# The Archdruid Report

Druid perspectives on nature, culture, and the future of industrial society

## Wednesday, March 26, 2008

### The Paradox of Production

One of the things that makes the challenge of peak oil so insidious, and so resistant to quick fixes, is the way in which many things that seem like ingredients of a solution are actually part of the problem. Petroleum provides so much of the energy and so many of the raw materials we take for granted today that the impacts of declining oil production extend much further than a first glance would suggest.
Read through discussions of the energy future of industrial society from a few years back, for example, and you’ll find that many of them treat the price of coal and the price of oil as independent variables, linked only by the market forces that turn price increases in one into an excuse for bidding up the price of the other. What these analyses missed, of course, is that the machinery used to mine coal and the trains used to transport it are powered by diesel oil. When the price of diesel goes up, the cost of coal mining goes up; when supplies of diesel run short in coal-producing countries – as they have in China in recent months – the supply of coal runs into unexpected hiccups as well.
I’ve pointed out in previous posts here that every other energy source currently used in modern societies gets a substantial “energy subsidy” from oil. Thus, to continue the example, oil contains about three times as much useful energy per unit weight as coal does, and oil also takes a lot less energy to extract from the ground, process, and transport to the end user than coal does. Modern coal production benefits from these efficiencies. If coal had to be mined, processed, and shipped using coal-burning equipment, those efficiencies would be lost, and a sizeable fraction of total coal production would have to go to meet the energy costs of the coal industry.
The same thing, of course, is true of every other alternative energy source to a greater or lesser degree: the energy used in uranium mining and reactor construction, for example, comes from diesel rather than nuclear power, just as sunlight doesn’t make solar panels. What rarely seems to have been noticed, however, is the way these “energy subsidies” intersect with the challenges of declining petroleum production to boobytrap the future of energy production in industrial societies. The boobytrap in question is an effect I’ve named the paradox of production.
It’s crucial to understand that the problem with our society’s reliance on petroleum is not simply that petroleum will become scarce in the future, and will have to be replaced by less concentrated or less abundant fuels. It’s that a huge proportion of industrial society’s capital plant – the collection of tools, artifacts, trained personnel, social structures, information resources, and human geography that provide the productive basis for society – was designed and built to use petroleum-derived fuels, and only petroleum-derived fuels. Converting that capital plant to anything else involves much more than just providing another energy source.
Consider the difficulties that would be involved in building the sort of hydrogen economy so often touted as the solution to our approaching energy crisis. We’ll grant for the moment that the massive amounts of electricity needed to turn seawater into hydrogen gas in sufficient volume to matter turn out to be available somehow, despite the severe challenges facing every option proposed so far. Getting the electricity to make the hydrogen, though, is only the first of a series of tasks with huge price tags in money, energy, raw materials, labor, and time.
Hydrogen, after all, can’t be poured into the gas tank of a gasoline-powered car. For that matter, it can’t be dispensed from today’s gas pumps, or stored in the tanks at today’s filling stations, or shipped there by the pipelines and tanker trucks currently used to get gasoline and diesel fuel to the point of sale. Every motor vehicle on the roads, along with the vast infrastructure built up over a century to fuel them with petroleum products, would have to be replaced in order to use hydrogen as a transport fuel.
The same challenge, in one form or another, faces nearly every other energy source proposed as a replacement for petroleum. It’s not enough to come up with a new source of energy. Unless that new source can be used just like petroleum, the petroleum-powered machines we use today will have to be replaced by machines using the new energy source. Furthermore, unless the new energy source can be distributed through existing channels – whether that amounts to the pipelines and tanker trucks used to transport petroleum fuels today, or some other established infrastructure, such as the electric power grid – a new distribution infrastructure will have to be built. Either task would add massive costs to the price tag for a new energy source; put both of them together – as in the case of hydrogen – and the costs of the new infrastructure could easily dwarf the cost of bringing the new energy source online in the first place.
Factor the impact of declining oil production into this equation and the true scale of the challenge before us becomes a little clearer. Building a hydrogen infrastructure – from power plants and hydrogen generation facilities, through pipelines and distribution systems, to hydrogen filling stations and hundreds of millions of hydrogen-powered cars and trucks – will, among many other things, take a very large amount of oil. Some of the oil will be used directly, by construction equipment, trucks hauling parts to the new plants, and the like; much more will be used indirectly, since nearly every commodity and service for sale in the industrial world today relies on petroleum in one way or another. Until a substantial portion of the hydrogen system is in place, it won’t be possible to use hydrogen to supplement dwindling petroleum production, which is already coming under worldwide strain as demand pushes up against the limits of supply. Instead, the fuel costs of building the hydrogen economy add an additional source of demand, pushing fuel prices higher and making scarce fuel even less available for other uses.
