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This was one of the weakest Do The Math entries. Perhaps because it hinged upon human behavior more than physics/math (the author's strengths). The thesis: In

This was one of the weakest Do The Math entries. Perhaps because it hinged upon human behavior more than physics/math (the author's strengths). The thesis: In brief, the idea is that once we enter a decline phase in fossil fuel availability — first in petroleum — our growth-based economic system will struggle to cope with a contraction of its very lifeblood. Fuel prices will skyrocket, some individuals and exporting nations will react by hoarding, and energy scarcity will quickly become the new norm. The invisible hand of the market will slap us silly demanding a new energy infrastructure based on non-fossil solutions. But here’s the rub. The construction of that shiny new infrastructure requires not just money, but... energy. And that’s the very commodity in short supply. Will we really be willing to sacrifice additional energy in the short term - effectively steepening the decline - for a long-term energy plan? It’s a trap! Yes, "we" would be willing to tolerate the use of increasingly scarce fossil energy to build non-fossil energy resources. Because the "we" investing in new non-fossil energy is largely separate from the "we" who worry about paying this month's bills if gasoline prices go up by a dollar a gallon. Investors care about what consumers want insofar as they see a way to profit by building things that consumers will pay for. Building non-fossil energy projects in a time of high fossil energy costs counts. Depleting their investment capital to temporarily subsidize retail level prices of fossil-derived energy doesn't count. They were never going to offer to do the latter, and even populist politicians (of the American variety) rarely propose seizing wealth to directly subsidize gasoline/electricity/natural gas at the retail level. American politicians have different approaches to making energy cheaper. There's a relatively small number of countries in the world that directly subsidize fossil fuels at the retail level for large swaths of the population. If this blog entry were written about e.g. India or Egypt I would find the political/institutional problem with higher fossil energy prices plausible as described. But it doesn't describe most of the world's democracies, nor China (for different reasons), nor most other countries.

BlueTemplar 7y ago
There's also a lot of countries having a much less laissez-faire attitude regarding energy - I'd even say that the USA is more of an exception... For instance, in Europe road transportation fuels tend to be heavily taxed - so they have the option of lowering those taxes to amortize any potential oil shocks (but not too long, and at the cost of taking the budget hit - a bit like India/Egypt in the end...)
- philipkglass 7y ago
  Even a more centrally coordinated approach is likely to end up in roughly the same place as a laissez-faire market approach: building replacement energy infrastructure faster rather than slower as a reaction to a persistently declining petroleum supply. As long as that happens, the "energy trap" described by Murphy doesn't materialize. A major French response to the first oil crisis in the early 1970s was a government coordinated plan to build nuclear reactors [1]. It's only people pushed toward bad decisions by short-term desperation (weak government leaders facing rioting, individuals too poor to steer market investment decisions) whose behaviors would set up this "energy trap." Market-driven investors and rational governments alike will invest resources into reducing future consumption of an increasingly expensive fuel even if it somewhat exacerbates the immediate problems caused by higher fuel prices. [1] Building nuclear reactors as a reaction to high oil prices made more sense than may be obvious now. At the time, France actually did produce a lot of electricity by burning oil. Oil-fueled electricity became much less popular after the 1970s except in petro-states and in isolated locations. Surprisingly, Pakistan managed to make the same mistake in the 1990s of building oil-fired electricity plants, which became very expensive to operate less than a decade later.
  - BlueTemplar 7y ago
    Ah, but we don't really have "Market-driven investors and rational governments" in the West anymore, not since the 80's : https://mattstoller.substack.com/p/why-private-equity-should-not-exist https://mattstoller.substack.com/p/why-private-equity-should... And Macron was really an idiot when he thought that asking the poorest people to pay the most for the ecological transition was going to fly... But isn't this also a symptom of an energy trap - the government itself not having any slack left for long-term planning ? http://www.lecourrierdesstrateges.fr/2018/11/04/augmentation-du-prix-du-carburant-les-vraies-raisons-de-la-rigidite-gouvernementale-enfin-expliquees/ http://www.lecourrierdesstrateges.fr/2018/11/04/augmentation... (fr) (Note that, in the end, the above seems to be very similar to issues in Egypt - government balance taking a hit due to less income from fossil fuels - well except that the Egypt issues are more dramatic, being caused by the country becoming a gas importer instead of exporter...)

BlueTemplar 7y ago

There's also a lot of countries having a much less laissez-faire attitude regarding energy - I'd even say that the USA is more of an exception... For instance, in Europe road transportation fuels tend to be heavily taxed - so they have the option of lowering those taxes to amortize any potential oil shocks (but not too long, and at the cost of taking the budget hit - a bit like India/Egypt in the end...)

philipkglass 7y ago
Even a more centrally coordinated approach is likely to end up in roughly the same place as a laissez-faire market approach: building replacement energy infrastructure faster rather than slower as a reaction to a persistently declining petroleum supply. As long as that happens, the "energy trap" described by Murphy doesn't materialize. A major French response to the first oil crisis in the early 1970s was a government coordinated plan to build nuclear reactors [1]. It's only people pushed toward bad decisions by short-term desperation (weak government leaders facing rioting, individuals too poor to steer market investment decisions) whose behaviors would set up this "energy trap." Market-driven investors and rational governments alike will invest resources into reducing future consumption of an increasingly expensive fuel even if it somewhat exacerbates the immediate problems caused by higher fuel prices. [1] Building nuclear reactors as a reaction to high oil prices made more sense than may be obvious now. At the time, France actually did produce a lot of electricity by burning oil. Oil-fueled electricity became much less popular after the 1970s except in petro-states and in isolated locations. Surprisingly, Pakistan managed to make the same mistake in the 1990s of building oil-fired electricity plants, which became very expensive to operate less than a decade later.
- BlueTemplar 7y ago
  Ah, but we don't really have "Market-driven investors and rational governments" in the West anymore, not since the 80's : https://mattstoller.substack.com/p/why-private-equity-should-not-exist https://mattstoller.substack.com/p/why-private-equity-should... And Macron was really an idiot when he thought that asking the poorest people to pay the most for the ecological transition was going to fly... But isn't this also a symptom of an energy trap - the government itself not having any slack left for long-term planning ? http://www.lecourrierdesstrateges.fr/2018/11/04/augmentation-du-prix-du-carburant-les-vraies-raisons-de-la-rigidite-gouvernementale-enfin-expliquees/ http://www.lecourrierdesstrateges.fr/2018/11/04/augmentation... (fr) (Note that, in the end, the above seems to be very similar to issues in Egypt - government balance taking a hit due to less income from fossil fuels - well except that the Egypt issues are more dramatic, being caused by the country becoming a gas importer instead of exporter...)