Friday, July 15, 2016

Some reflections on the Twilight of the Oil Age (Part II)

Guest Post by Louis Arnoux

Part 2 – Enquiring into the appropriateness of the question

Let’s acknowledge it, the situation we are in, as depicted summarily in Part 1, is complex.  As many commentators like to state, there is still plenty of oil, coal, and gas left "in the ground".  Since 2014, debates have been raging, concerning the assumed “oil glut”, concerning how low oil prices may go down, how high prices may rebound as demand possibly picks up and the “glut” vanishes, and, in the face of all this, what may or may not happen regarding “renewables”.  However, in my view, the situation is not impossible to analyse rigorously, away from what may appear as common sense but that may not withstand scrutiny.  For example, Part 1 data have indicated,that most of what’s left in terms of fossil fuels is likely to stay where it is, underground, without this requiring the implementation of  difficult to agree upon resource management policies, simply because this is what thermodynamics dictates.

We can now venture a little bit further if we keep firmly in mind that the globalised industrial world (GIW), and by extension all of us, do not “live” on fossil resources but on net energy delivered by the global energy system; and if we also keep in mind that, in this matter, oil-derived transport fuels are the key since, without them, none of the other fossil and nuclear resources can be mobilised and the GIW itself can’t function.

In my experience, most often, when faced with such a broad spectrum of conflicting views, especially involving matters pertaining to physics and the social sciences, the lack of agreement is indicative that the core questions are not well formulated.  Physicist David Bohm liked to stress: “In scientific enquiries, a crucial step is to ask the right question.  Indeed each question contains presuppositions, largely implicit.  If these presuppositions are wrong or confused, the question itself is wrong, in the sense that to try to answer it has no meaning.  One has thus to enquire into the appropriateness of the question.”

Here it is important, in terms of system analysis, to differentiate between the global energy industry (say, GEI) and the GIW. The GEI bears the brunt of thermodynamics directly, and within the GEI, the oil industry (OI) is key since, as seen in Part 1, it is the first to reach the thermodynamics limit of resource extraction and, since it conditions the viability of the GEI’s other components – in their present state and within the remaining timeframe, they can’t survive the OI’s eventual collapse.  On the other hand, the GIW is impacted by thermodynamic decline with a lag, in the main because it is buffered by debt – so that by the time the impact of the thermodynamic collapse of the OI becomes undeniable it’s too late to do much about it.

At the micro level, debt can be "good" - e.g. a company borrows to expand and then reimburses its debt, etc…  At the macro level, it can be, and has now become, lethal, as the global debt can no longer be reimbursed (I estimate the energy equivalent of current global debt, from states, businesses, and households to be in the order of some 10,700EJ, while current world energy use is in the order of 554EJ; it is no longer doable to “mind the gap”).

Crude oil prices are dropping to the floor

Figure 4 - The radar signal for an Oil Pearl Harbor

In brief, the GIW has been living on ever growing total debt since around the time net energy from oil per head peaked in the early 1970s.  The 2007-08 crisis was a warning shot.  Since 2012, we have entered the last stage of this sad saga – when the OI began to use more energy (one should talk in fact of exergy) within its own productions chains than what it delivers to the GIW.  From this point onwards retrieving the present financial fiat system is no longer doable.

This 2012 point marked a radical shift in price drivers.[1]  Figure 4 combines the analyses of TGH (The Hills Group) and mine. In late 2014 I saw the beginning of the oil price crash as a signal of a radar screen.  Being well aware that EROIs for oil and gas combined had already passed below the minimum threshold of 10:1, I understood that this crash was different from previous ones: prices were on their way right down to the floor.  I then realised what TGH had anticipated this trend months earlier, that their analysis was robust and was being corroborated by the market there and then.

