These RE expansion aims will not be met and, if the outcome looks like falling even further below target, I’ll revise my supply projections accordingly.

      Meanwhile, where I’m at is (a) roughly unchanged total supply volume, but (b) lower surplus energy as ECoEs roughly double by 2040. The per capita numbers, both total and surplus, look even worse, of course.

    • After making the above comment, I couldn’t help but keep reading and I found this post from a rather brilliant economist and modeler:


      Wherein he states:
      “Even if this can eventually be accomplished, it certainly can’t happen now. This is why the ‘real’ economy of goods and services has been decelerating, to the point at which involuntary “de-growth” has become a reality.”

    • Tim said, “de-growth” has become a reality.”, and then he said, “roughly unchanged total supply volume”, and “I very much accept anthropogenic climate change, but believe that deteriorating economic output will be the main factor operating to contain this process.”

      OK, fine, all the best to you. I wont be bothering you again.

    • I regret that, as I have greatly valued your contribution to our debates.

      It seems, to me, probable that the authorities will promote growth in RE capacity, and logical that the continuing rises in ECoE will drive prosperity downwards, even if this big expansion in RE takes place.

  43. Apologies Dr Tim for the long post..

    This is mostly in answer to a request of @Steven Kurtz from quite a few posts ago. Getting the information about efficiency of different technologies to make synthetic fuel or usable hydrogen always seems very difficult, spread over a variety of sources, with most numbers being smoothed and adjusted for future technology gains.

    Luckily the Haru Oni project in Chile gives some real numbers we can get our teeth into…

    The $US55m ‘pilot project’ for creation of synthetic fuel has enough information spread out over various sources.

    The plan is to make (not operating yet!) 130,000 litres of E-fuel from a 3.4Mw wind turbine located in Puntas Arenas in very southern Chile, where the wind is relentless, an assumed 70% capacity factor from the Siemens web pages..

    Just the calculations before comment… 130,000ltr of fuel at about 9.6Kwh/ltr, = energy output of 1,248,000Kwh = 1,248Mwh.

    Input wind generation 3.4Mw X 24hrs X 365d X 0.7cf (capacity factor) = 20,848.8Mwh of electricity.

    Efficiency of plant, excluding any ongoing replacement, maintenance or repair costs, and zero ‘operator input’ = 1,248/20,848.8 = 5.98% efficiency of raw electricity into synthetic fuel at this plant, including carbon capture from atmosphere.


    Of course the energy calculations of efficiency exclude all the embedded energy in all the built equipment, all the transport of the capital equipment to southern Chile, all the transport of the finished product to whichever market.

    The processes include..
    Wind turbine..
    Storage of CO2 and H2 (requiring compression)..
    Direct Co2 capture from air..
    Methanol synthesis plant, including cooling towers..
    Methanol to gasoline plant..
    plus power control centre, tank farm, raw water source and storage.

    It’s clearly a boondoggle, yet has the backing of Siemens Energy, Porche, Exxon Mobil, Enel Green Power, ENAP, and others.
    Just look at the diagram of the proposed site (currently being constructed), with all the processes involved …
    or better (well down the page on the Siemens web site link).

    All the different industrial processes, made up of hundreds if not thousands of individual components from around the world, all required to operate seemlessly together. It’s a complexity that relies on everything about the existing system continuing in it’s entirety to maintain production.

    If they carried a full range of spare parts for contingencies, plus experts on site to do whatever repairs are needed, then the energy efficiency goes down from the ~6%. If they rely on parts and repairs coming from wherever in the world when needed, plus the experts to repair it, then the energy efficiency goes down. 6% efficiency is the best as it assumes/allows for no down time and no cost of operation, maintenance or repairs.

    There is no information about how the ‘industrial sized plants’ will have better efficiency. They are ‘concept targets’. There is also no indication they can produce the amount of E-fuel at the proposed 6% efficiency either, as it’s still being built. I look forward to following the numbers from the Haru Oni paln, but will not be surprised if they go very quiet on the actual output over the next year or so.

    This is being built where the renewable energy input is probably the highest in the world, yet no ‘cost’ for all the energy in the capital goods. If located somewhere where the capacity factor was 35% (still above solar in deserts), then a lot of changes would be needed, more than just allowing for 2 wind turbines. Some type of energy storage, or perhaps doubling the size of equipment that ran less often would be needed. There are no details about any of this in their ‘plans’.

