Why There Will Be No Recovery

Those who would argue for economic recovery must answer two intractable questions.

The first is: Where will the energy come from, as more of the world’s net exporters become net importers?

Britain, Argentina, Indonesia, and others have become net importers in recent years. (Joining a long list of others) Mexico and Columbia are expected to follow suit within a decade. Clearly, we can’t all be net energy importers.

There is also the obstinate fact that aggregate net energy — the energy you get in return for investing energy in its production — has been dropping steadily. Oil net energy dropped from 100 in the early 1930s to 11 or less today. Net energy for natural gas is now in decline. We don’t have adequate data to know yet, but coal’s net energy is probably in decline too. Meanwhile, the net energy of all substitutes is low: wind, 18; solar, 6.8; nuclear, 5-15; all biofuels, under 2.

The second question is: If the creeping infection of sovereign default continues to spread to more countries, where will the money come from to bail them out?

The answer has been, and continues to be, more aspirin. Without more cheap energy, monetary tactics to play the game into overtime will not only be futile, they will only draw us closer to the edge of the net energy cliff.

Continued here

Is it coincidental that the money multiplier is now less than zero? For every $1 increase in the monetary base – the money supply only increases by 79 cents.

Starting around 2012-2014, we will need to build the equivalent of the entire world’s existing renewable energy capacity every year just to replace the lost BTUs from oil.


  1. Author
    ptsp 6 years ago

    Memmel always posts some interesting ideas on the oil drum too:

    There are more people unemployed right now then at the beginning of 2009 and oil prices are almost three times higher and in general the economy has shrank dramatically and they are still higher. Perhaps at the moment its flat to maybe slightly growing again but compared even to 2008 the absolute size of the economy is significantly smaller and prices are still rising.

    At some point the elasticity of demand has to be questioned in the sense that most people seem to be assuming that demand has a lot of elasticity yet if one looks at the events it seems that the opposite is true indeed so far oil demand seems to have responded in a very inelastic manner if you use price as your key guide and VMT. But then of course your forced to seriously question the US claims about its oil supply situation.

  2. clara 6 years ago

    Due to posts like these Luke’s blog is now better than yours. HA.

  3. Author
    ptsp 6 years ago

    Or cos he has clara street on it?! Cant really compare that to a post about the issue of declining energy now can you. Luke often talks about this stuff as much as I do, so there is no escaping it there, here or when we start feeling the effects more and more over the next years. Go back to watching popstars if you don’t want to know anything :)

  4. Clara 6 years ago

    I WILL

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