Until 2012, the determining price driver was the total energy cost incurred by the OI.  Until then the GIW could more or less happily sustain the translation of these costs into high oil prices, around or above $100/bbl.  This is no longer the case.  Since 2012, the determining oil price driver is what the GIW can afford to pay in order to still be able to generate residual GDP growth (on borrowed time) under the sway of a Red Queen that is running out of thermodynamic “breath”.  I call the process we are in an “Oil Pearl Harbour", taking place in a kind of eerie slow motion. This is no longer retrievable.  Within roughly ten years the oil industry as we know it will have disintegrated.  The GIW is presently defenceless in the face of this threat.

The Oil Fizzle Dragon-King

Figure 5 – The “Energy Hand”

To illustrate how the GEI works I often compare its energy flows to the five fingers of the one hand: all are necessary and all are linked (Figure 5). Under the Red Queen, the GEI is progressively loosing its “knuckles” one by one like a kind of unseen leprosy - unseen yet because of the debt “veil” that hides the progressive losses and more fundamentally because of what I refer to at the bottom of Figure 5, namely were are in what I call Oil Fizzle Dragon-King. 

A Dragon-King (DK) is a statistical concept developed by Didier Sornette of the Swiss Federal Institute of Technology, Zurich, and a few others to differentiate high probability and high impact processes and events from Black Swans, i.e. events that are of low probability and high impact.  I call it the Oil Fizzle because what is triggering it is the very rapid fizzling out of net energy per barrel.  It is a DK, i.e. a high probability, high impact unexpected process, purely because almost none of the decision-making elites is familiar with the thermodynamics of complex systems operating far from equilibrium; nor are they familiar with the actual social workings of the societies they live in.  Researchers have been warning about the high likelihood of something like this at least since the works of the Meadows in the early 1970s.[2] 

The Oil Fizzle DK is the result of the interaction between this net energy fizzling out, climate change, debt and the full spectrum of ecological and social issues that have been mounting since the early 1970s – as I noted on Figure 1, the Oil Fizzle DK is in the process of whipping up a “Perfect Storm” strong enough to bring the GIW to its knees.  The Oil Pearl Harbour marks the Oil Fizzle DK getting into full swing. 

To explain this further, with reference to Figure 5, oil represents some 33% of global primary energy use (BP data). Fossil fuels represented some 86% of total primary energy in 2014.  However, coal, oil, and gas are not like three boxes neatly set side by side from which energy is supplied magically, as most economists would have it.

In the real world (i.e. outside the world economists live in), energy supply chains form networks, rather complex ones.  For example, it takes electricity to produce many products derived from oil, coal, and gas, while electricity is generated substantially from coal and gas, and so on.  More to the point, as noted earlier, because 94% of all transport is oil-based, oil stands at the root of the entire, complex, globalised set of energy networks.  Coal mining, transport, processing, and use depend substantially on oil-derived transport fuels; ditto for gas.[3]   The same applies to nuclear plants.  So the thermodynamic collapse of the oil industry, that is now underway, not only is likely to be completed within some 10 years but is also in the process of triggering a falling domino effect (aka an avalanche, or in systemic terms, a self-organising criticality, a SOC). 

Presently, and for the foreseeable future, we do not have substitutes for oil derived transport fuels that can be deployed within the required time frame and that would be affordable to the GIW.  In other words, the GIW is falling into a thermodynamic trap, right now. As B. W. Hill recently noted, “The world is now spending $2.3 trillion per year more to produce oil than what is received when it is sold. The world is now losing a great deal of money to maintain its dependence on oil.”

The Tooth Fairy Syndrome

To come back to David Bohm’s “question about the question”, in my view, we are in this situation fundamentally because of what I call the “Tooth Fairy Syndrome”, after a pointed remark by B.W. Hill in an Internet debate early last year: “It is interesting that not one analyst has yet come to the very obvious conclusion that it requires oil to produce oil.  Perhaps they think it is delivered by the Tooth Fairy?”  This remark vividly characterised for me the prevalence of a fair amount of magical thinking at the heart of decision-making within both the GEI and the GIW, aka economics as a perpetual motion machine fantasy.  Unquestioned delusional beliefs lead to wrong conclusions.

