Economists, Fad

Richard Heinberg in his article points out that economists think that they define reality:

Soros goes on to point out that “some of the most accessible and most prolific sources of oil in places like Saudi Arabia and Mexico were discovered forty or more years ago and their yield is now rapidly falling.” But, tellingly, he reassures his readers that “[Peak oil] is a misleading concept because higher prices make it economically feasible to develop more expensive sources of energy.”

Soros is far from being alone in this opinion. There is a veritable cottage industry of economists and statisticians (including Daniel Yergin, Bjorn Lomborg, Peter Huber, and Michael Lynch) who tirelessly implore their readers not to panic over oil prices because The Market will always come to the rescue. As easy conventional oil depletes, tar sands, oil shale, and biofuels become more economic to produce. Even coal-to-liquids becomes feasible on a large scale. And, as everyone knows, there is an endless amount of coal.


These latter commentators genuinely believe that conventional economic theory defines reality. Where there’s a buck to be made in doing what needs to be done, someone will do it, and resource depletion will never be a problem because of the principle of infinite substitutability.

He goes on to explain:

These are matters of physics, not economics. Throwing more dollars at energy production solves nothing if the energy source has a low net payback

What economists say is that as the price of the oil becomes intolerable, The Market will search for other sources and find a way out of this scarcity [and adversity]. There is an underlying assumption that innovation will happen (either inevitably or eventually) and it will bring down the costs by finding new sources of energy. Physicists and Geologists say that this is not entirely true when it comes to the case of energy because in energy, only the net energy matters. And they have some facts/evidence to show that net energy from other energy sources will be less.

Economists will keep telling us “Wait and see”, while environmentalists and others will keep telling us “Stop sucking”.

And if what geologists and physicists say is true, as the author points out:

In the early decades of the petroleum era, the quantity of both total and net energy liberated by efforts to drill for oil was unprecedented, and it was this abundance of cheap energy that enabled the growth of industrialization, urbanization, and globalization during the past century. It took only a trivial amount of effort in exploration and drilling to obtain an enormous energy return on energy invested. But industry tended first to find and extract the oil that was highest in quality and easiest to access; thus with every passing decade the net energy (as a percentage of total energy) derived from oil extraction has declined.

As the net energy available to society declines, increasing constraints will be felt on economic growth, and also on the adaptive strategies (which require new investment—example: the building of more public transport infrastructure) that society would otherwise deploy to deal with fuel shortages. More of society’s resources will have to be devoted directly to obtaining energy, and less will be available for all of the activities that energy makes possible.

And notably, the caption of the website (that posted this article) is “Reduce consumption, produce locally


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