Thursday, August 11, 2016

Is the Oil Industry Dying?

Click here to access article by Richard Heinberg from Pacific Standard.

I've been waiting quite a while to hear from one of the peak oil theorists to respond to the current oil glut and low prices. This article is an excellent response.
Money is effectively a marker for energy, and we can borrow and spend money now on costly energy with the promise that we will pay for it later (hence the massive build-up of debt in the oil industry). But if cheaper-to-produce energy and higher prices don’t emerge soon, those debts will eventually become transparently un-repayable. Hence what is inherently an energy crisis can appear to most observers to be a debt crisis.

The problem of eroding energy profitability is hard to deal with partly because the decline is happening so fast. If we had a couple of decades to prepare for falling thermodynamic efficiency, there are things we could do to soften the blow. That’s what the peak oil discussion was all about: It was an effort to warn society ahead of time. Once the dynamic of declining energy profitability really gets rolling, adaptation becomes much more difficult.