This is not new.  Here are a few words of explanation.  In 1981, I met US anthropologist Laura Nader at the Australia New Zealand Association of the Advancement of Science (ANZAAS) Congress held that year at University of Queensland in Brisbane.  We were both guest speakers at seminars focusing on Energy and Equity, and in particular on how societies actually deal with energy matters, energy crises and decide about courses of action.  The title of her paper was “Energy and Equity, Magic, Science, and Religion Revisited”.

In recent years, Nader had become part of US bodies overseeing responses to the first and second oil shocks and the US nuclear energy industry (she was a member of the National Academy of Science's Committee on Nuclear and Alternative Energy Systems, CONAES). As an anthropologist, she was initially taken aback by what she observed and proceeded to apply her anthropological skills to try and understand the weird “tribes” she had landed into.  The title of her paper was a wink at Malinowski’s famous work on the Trobriands in 1925.  

Malinowski had pointed out that: “There are no people, however primitive without religion or magic.  Nor are there… any savage races [sic] lacking either in the scientific attitude or in science though this lack has been frequently attributed to them.”  

Nader had observed that prevailing decision-making in the industrialised world she was living in was also the outcome of a weird mix of “Magic, Science, and Religion” with magical and mythical, quasi religious, thinking predominating among people who were viewed and who viewed themselves as rational and making scientifically grounded decisions.  At the time I was engaged in very similar research, had observed exactly the same kind of phenomena in my own Australasian fieldwork and had reached similar conclusions.

In my observations, since the 1970s the prevalence of this syndrome has considerably worsened. This is what I seek to encapsulate as the Tooth Fairy Syndrome.  With the Oil Peal harbour, the unquestioned sway of the Tooth Fairy is coming to an end.  However, the imprint of Tooth Fairy thinking remains so strong that most discussions and analyses remain highly confused, even within scientific circles still taking economic notions for granted. 

In the longer run, the end effect of the Oil Fizzle DK is likely to be an abrupt decline of GHG emissions.  However, the danger I see is that meanwhile the GEI, and most notably the OI, is not going to just “curl up and die”.  I think we are in a “die hard” situation.  Since 2012, we are already seeing what I call a Big Mad Scramble (BMS) by a wide range of GEI actors that try to keep going while they still can, flying blind into the ground.  The eventual outcome is hard to avoid with a GEI operating with only about 12% energy efficiency, i.e. some 88% wasteful current primary energy use.  The GIW’s agony is likely to result in a big burst of GHG emissions while net energy fizzles out.  The high danger is that the old quip will eventuate on a planetary scale: “the operation was successful but the patient died” Hence my call for “enquiring into the appropriateness of the question” and for systemic thinking.  We are in deep trouble.  We can’t afford to get this wrong.

Next: Part 3 – Standing slightly past the edge of the cliff

Bio: Dr Louis Arnoux is a scientist, engineer, and entrepreneur committed to the development of sustainable ways of living and doing business.  His profile is available on Google+  at:

[1] As THG have conclusively clarified, see
[2] The Meadows’ original work has been amply corroborated over the ensuing decades.  See for example, Donella Meadows, Jorgen Randers, and Dennis Meadows, 2004, A Synopsis: Limits to Growth: The 30-Year Update, The Donella Meadows Institute; Turner, Graham, 2008, A Comparison of the Limits to Growth with Thirty Years of Reality, Socio-Economics and the Environment in Discussion, CSIRO Working Paper Series 2008-09; Hall, Charles A. S. and Day, John W, Jr, 2009, “Revisiting the Limits to Growth After Peak Oil” in American Scientist, May-June; Vuuren, D.P. van and Faber, Albert, 2009, Growing within Limits, A Report to the Global Assembly 2009 of the Club of Rome, Netherlands Environmental Assessment Agency; and Turner, Graham, M., 2014, Is Global Collapse Imminent? An Updated Comparison of The Limits to Growth with Historical Data, MSSI Research Paper No. 4, Melbourne Sustainable Society Institute, The University of Melbourne.
[3] Although there is a drive to use more and more liquefied natural gas for gas tankers and ordinary ship fuel bunkering.


