Energy and the economy

Via FT Alphaville an interesting but scary article on Energy is everything by Michael Lardelli.

He considers the embedded energy value of each dollar and looks at the world economy in terms of money supply as well as in energy production terms. His thesis is that the world economy has actually been contracting since 2005, as net energy output falls – economic growth since then was effectively a monetary illusion.

So if economic growth is energy constrained, why doesn’t the price of oil go up, incentivizing energy producers to extract more and increase energy output? Lardelli argues that as we use up easily available resources the remaining energy supplies themselves require more energy to extract. Energy becomes simultaneously scarce and unprofitable.

Once energy is in decline the recent pervasive economic lie that everyone can become wealthier can no longer be sustained. Now one person’s increased wealth can only come at the expense of another person’s worsened poverty. Actually, it is worse than a zero sum game since the economy is not just failing to grow – it is actually contracting at the same time as the number of consumers (population) is expanding.

So now what do we do?

(Reminds me of the ideas in novel The Burning by Thomas Legendre.)


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