The post below shares Nate Hagen's timeless address to President Obama about the importance of energy in our society, written in January 2009. It goes into how energy ties into our economic system, the importance of energy quality, and discusses policy options to deal with decreasing availability of high quality energy supply.

The post/letter below is very important to me, as it brings together much of what I have worked on the past few years. We are at a major crossroads in the history of our nation and our world - the juncture where financial capital no longer can function as an effective marker for real capital. The crisis we face is the product of our own success - therefore it is highly unlikely to be fixed with the same policies and thinking that steered us to the present precipice. There are dozens if not hundreds of salient aspects of our supply and demand situation, each with its own cheerleaders, opponents and unaware. Unless one casts a wide boundary net, myopic focus on any particular issue runs the risk of creating more long term harm than good. In this letter, I attempt to highlight our situation's most critical components, not claiming other issues are unimportant, but that the following principles likely trump/supercede the others:

1) It is energy, not money, that powers our economies. Money is only a marker for real capital and the divergence is large and growing at an accelerating pace.

2) All energy is not equal- each energy investment entails different input costs, and has different output quality, often not recognized by the market system, nor by many environmentalists. We are at peak oil globally and are likely approaching the net energy cliff for the USA

3) We can likely deal with energy decline, but our current economic system of claims and wealth distribution cannot. It is likely that collective policy responses to resource depletion (more debt) will create another form of bottleneck in the form of currency dislocations or social reactions to jubiliee.

4) The highest odds for arriving at a better energy future lie in exploration of, understanding of, and ultimate jettisoning of our cultural addiction/habituation to conspicuous consumption. Ends and then means.
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David Cameron describes the economic downturn as "no normal recession" UK Prime Minister David Cameron to party conference, 5th October 2011.

This is the fourth post in the series following the oil price, markets and general health of the global economy examining the simple theory that OECD recession may result from annual average oil price exceeding $100 / bbl.

The annual average price (AAP) of Brent went through $100 on around 16th August 2011 and the AAP stood at $105.3 on 12th October. The AAP high point in the 2008 price spike was $104.8 on 9th October that year.

Below the fold are observations and commentary on debt, economic growth, interest rates, commodities prices and government policy. This is not intended to be quantitative analysis but instead is intended to provide a platform for discussion in the comments.

Like many of you, I am often unhappy with our political leaders. One thing that annoys me the most is that many will say or do just about anything to get elected. By now, you have surely heard the news that Republican presidential hopeful Michele Bachmann has promised a return to $2/gallon gasoline if she is elected president:

GOP candidate Michele Bachmann: I'll bring back $2 gas

NEW YORK (CNNMoney) -- President Michele Bachmann has a promise: $2 gas.

"Under President Bachmann you will see gasoline come down below $2 a gallon again," Bachmann told a crowd Tuesday in South Carolina. "That will happen."

"The day that the president became president gasoline was $1.79 a gallon," Bachmann said. "Look what it is today."

It is no secret that consumers are suffering from very high gasoline prices. And as a result of these high prices, ExxonMobil just reported a first-quarter profit of $10.7 billion — 69 percent higher than a year ago. The national level of disgust and anger is approaching record levels as we watch the loss of our hard-earned dollars become Big Oil’s gain. The question is, what are we going to do about it?

Before discussing how to deal with this, we should first discuss what it is that we are actually trying to do. I believe the very simplistic view is that by going after the oil companies, they are going to relent and lower gas prices. Thus, their profits will return to ‘normal’ levels along with our gas prices. We want a return to the good old days of sub-$2/gallon gasoline. But most of the proposals that are being floated won’t do anything to relieve high gas prices, although they may have an impact on oil company profits. If that’s the case, then what is the point? I would say that it is simply feeling like justice was served. We want to get even with Big Oil.