  1. Mr Arnoux

    I would point out that many oil producing regions have societies of very poor internal stability and substantial portion of the cost of oil extracted there is the cost to stabilize these regions. Any reduction of this would cause social unraveling and the shutdown of oil activities due to lack of security. We are already witnessing this in places like Libya, Nigeria, Venezuela and the Persian Gulf. It is nearly certain that attempts to restabilize these regions will prove more costly than the value of the oil that could be recovered.

    1. Hi MSD,
      Thanks. Yes, the oil resource "curse" or "disease" that you refer to is prevalent in many oil exporting countries. Part of the BMS I talk about at the end of this post is likely to precipitate even more chaos.

  2. I find it fascinating that facts that we waste 88% of the energy we use, and 86% of the energy we use comes from fossil fuels.

    1. Hello John,
      Yes, few people do realise that the situation is that bad and that we are sliding down a thermodynamic cliff with no brakes on and no steering wheel.

  3. Another real good synopsis of the current situation, at least on the production end.

    One thing you haven't treated so far though is the effect of Demand Destruction with weaker economies (militarily generally speaking) being triaged off the total oil economy.

    So, is it possible for some places to maintain a high energy per capita economy while starving others of the energy, and if so for how long can that persist?


    1. Hello DD,
      Thanks. Yes, I see this as part of what I call the BMS. In energy matters inequality is prevalent. Some regions are likely to retain access to residual net energy from oil longer than others and to the detriment of others. The BMS is not shaping up as a nice and smooth affair. Prof Micheal Klare has spoken of a global "30 Year War" (Klare, Michael, 2011, “The New Thirty Years War”, in European Energy Review, 5 September). However, war requires a lot of energy, essentially oil based, so I think that war is also likely to accelerate thermodynamic collapse dynamics. For example, in the Middle East a number of researchers have noted the contribution of years of drought and displacement of about 1 million farmers to Syrian cities to the lead to the present tragedy. However, few realise that another factor contributing to turmoil in the region is the competition between two sets of pipelines projects and related political and military interests, one focused on Iran and the other on KSA to link those areas to the Mediterranean.
      It is not possible to read through a crystal ball at the regional level. It is likely that if mistakes can be made and atrocities committed, they will take place… All in all, however, I tend to agree with B. W. Hill that globally the tail end of the Oil Fizzle process is most unlikely to extend beyond 2030.

  4. I know I have pointed this out repeatedly in this forum, but I will have to do so again, as the science community seems to be unwilling to enter political discussion.

    The current capitalist system we live in is based on growth (which is based on growing fossile fuel ressources). Capitalism relies on growth to produce capital accumulation by ownership of the means of production and capital itself. Without growth, the only means for accumulation left is exploiting the working population by reducing wages, stripping down social systems and taking money directly from the taxpayer (i.e. by impliementing austerity measures).

    Science needs to understand, that any threat to the accumulation of capital through growth, will be recognized by the elites as a political threat to the current stratification of our societies.

    Thus science and scientists are perceived as political agents whenever the release findings that threaten the idea of endless growth and therefore accumulation and the current hegemony.

    Since the release of the "limits to growth" study, the blowback against scientists was always political, even if they themselfs refused to accnowledge themselfs as being political. This was never more obvious than with the attacks on Michael Mann after the release of the hockey stick curve.

    The fundamental dynamic of the limits to growth problem is a political problem. Science itself became the target of those with an interest in maintaining the current system.

    Natural scientists are often as much guilty of self deception as are the climate deniers. they continously refuse to aknowledge the political aspect of natural science and desperately hold on to the delusion of the political neutrality of science.

    Any solutions to peak oil, climate change, ressource crises, land erosion etc. would have to be political solutions first, not scientific solutions.

    The current situation is therefore not only the result of shortsighted political decisions, but also of the science community perceiving itself as part of the elites.