The same thing is true of any other alternative energy system that attempts to replace petroleum in its current uses. The costs differ, depending on how much of the existing infrastructure has to be replaced, but there’s always a price tag – and a large portion of the energy needed will have to come from petroleum, because that’s the energy source our society uses for a great many of its crucial needs. If the new energy source can be produced and used by existing infrastructure with minimal modification, this effect may well be small enough to discount, but it is always there.
The advantage of energy sources that can use existing infrastructure is one of the reasons why ethanol and biodiesel have entered the energy stream in amounts large enough to affect total liquid fuel numbers, and have helped drive grain prices to stratospheric levels into the bargain, while so many other alternative fuels languish on the drawing boards and the imaginations of peak oil optimists. Both of these can be distributed and used as though they were petroleum products. Neither one is a viable response to the broader problem, of course; stark limits get in the way of fueling an industrial economy by pouring our food supply into our fuel tanks. All the arable land on the planet is not enough to produce more than a small fraction of the liquid fuels we get from petroleum today, and long before even that inadequate point was reached, mass starvation or violent revolution would cut the process short.
All other proposed replacements for petroleum, however, require much larger investments of money, energy, and raw materials for new infrastructure. The production of energy and raw materials depends on petroleum nowadays; so does the global economy which gives money its value – and conventional petroleum production worldwide is almost three years into what is most likely an irreversible decline.
At this point the paradox of production can be easily defined. If energy prices are high because supplies are limited, the obvious solution is to increase the supply by producing more energy. If this requires replacing one energy resource with another that cannot be produced, distributed or consumed using the identical infrastructure, though, the immediate impact of such a replacement will be to raise energy prices, not lower them. The direct and indirect energy costs of building the new energy system become a source of additional demand that, intersecting with limited supply, drive prices up even further than they otherwise would rise.
If the new energy source turns out to be more abundant, more concentrated, and more easily extracted than the source that it’s replacing, this effect is temporary; if the new source can be distributed and used, at least at first, via old technology, the effect is minimized; if the new source is introduced a little at a time, in an economy reliant on many other sources of energy, the effect can easily be lost in the static of ordinary price fluctuations. All three of these were true of petroleum in its early days. It started as a replacement for whale oil in lamps, and was distributed and consumed in existing technology; decades later, it found a niche as a transportation fuel, and relied on the old lamp-oil distribution system until a new one could be constructed on the basis of existing revenues; its other uses evolved gradually from there over more than half a century, until by 1950 it was the world’s dominant energy source
None of the proposed replacements for petroleum, though, have those advantages. None of them yield as much net energy as crude oil under natural pressure, and none combine petroleum’s unique mix of abundance, concentration, ease of production and distribution, and fitness for a world of machinery designed and built for petroleum-based fuels. The fuel they need to replace remains by far the most important energy source in the world today. Nor do we have half a century to ramp up a new energy system for the industrial economy; conventional petroleum production is already declining steadily, and the most reasonable projections of future production show it dropping off a cliff within the next decade or so.
At the very least, then, trying to solve the energy crisis on the downside of Hubbert’s peak by bringing new energy sources online will drive up the cost of petroleum further than it would rise on its own, since the direct and indirect energy costs of the new source and its infrastructure have to be met from existing sources. That poses the same political test faced, and failed, by the nations of the industrial world in the late 1970s, when promising steps toward sustainability went into the dumpster because their immediate costs hadf more political impact than their long-term benefits.
It also risks potentially fatal damage to the industrial economy itself, which will face severe strains already as the age of cheap abundant energy comes to an end. Pursued with enough misplaced enthusiasm, a crash program to bring some new energy source online in a hurry could drain enough energy, raw materials, labor, and money out of an already fragile system to drive it over the edge into economic and political collapse.
Fortunately, this is not the whole story. There is at least one proven way to counter the paradox of production, exert downward pressure on energy prices, and free up resources and time that can be used to respond constructively to our predicament. I’ll discuss it in next week’s post.