    Porche are going to buy the E- fuel produced, for motosports, which by itself shows how delusional the whole concept is.
    We are in massive overshoot and if the plans for the future include schemes like this one, then there is no way out. The scientific experts working on the Haru Oni plant would be well aware of the poor efficiency and complexity involved, but their income relies on others believing it is a possible renewable answer.

    • @Hideaway.


      Thanks for the post. Sums up the disconnect that is going on out there.

      Must be a fun project to be working on though.🤣. And southern Chile has some spectacular scenery.

    • Carbon Recycling International in Iceland has been making e-methanol, i.e. to blend with petrol for 12 years. It uses CO2 in the geothermal waters rather than air capture for the fuel synthesis. If it was highly profitable, I think there’d be more such plants by now. There aren’t.

      If this Chilean scheme costs $55,000,000 and produces 130,000 ltr per year for say a life of 25 years, that’s a unit cost of

      $55,000,000/3,250,000 ltr = about $17 per ltr of fuel.

      That would suggest $680 (£500) to fill up my small Skoda, plus any VAT and duty (!)

      I haven’t allowed for a positive interest rate, i.e. some return on capital. The above is what one gets if one repays the capital cost over 25 y. Nor have I accounted for operation and maintenance costs.

      Instead of planning for future reality, governments fall victim to snake oil salesmen.

    • I blame the movies.

      Teleportation? Easy, all one needs is a Heisenberg compensator. (Star Trek)
      Reaction Mass Problem? Easy, make an episode showing the invention of an engine that violates the laws of thermodynamics. The inventor inevitability dies in a very dramatic way. (The Expanse)
      Any other problem? Just have your resident “scientist” (Spock, Samantha, Chief O’Brian, etc.) say some sciencie or techie sounding stuff and – *poof* – all is well.
      Fusion Energy? Just travel to the future and return with a “Mr. Fusion” reactor in your DeLorean. (Back to the Future. “4.21 Gigawatts? 4.21 GIGAWATTS?!?!?!?!?” )

      People, especially those that don’t read, fall into the trap of believing lies. They have a suspension of disbelief that carries into their real lives to the point that they can no longer tell truth from fantasy. Put those people in charge of decision making and presto … millions spent to reverse the process of combustion (CO2 and H2O magically forming fuel) in a sciencie looking project that claims to definitely NOT violate the second law.

    • @David .. Likewise for the planned $50b plants producing 550m litres/yr. Capital cost of $3.63/ltr over a 25 year plant life, before any further costs. They are touting a $2/ltr production cost, so the best it could be is $US5.63/ltr, before interest, taxes profit margin etc.

      Modern civilisation cannot run on $US7+/ltr fuel, only a few minor uses at best. It’s not possible to build or run the plant at this price as the rest of the system needs to hold together for all of the components to be available. It’s a catch 22.

      Also, how on earth would Porche, or Siemens Energy that are supporting this boondoggle not be aware of this glaring weakness?? In my opinion they are well aware of the numbers, but are going along for the good advertising about doing ‘something’ towards the climate future predicament.

      The story of the Porche investment into this synthetic fuel company is all over the net and news. You can’t tell me that the engineers, CEO and Board would invest $US75m without being on top of all the numbers.
      It is most likely they know all about the energy crisis dead ahead as well, just from the numbers presented in this project and have considered ‘business as usual’ until it’s not possible, or until ‘something’ saves us, as the best course of action.


      The 6% efficiency of the synthetic fuel production, makes a mockery of trying to build renewables with renewables. Making solar panels, which according to Renew magazine a few years ago cost about 3,700Kwh to make 1Kw.

      The processes being mining, processing of raw ore, transport, industrial heat processes then more transport, pretty much all needing liquid fuels or gas. Using the above synthetic fuel source generated by renewables at the 6% efficiency, it would take 61,666Kwh of electricity to make the 3,700ltr of fuel necessary to make 1Kw of solar panels. Given a life of 25 years for solar panels, in a city with an average of 4hrs of sunshine, the 25 year life would only return 36,500Kwh of electricity. In other words not enough energy produced to cover the energy cost of manufacture of the panels.