    What we are experiencing right now is not only the twilight of the oil age, but the end of capitalism. Authors of studies like the above, seem to be based on an unchangeable capitalist organisation of the economy, unable to accept that they themselfs are anticapitalist agents contributing to the fall of capitalism.

    Natural sciences must therefore fall short on delivering realistic models for a post fossil future, because they are totally oblivious to all scientific evidence from political and social science, that we are indeed facing the end of capitalism. (See i.e. Wolfgang Streek, Director of the Max Planck Institute for the study of societies: How will capitalism end? )

    Only by clearly speaking out against capitalism and accumulation and by naming it the real origin of the ressource and climate crisis, will we make progress towards overcoming it.

    1. Hi Alien

      I agree with all of your statements about the political nature of science, and that capitalism is the agent enabling our destructive behavior. However, my observation is that it is merely an agent and not a cause. If historical events had unfolded differently and the Soviet bloc had become the dominant influence in the world, the outcome would be no different. Socialism would simply be the agent enabling growth and fossil fuel consumption.

      I spent many years as a Marxist and can tell you that during that time I subscribed to the belief that planned equitable growth was the solution to the world's problems. It wasn't until I realized that growth itself was the problem that I rejected Marxism. I realized it only treated some of the symptoms of the disease (inequity, oppression, etc) while the virus itself was civilization.

    2. Hello Alien,

      Having worked for 45 years in both the natural sciences and the social and human ones, as well as in engineering may be I could put in a wee grain of salt here. This is about epistemology. The natural sciences are exclusively focused on addressing "how" questions. The social and human sciences in addition to "how" focus on "why" questions and thus have very different epistemologies. The two do not blend. The use of science in any social setting, of course, involves politics. However, there is a point where both natural sciences and the social and human ones meet. The sciences, fundamentally, never focus on saying "what is". This they leave to religion. They focus exclusively on sorting out what is false, erroneous, aberrant, etc. In doing so they delineate a provisional field of what is possible… Of course, numerous scientists do try to say what is; however, it is important not to confuse scientists and science. Science progresses through endless critique of what scientists do and say. While individual scientists may believe in this or that, the scientific process, through numerous meanderings, progresses entirely outside belief and without recourse to any scripture purporting to say what is rigidly and for ever ;-))

    3. I have come to the conclusion that when CC and/or PO becomes an in your face reality, meaning some event or series of events that makes denial difficult or impossible, the general public will understand that growth is finished, over, caput. That is when things will get interesting.

      Many believe that that moment can be avoided and TPTB have certainly done all they can to do just that but in truth it only makes the moment of truth even more disturbing.

      Great work Dr. Arnoux! I for one find comfort in your sober analysis.

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    6. Capitalism cannot be based on growth. capitalism is based on an exchange of wants with the most tradeable good, with the lowest declining marginal utility, being the market's choice of money. And the best capital.
      What we have is a fiat system based on debt, which is forced on the people though taxation. This is state mandated monopoly money with a minus value. Money and capital cannot have a minus valuation. There is confusion between capital and debt.

  5. Hi Louis,

    Very nice work, glad to see someone else talking about the report by The Hill's Group! The run up in price in your Figure 4 was accurately predicted in the limits to growth, as I have discussed with Ugo Bardi by email. You can see and hear my talk on the subject in this video:

    I've been doing some more work on visualising the reasons for the price decline which I can dig out and send to you.

    Best wishes,


  6. I am trying to spread the messages, draw my activist friends attention to it, and understand enough to write about it. I am trying to take it seriously. My personal stake is my dependency. What will I have, and the privileged people I know, when the global finance system collapses , possibly soon, and value of retirement savings goes in puff of smoke, and access to the essentials of life is imperiled (food, water, social cooperation). It looks like time to change, when most inconvenient.