#### 24 comments:

Mary said...

  Thanks John, I stayed up late to see your post, wonderful as always. but such a tease, next week!
  I have begun the thinking process to determine what there is to eat that is not derived from wheat, corn or soy or rice. Even organic chickens eat grain. Grass fed beef if it can be delivered. No milk or other dairy, no bread, no pop, no ---you name it. Have read Daniel Quinn and it does seem to me that our adherence to the "modern" diet has trapped us. So I am researching the food choices of the First Nations here on the West Coast. I can give you excellent references on the topic if you like. I think it is really important to look at the long term food supply and food preservation and get ready now before it is a matter of starve or else.
  mary_ballon@yahoo.ca

  3/26/08, 10:28 PM
Danby said...

  The end result, of course, is that people will have to stop driving. That's what America is unable to swallow. America's economy is built on fast cars and big trucks.
  The real problems center around transport of goods and people. The western half of America is a land of large distances and sharp relief. Moving a load from Seattle to San Francisco is the equivalent of moving one from Paris to Rome, except out here, there are only 1 large and 4 small cities in between. Other than that, it's lumber towns and cattle. There's just not much market for rail services outside the large cities. The distances and mountains make it a very inefficient place to ship goods in and out.
  Then consider aircraft. The airlines made a very conscious decision in the '60s to trade fuel economy for labor economy. A typical Jet engine requires 1/10 as much maintenance as a piston engine of equivalent power. It also uses 10x as much fuel. In the '60s, fuel was so cheap that the trade off made good sense. Now, not so much, but there are no longer 10,000 horsepower radial piston engines being built, so how could they go back, even if they were farsighted enough to want to?
  The low cost of fuel has been subsidising US industry for a long time. Now that subsidy is going away. Soon we will be trying to run our industry with slow cars and small trucks. Then buses and trains. Will our industry cope? It's mighty hard to tell yet.

  3/27/08, 2:09 AM
Sabretache said...

  A startling illustration of some of the issues raised in this post is the Olympic Dam uranium mine in Southern Australia. There is a proposal to turn it into an open-caste operation on a scale even larger than the Escondida copper mine in Chile. Turns out that the whole project is on the borderline of viability at best, despite the desperate need for uranium if a promised nuclear renaisance is to become reality. A decision by BHS Billiton is expected later this year. If it does proceed (and it's a BIG if) 3+ cubic kilometres of overburden will need to be removed just to reach the low-grade ore bearing strata. The operation will take about 3-4 years and the petroleum required will increase Australia's current total annual diesel consumption by over 70% !!! - not to mention the vast requirement for fresh water in a drought-stricken country plus the vast quantities of fossil fuel, nitric acid and other chemicals required to process the ore when they finally get to it.
  See: The Big Hole
  and: An even bigger hole

  3/27/08, 3:46 AM
yooper said...