      Dr Tim, it’s becoming very obvious how renewables just cannot replace all uses of oil and gas, especially the heavy uses of mining, agriculture, heavy transport and industrial heat processes. Given the willingness of companies to spend millions on an obvious boondoggle, will it change or help decipher your prognosis about the future??

      My own conclusions about the future were made well over a decade ago, hence the ‘nic’ I use. Hopium is going to be ‘answer’ with the Haru Oni project being the perfect example. Keep the show going until it all collapses. I can’t think of any other reason why they would waste so much energy and resources on boondoggles unless ‘they’ didn’t have any answers.

      ‘They’ being all of us…

    • I often think we are living in a modern dark ages, lit up by pretty coloured screens.
      People like science, but only the science that makes life easier. Hard science telling us limits (eg: Betz’s law) is not “popular”. Worst of all, it is ignored by the people making decisions about our future.

    • Using wind or solar PV to manufacturing synthetic fuels to burn in IC engines, would appear to be a dead end. Biomass could have some limited applications for transport or agricultural fuel. But the inherently poor EROEI of ambient energy sources makes them unsuitable for producing synthetic fuel.

      Given that we are starting with electricity or mechanical shaft power, it would be a lot more viable to use it directly to produce movement as it is produced. Electrified railways and tramways are options. A while back, I looked into the option of transporting goods in floating barges through ditches and pipelines. Motive power would be provided by using wind turbines to pump water along at 1-2× human walking speed. You don’t even need electrical generators to do this. The wind turbines can be entirely mechanical with just a few moving parts.

    • @TonyH.

      I’ve always thought that one of the great legacies of the early industrial revolution in the UK, is the extensive network of canals. Every city is connected by them. The relatively small distances in the UK, in this case, was an enabler.

      They have become a recreational playground. They are a great way to see the UK countryside. But I guess their day may come again, as a means of transporting commodities.
      In the early days, the canal boats where pulled by horses walking along the “tow path” running along the side of the canal.

      They are a perculir UK phenomenon. The rest of the world, industrialising later, went straight to railways and bypassed the canal building phase.

      Caen Hill has an amazing lock gate system.

    • There are canals in the US as well. They were similarly built for transport. There’s even a folk song called The Erie Canal.

    • English canals are sadly labour intensive. And although there were some experiments carried out into electrifying canal boats around the turn of the last century, it never caught on. They are diesel powered vehicles, albeit more efficient per tonne-mile than trucks. But very poorly efficient per man-hour. They could be made to work. Maybe robotics or remote piloting would be of use here. The UK has the advantage of being an island surrounded by water. We could use coastal vessels to transport goods to local ports.

      I had in mind something different. Basically, long trains of unmanned barges running through pipes and ditches. They would discharge into ponds, which would serve as junctions between pipes going to different places. The wind would propel the barges through the action of water jets against their hulls. This allows wind power to be used for direct propulsion and labour intensity to be avoided. If a system like this could be used for transportation between hubs, then shorter range electric vehicles can transport goods to and from the hubs.

      There are quite a lot of downsides to this idea that I can see. Freezing in winter. Low speed. The need for junction ponds. A revitalised rail freight system would achieve the same ends using existing infrastructure and would be faster. I have often thought that the UK would benefit from a dedicated freight railway running from the container port at Southampton and weaving through the various industrial regions of England and terminating at Glasgow. The existing rail network could be used to distribute freight to most towns at night after passenger services had finished.

    • @Steve B Kurtz

      As is the way, the ones in the US are much bigger/wider than the UK.

      The boats that navigate them here are called “narrow boats” for good reason.🤣 All very quaint.

      All the main cities in the UK are connected by them.
      Birmingham boasts that “It has more canals than Venice”.
      Given the choice though, I’d rather go to Venice.🤣

      Before the age of steam, they were pulled by horses. Through tunnels, people would lie on the roof and “walk” the boats along by pushing against the roof of the tunnel.
      The good olde days!!!!!!

  44. The book “Bright Green Lies” by Jensen, Keith and Wilbert is the best expose of many of the delusional projects that have been mentioned in some of the recent posts here.

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