This week’s interview is one of the most important discussions we’ve had to date on energy, its supply/demand dynamics, and the tremendous impact it has on our economic and social identity. It is clear now that we are staring at a future of declining output at a time when the world is demanding an ever-increasing amount.
Nate Hagens, former editor of the respected energy blog, The Oil Drum, gives a fact-packed update on where we are on the Peak Oil timeline. But interestingly, he explains how he sees the core issue as less about the actual amount of energy available to the world and more about our assumptions about how much we really need:
“We’re not really facing a shortage of energy; we’re facing a longage of expectations. And the sooner that we as individuals or a nation recognize that the future is going to see much lower consumption than today and prepare for that, psychological resilience is going to be really important, because if no one is psychologically prepared, people are going to freak out when some of these freedoms start to go away.
Look, the average American consumes around 230,000 kilocalories a day of energy. The body itself consumes about 2,500 to 3,000 of those, endosmotically, within the body. So exosmotically, outside of the body, we consume 99% of our energy footprint. So if Peak Oil is upon us, or any issue with coal or natural gas, or the main fossil pixie dust that has subsidized our lifestyle for the last century, if that stuff declines twenty or thirty or even forty percent, it’s not like we’re literally out of calorie availability. It’s just that our system is built on all this decadence and industry and trade and cross border transfers; it has all been built on a model that can’t continue. What’s going to break first is people’s expectations of what they own, the digits in the bank, and all of the financial claims. But those are just digits, they’re abstract digits. The day that a financial system would be disrupted, nothing happens physically.
So I think if we drop our energy consumption quite a bit, nothing has to change other than our supply chains and the way that goods and medicine and water and sanitation and all that get to the cities and towns and states. That has to be deeply thought about on a national level. But I’m optimistic – if we were sitting here and the average American used 10,000 calories a day of total energy, and we needed 3,000 for our bodily functions to continue, that would be a real problem, because there wasn’t much extra. But we have a huge amount of energy relative to what we need.
So I think there are two main things that need to happen – and of course, individuals can play a role in this – but one is we need to design some sort of future system that is an accurate barometer of what we really have on our natural capital balance sheets, relative to what we really need on our human behavior balance sheets. People are working on both sides of that.
Number two is we need some sort of bridge, some sort of mitigation towards a financial currency trade disruption, which very few people are working on. The fact is that a large percentage of our economic output globally is traded: If there’s some problem with the euro or the yen or the pound or the dollar, how does that stuff continue to get shipped every day, along with all the components and everything else that we need? In my discussions, very few people are looking at that. And so on a macro level, people need to start focusing on how supply chains look and what are ways around our current system so that we can guarantee at least basic necessity-type things to continue to reach our shores and be processed, etc.”
In Hagen’s opinion, successfully entering a post-Peak-Oil future necessitates a fundamental change in our social values:
“What are we driving for? What is the goal of a society and a goal of a culture? And it has been, for quite a while, profit that is supposed to trickle down. Once the assumption of growth goes away, then you have to start looking at different objectives, and that’s the gorilla in the room that people are afraid to voice. And I think if they understood the energy-economic link better, they might start to come to that conclusion.”
Also in this interview:
- Why we’ve now reached the “biophysical gauntlet” where higher energy costs are handicapping future economic growth
- The subtle yet critical relationship between debt and energy. And why our ignorance of it is worsening our collective situation.
- The most probable implications of Peak Oil for the financial markets and asset valuations
- What individuals (and society) should do to position for a future of lower available energy
- Why ‘self worth’ is the new ‘net worth’
Note: Listeners interested in the conclusions expressed within this interview will also want to read Chris’ recent report on Past Peak Oil – Why Time is Now Short, which takes a deep dive into the data behind the supply and demand imbalances in the global market for oil.
Nate Hagens is a well-known authority on global resource depletion. Until recently, he was lead editor of The Oil Drum, one of the most popular and highly-respected websites for the analysis and discussion and global energy supplies, and the future implications of the energy decline that we are facing. Nate’s presentations address the opportunities and constraints that we face in the transition away from fossil fuels.
Nate holds a Master’s Degree in Finance from the University of Chicago and recently completed his PhD in Natural Resources at the University of Vermont. Previously, he was President of Sanctuary Asset Management and a Vice-President at the investment firm Solomon Brothers and Lehman Brothers. He is a frequently featured presenter and active participant for the Association for the Study of Peak Oil and Gas (ASPO).