  Yes John! This article is all about what I've been alluding to for the past several weeks!If we cannot power this society, a society in which that power created, then we've got a problem. Time and again, I've asked you whether or not this process is reversible. Let's face it, almost every alternative energy source is a net loss, it's a "sink". "Net Creativity"? I'd like to add, we don't have the time to fool around with such notions, before as you said, starvation and revolution is right around the corner.
  I've got a damn good idea of how to counter "The Paradox of Production" and that is to build nonmechanized driven plows and hand shovels, instead of producing D-8 bulldozers. Building infrastructure that is not dependent on oil, within the limits of time and resource we have now. "Power down"?
  If we can accomplish all that, then maybe we can cushion the inevitable hard landing we're going to experience (no matter what). Perhaps the earth can support more than two billion on earth, one hundred years from now?
  Thanks, yooper

  3/27/08, 6:35 AM
Stephen Heyer said...

  Hi John,
  I like your “paradox of production” booby-trap.
  Pretty obvious really, the deadly effects of squandering the last of the oil age’s almost free energy on a few decades of “hysteria of greed”, after we clearly saw what was coming, has been extensively discussed before by just about everyone with an interest in peak oil.
  Yes, we could have probably pulled off a fairly painless transition to a first level, semi-sustainable economy if serious action had started in the 70’s, by which time a lot of people were aware of the “peak everything” problem. Even better would have been to start in the 50’s when evidently some government departments realized that this would probably happen in the first half of the 21st century.
  But, the point is, that somehow this is not lodging in peoples’ awareness. Perhaps it all looks so hopeless they are in denial, or perhaps they do not want to admit to their children and grandchildren (or themselves) that they squandered their own children’s heritage.
  So keep hammering the point, keep finding ways of saying it so simply, clearly and memorably (paradox of production booby-trap) that it is impossible to carefully not notice or forget if you do happen to accidentally stumble over it.
  "Men stumble over the truth from time to time, but most pick themselves up and hurry off as if nothing happened." (Winston Churchill).
  One minor quibble though: I don’t think all the current alternatives are completely worthless. Rather, I think that used sensibly, in appropriate niches, some can make a valuable contribution.
  Not replace the current vast river of cheap oil you understand, but altogether help out.
  Two that spring immediately to mind are alternative sources of electricity – wind, solar, wave, ocean thermal, that sort of stuff, largely because it is so easy to plug it into the current distribution system and biodiesel (http://en.wikipedia.org/wiki/Biodiesel).
  At worst, biodiesel should make a valuable niche contribution for local use where farms have some suitable spare land they can use for oil crops to fuel their own tractors (and no doubt the family car). If biodiesel from algae (do a Google search) can reach commercial level, a project an acquaintance of mine from Northern Chile is working on, the contribution could be rather more substantial.
  Of course, right now, the single most effective, most guaranteed to work thing we can do is reduce consumption of about everything. Not that hard really, as we consume so much we do not really need, in fact these days even want.
  NOTE: A friend helps with recycling at the local dump and we cannot believe what people throw out – I mean, items like nearly new fridges and motor mowers. We’ve reached the conclusion they just shop till their McMansions are full, throw that lot of stuff out, then buy a new lot. Recreational shopping!!!
  Reducing consumption would give us some spare resources to devote to the transition.
  Fat chance! I’m probably in danger of being “rendered” for even suggesting it as it would undermine the entire blind, mindless shop-till-you-drop culture/economy the people who are running things need so as to continue transferring all the real wealth and power to themselves and their mates.
  They knew what was coming long before we did, and they want to make sure they are unassailable.

  3/27/08, 7:16 AM
John Michael Greer said...

  Mary, I see you've joined the crystal ball brigade -- we'll be talking about food preservation and the like in a couple of weeks. I'm not a great fan of Quinn, but options that don't depend on grain will probably be a good idea in the next few years as the ethanol business sucks up a growing fraction of our food supply.
  Dan, exactly. The retooling of the transportation system to handle lower energy inputs is a huge task -- and it's not the only chunk of infrastructure that would have to change.
  Sabretache, that's a great example. I wonder where they think they're going to come up with the diesel.
  Yooper, good. You're anticipating a bit of next week's post -- though only a bit.
  Stephen, I never said that all the current alternatives are worthless! The problem, in a significant number of cases, is not the energy alternatives themselves but the way in which we are trying to use them. Hang on for next week's post...

