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144 comments on Implications of Energy Return on Investment, Peak Oil and the Concept of “Best First”
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144 comments on Implications of Energy Return on Investment, Peak Oil and the Concept of “Best First”
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I think you have captured the essence of the issue. When an economy must give the energy producer back more energy than that energy producer can provide, then the economy contracts. Thus we have a mechanism that explains volatile pricing behavior.
Prices spike, energy flow reverses to negative, economy contracts, prices drop, energy flow becomes positive again, economy grows, prices spike, round and round.
Some essential predictions from this model that we can expect:
1. Prices will not rise forever, but instead will bounce between a high and low. The high price will be set by when energy flow turns negative and the bottom by cost of production. The trend will be slowly rising as less essential industries are eliminated (See Jeff Vail's excellent post on Elasticity of Demand) and as depletion raises producer costs.
2. The main damage of peak oil will be unemployment. Industries that are less efficient at turning energy into goods and services will be forced energy negative. Those industries will be forced to borrow funds or shut down during price spikes (eventually leading to permanent closure as long term prices rise).
Some positive and negative side effects:
1. Export land will shift from phase 1 (exporters earn more from selling less) to phase 2 (exporters earn less from selling less) sooner (or in an odd pattern like we are seeing now).
2. The market solution to peak oil is not so much efficiency improvements such as higher car MPG, but instead it will be pushing more and more people out of the economy.
3. Alternative energy sources are going to have a hard time gaining momentum until it is far to late to adapt because they are the marginal energy producers and the fossil sources must fall to similar low EROEI. Every price drop will tend to kick them back out of the market.
(Thanks EROI Guy and Dr. Hall. It is great to see more articles on this vital topic.)
"I think you have captured the essence of the issue. When an economy must give the energy producer back more energy than that energy producer can provide, then the economy contracts. Thus we have a mechanism that explains volatile pricing behavior."
Do you think we have to wait until net energy is negative? I think not. Instead, it seems to me that within an economy for which growth is a sina qua non just the shift of an increasing amount of economic output to the provision of energy is likely to wreak havoc on the financial system.
I disagree RE will not come in time. It has already beat every gov goal set for it and if not for the subsidies to oil, coal for their real costs, many AE/RE.
This will cause many jobs because RE costs are mostly labor, some material that stays locally.
Nor shipped off to some oil dictator, terrorist. Just more oil costs we bare in our income taxes instead of in the price of oil. So on the EROI you need to include oil wars, military costs as they use a lot of energy.
Energy costs will be capped at RE costs which is around $.15kwhr or less with wind, solar thermal engines/heat with back up pellet burners, tidal/river generators without dams, future cheaper PV like First Solar all coming in under the prevailing electric rates in most of the US.
Another EROI not included is how eff the fuel can be used. For instance in a car is only around 7% of the fuel's energy actually moves the car. Vs an EV which gets about 20-40% of a thermal powerplant's fuel to move it. If one considers RE 100% eff then it's more like 65% eff. Since electricity is a much higher level/eff fuel then it should be accounted so.
I can, have built EV's and the RE means to power them, homes for under $25k/set not including a very eff home and make good money at it. While costly you get lifetime energy for home, EV including the EV only maintaining costs caps ones cost equal to about $1000-1500/yr for 2 people. That's cost effective now. Many drive EV's every day and many are online or in EV clubs close to you.
Because of this even as oil supplies dwindle they won't have the pricing power to go above that.
While Jon may be right we won't do enough RE in time, it can be done in 5 yrs for the US to be energy independent.
And the time to start is now, actually it should have been done 15 yrs ago top avoid this mess. But thinking world growth will greatly slow because fossil fuels are depleted misunderstands Americans. While we rode the oil ride up, we'll jump to the next best energy thing which is RE faster than one would think. There is no lack of energy, just a lack of equipment needed.
And the money spent now for oil, coal will go to paychecks, consumers pockets instead of big oil, oil dictators, terrorists, increasing our economy while cutting theirs.
I believe oil production peaked in July and probably will never reach that level again. Especially if Obama, congress does a good energy policy which would be much less expensive in the short and long run by getting us quickly off oil, coal.
I'm rather skeptical. Can you cite any sources for this assertion?
Thanks,
Hi Pragma. I don't have references as I go by my own experience as few are doing it.
But I can easily build 1kw windgens for around
$.50/peak watt or about $2/cont watt in 11mph
average winds.
I've done the math on solar thermal engines which comes to about $2/peak watt. With a wood pellet backup burner
for heating/electric if needed when the sun
doesn't shine.
Tidal/river generators without dams come in at
$.02/.01/kwhr respectively.
Using the solar engine as a pellet, other fueled
CHP unit heating while selling/using the electric produced comes in under coal.
The facts are if the real cost was in coal, oil RE would already be our main energy source.
With just $1B I could have all these in mass production
in 1,000's of local factories within a yr. It's not that hard and needs no new tech, just someone to start doing them.
I build eff EV's that get 150-400mpg energy
equivalent using 1890's to 1970's tech, lead
batteries.
The facts are just conserving we could cut our
energy use in 1/2 just with composite plug in hybrids that cost less than present cars along with putting new insulating/solar shells on homes, business, other energy eff appliances which in the future higher energy cost could pay for themselves in 5 yrs if a little learning, thought was taken.
Because of these facts oil could never get higher because in 5 yrs we would switch.
One want to look ahead and energy is only going to get more costly so we all need to secure our our energy by buying the equipment needed to catch it. They is no shortage of energy, only the equipment needed which is well known, easy engineering problem. Politics, big oil/business are what's in the way, nothing else
All these are on lists on the web detailing how to do it if one wants to.
jerryd
Do please provide links.
"Alternative energy sources are going to have a hard time gaining momentum until it is far to late to adapt because they are the marginal energy producers and the fossil sources must fall to similar low EROEI. "
You seem to be thinking of bio-fuels. They are a misleading distraction. Instead, think wind and solar, which have an E-ROI which is higher than new oil, and as a practical matter as high as old oil (around 50 for wind, 20+ for solar).