    Thermodynamic system limits are hard, and the GEI and debt systems are complex and fragile. I do not know why there is so much wasted energy (88%), which implies that it otherwise it might not have been so wasted, if people saw this coming. That goes for so many things, if we really understood the long term price, in our entire metaphysical being (reason, religion, magic), we would be different sorts of people.
    I wondered before how much of the energy costs of oil extraction that are increasing with depletion (depth of extraction, increased water cut, and things I don't understand, refining,), can be substituted with renewable energy generated electricity. Burning oil for that part of the increased electricity demand gets to be crazy. Burning coal or gas to keep oil extraction going also crazy as depletion still requires additional amounts of fuel and carbon emissions. This seems to require a 5 balls juggling act, see how long before they start being dropped.

    1. Hello Michael,

      Many thanks. Yes, these days it has become very difficult to figure out what is going on and what to do about it. It requires a lot of patience, time, dedication, learning about a wide range of disciplines, a ruthless focus and honesty to identify what does not stack up, even if it happens to be a cherished or pet idea, and progressively delineating a field of what's possible to get us out of trouble. I have spent some 45 years at this and now I am attempting to share and contribute with others.
      So thanks again for your involvement and contributions.

  7. What happened to part 3? It was up on my feedly feed, but seems gone from this site. I enjoyed it while it lasted!

    1. Technical problems. Keep calm and stay tuned!

  8. Dr Arnoux: I have been searching unsuccessfully so far for data on the total amount of energy generated worldwide and what fraction is actually delivered to the end users. Am I to assume that since 88% is "wasted" then one need only multiply the total by 0.12? how verifiable is this fact? I have searched this site and Hills et all but real access to his data requires $69 to purchase his monograph. Thank you. stunning paper but before I run with it I would like to have verifiable data beyond a statement that the OI will be in a fatal death spiral in as little as 10 years.

  9. Hello sv koho,
    The full reference re the 88% in in Murray, James, and King, David, 2011, “Oil’s tipping point has passed, The economic pain of a flattening supply will trump the environment as a reason to curb the use of fossil fuels” in Nature, 26 January, Vol. 481.
    Statistics re global primary energy use can be found at IEA, IEA, BP, OPEC, etc...

  10. "global debt can no longer be reimbursed "

    I have a problem with this statement. Money/debt is a human construct. A government can print money and helicopter drop it into the economy (unlike QE at the moment which is issued as more debt) to inflate past debt away.

    1. Eduardo, Dr Arnoux notably measured the debt in ExaJoules of energy. The thing is that printing more money does not make any difference to the debt of energy. This is where economists go wrong, they assume that economies are powered by an infinite resource of peoplel-power and that adding more population automatically increases that source of wealth.

  11. I think that something like 50% of the US debt is held by the fed. This debt has cost next nothing to create, so therefore the fed could be wound up and this part of the debt could be writted off, instantly(as being odious and illegal) this would only leave overseas treasuries as outstanding debt. (In fact the rest of the world seeing this happen could follow suit).
    A substantial percentage of these treasuries could be called in and bought back, using the banks, who own the fed and their shareholders worldwide assets as collateral. (The us military and inteligence could now have a constructive purpose for a change)
    The shareholders and all associated and benefitting from the conspiracy, to defraud the people of the us, could be brought to justice. The government could in a stroke, cut its spending by at least its current borrowing. Because it would have to. No more freebees no more wind mills, etc.
    By these actions there would be no future requirement to burn unaffordable unobtainable energy. Because there would be, next to no debt to repay.
    Gold and silver could be remonetised with free sovereignage, for all who bring it, to the mint. The dollar would have be replaced or revalued with a price in ounces of silver/gold. This would mean that future energy consumption would be purchaseable only by exchanging past consumed energy or the obligation to be repayed with the same, thus conserving future energy use. Excessive goverment spending using debt would have to stop. and the enforcement of constitutional money would enforce this.
    Following the above the rest of the world would follow suit with trade balences having to be settled in gold. There would however be unforseen consequences as some professions would probably disappear and economics could be one of them.
    Global warming real or not, would be cured, along with most resource depletion, as over consumption would no longer financed by ever increasing quantities of debt. Methods of farming would have to change to those using energy more efficiently, and of course farm subsidies would have to been ended.



Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)