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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It looks to me as though 2012 is likely to be a truly awful financial year, with several crises converging:

1. Either very high oil prices or recession,
2. The US governmental debt limit crisis,
3. The Euro crisis,
4. The Chinese debt problem,
5. Debt deleveraging in the US and elsewhere,
6. Further MENA (Middle East/North Africa) political problems, and
7. Conflict between need for greater resources and pollution issues.

It seems to me that we may be reaching “Limits to Growth,” as foretold in the book by the same name in 1972. The book modeled the consequences of a rapidly growing world population and finite resource supplies. A wide range of scenarios was tested, but the result in nearly all scenarios was overshoot and collapse, with the timing of collapse typically being in the 2010 to 2075 time period.

The authors of Limits to Growth did not model the full interactions of the system. One element omitted was how debt would impact the system. Another item omitted was how prices for oil and other resources would affect the system.

If a person follows through the expected effects of high oil prices and debt, the financial system would appear to be the most vulnerable part of the system. The financial system would also appear to be what telegraphs problems from one part of the system to another. Unless a solution is found, failure of the financial system could ultimately bring down the whole system.

It is clear there are limits to the pollution a given ecosystem can absorb, the level of resources that can be depleted, and debt that can be incurred. Despite concerns of many about these limits we are far from tackling any of these problems on a meaningful scale. The question is why this is the case and if we (the Human Race) have the knowledge and capability to live within such limits on Planet Earth?

In this post, different modeling approaches to gain insights into sustainability will be discussed. We hope that readers will contribute their thinking of what a sustainable ecosystem would look like, and how to map the road towards it. One of the parts of this post is the initial outline of a project to model a human ecosystem from cradle to grave. This project will be carried out by the Institute for Integrated Economic Research (IIER), an institute in which Nate Hagens and myself are involved. Also IIER is looking for individuals to participate in this project, and encourages anyone with a passion for working on resources and energy consumption to take a look at our job advert and contact us via recruiting at iier dot ch.

This is a guest post from Dolores García, an independent researcher based in Brighton, UK.

Recently Jorgen Randers (best known for being one of the co-authors of The Limits to Growth, 1972) asked me to do some modelling work on the World3-Energy model, an updated version of the classic World3 computer model that was used in The Limits to Growth that includes a much larger amount of information about energy. He’d like to use it for the next book that he intends to publish sometime in 2012.

I have published on The Oil Drum before the details of World3-Energy (a dynamic systems model), can be found in:

A New World Model Including Energy and Climate Change Data

And a few answers to reader’s questions can be found here:

New World Model – EROEI issues

Part of the work I’m doing for Jorgen Randers is comparing the results of World3-Energy with IEA’s results. I thought the readers of The Oil Drum would be interested in this.