  3/27/08, 8:41 AM
Panidaho said...

  Honestly, I'm not sure how much longer our current transportation infrastructure will be up to the task of getting things around anyway - even setting future effects of Peak Oil aside as an issue. We've already got crumbling roads, falling bridges, independent truckers going on strike because they are being taxed and "fee-d" to death, automobile manufacturers selling out to India or going out of business, airlines downsizing, merging or shutting down...
  It looks to me like our transportation infrastructure is pretty sick in some major areas and we've only just begun to really feel the effects of PO. So even if we were to find something else of comparable energy output that could somehow miraculously just "plug in" to what we already have, we're still in deep doo-doo because what we already have in many areas is already falling apart!
  One especially worrisome aspect of a crumbling transportation infrastructure has already been mentioned - it seriously and adversely affects the economy and visa versa. It's a vicious circle that rapidly can become a death spiral.
  I'll be waiting with baited breath for next week's post. Home food storage is a topic that's near and dear to me own heart, and I'm always looking for new ideas.

  3/27/08, 9:13 AM
Green Engineer said...

  Brilliant - I am so pleased that I have found your blog. I have read much of it and appreciate your insight and wisdom.
  Re: Paradox of Production
  There may be an error in over genaralizing the impacts of peak Oil. I think it probable that some regions will fare better than others. Those regions not curently exceeding their carrying capacity or closest to their carrying capacity will do better than regions that are drastically exceeding carrying capacity now.
  And some regions will have greater access to sustainable energy sources than others:
  I am working on the start-up of the first green glass making plant being build in Kalama, Washington. This plant will use no fossil fuel in the melting of their glass bathc or the manufacture of glass shapes and bottles. They will use exclusively hydro-power.
  I also see that Matthew Simmons has founded a founded a new investment banking operation - Ocean Energy Institute - to capitalize power gneration from ocean currents like the Gulf Stream. Ocean energy systems are being designed to provide power for a moderate sized city (200,000 population complete with manufacturing facillities.
  So some regions may face better than others. Some regions are already well beyond Overshoot and in Decline, Ex: Zimbabwe. I suppose that some regions will be impacted sooner and more severely than others. I do not think the impact of Peak Oil will be uniform and that means that the appropriate response(s) must be unique to each region also.
  Bill

  3/27/08, 2:04 PM
DaveK9999999 said...

  I have tried to quantify how much energy debt a new renewable energy system would take on, in order to grow into a significant portion of the national energy mix.
  See "The Energy Dynamics of Energy Production"
  The associated spreadsheet can be used to model different energy types, but I have only dealt with photovoltaics so far.
  In order to expand a new industry rapidly, you have to set it up with outside energy assistance. We are entering an era of energy scarcity and when we get on to electricity rationing, we will not be so keen to learn that a 1 GW solar panels factory wants to come to town and use our electricity.
  Dave Kimble
  www.peakoil.org.au

  3/27/08, 5:59 PM
Dwig said...

  OK, I'll join the prognostication parade. In your "Pieces of the Puzzle", you point up the fallacy of the either/or approach of trying to identify the best single solution. One possible element of a strategy for resolving the paradox is to use a combination of approaches in a mix that varies over time and across regions. For example, electricity can be substituted for petroleum energy to some extent even today, and you've discussed biofuels. And as green engineer points out, different combinations will be appropriate in different regions and situations.
  I see some other possibilities, working the demand side. One is the widespread replacement of motor power by human power, as exemplified by the localized food production movement and the increased use of human-powered vehicles (and the chilling possibility of widespread slavery). Also, there's a lot of "low hanging fruit" available in improved efficiency of energy usage; in the short term, we could probably offset the decline in energy availability just by using it less wastefully (of course, that effort would itself be a waste if we don't use the "breathing space" wisely). Another possibility is the reduction in human population, as is taking place in a quiet way in the OECD countries today. (Again, there's the painful way to accomplish that, via massive die-offs.)

  3/27/08, 7:51 PM
yooper said...

  Hello John! "The Paradox of Production", eh? How about some recent evidence of "catabolic collapse"? http://www.depression2.tv/d2/node/66 check out that graph. Is this the vision of the future?
  I'll be back with more, rest assured.
  Thanks, yooper

  3/27/08, 9:05 PM
RAS said...

  It's this paradox that will get us in the end. You can try all these alternative engergy schemes you want, but in a world of declining energy you're going to have to sacrifice some of the energy for each one -thereby reducing the total energy available and causing problems, politically and otherwise. Just like declining exports will hurt us well before PO itself really sets in.
  Stephen wrote: "Pretty obvious really, the deadly effects of squandering the last of the oil age’s almost free energy on a few decades of “hysteria of greed”, after we clearly saw what was coming, has been extensively discussed before by just about everyone with an interest in peak oil."
  One thing I can't stop thinking about is this -how in the name of all that's holy am I going to explain all of this to my children? Yes dear, we destroyed half the world for IPODS and hair dryers.
  Panidaho -have you seen Sharon Aystk's series on food storage this month? She's devoted almost the entire month to it, and there's a yahoo group on it too. Check it out on her site: http://sharonastyk.com/

  3/28/08, 6:08 AM
yooper said...

  Hello John! Forgive me a bit, I've been off on my own and perhaps a little off topic here.
  Understanding more of "catabolic collapse" as you might suspect, I've been searching for recent examples. Do you think Japan is ahead of us on the curve? That graph of Michael's, sure supports your theory to a tee. Could it be that Industrial Japan (2nd largest economy in the world) was the first industrialized country to reach a limit of growth? This is a very small island with little resource and a population density of 336 per sq. km.. Any thoughts?
  Thanks, yooper

  3/28/08, 11:41 AM
Anthony said...

  John,
  I think a lot of what has been said is dead on. But one implication that has not been addressed is a movement towards local governance. As the nation faces the fact that one energy policy is not going to "fit all" that will just be another push towards the inevitable move of regional autonomy.
  Just finished the Druidry Handbook by the way. Highly recommended.
  Bill (Green Engineer) I'm interested in your project. If you feel like contacting me you can at anthony@epsgd.com
  AV

  3/28/08, 3:50 PM
John Michael Greer said...

  Teresa, the state of transport infrastructure is another major point. One of the predictions of the catabolic collapse theory that's already being borne out is the way that malign neglect is converting a great deal of today's infrastructure into waste.
  Bill, of course there will be major regional and national variations. My focus, though, has to be on the big picture -- the role of chance and contingency in shaping the future is such that predictions have to work in broad brushstrokes.
  Dave, many thanks -- this is excellent. Crunching numbers is not my strong suit, and it's good to see people with the necessary skills stepping up to the plate.
  Dwig, very good. I'll be talking about some of these points in more detail in later posts.
  Yooper, I ain't arguing. I think we're well into the opening round of the second crisis period of the catabolic collapse of industrial society (the first having been from 1972-1982 or thereabouts).
  Ras, I think a lot of us are going to have a lot of explaining to do.
  Anthony, my guess is that local governance will be more of a default option following the effective disintegration of national governments -- if past examples of catabolic collapse are anything to go by, nation-states will cling like grim death to local and regional control until it drops from their lifeless fingers. Mind you, I could be wrong. Thanks for the kind words about the Handbook!

  3/28/08, 11:53 PM
yooper said...

  Ok John. I'm going to take some time investigating this matter.
  Thanks, yooper

  3/29/08, 8:24 AM
Mark said...

  Thank You for your blog, John, The perspective is a clearing in the fog.
  There are two things that I am struck with in this post modern and burgeoning post peck oil world. One is that alot of people have a sense of intitlement, as if, "but I deserve to drive every where and to keep a large house at 70+ degrees". This is also tied to the " Why is fuel so expensive, what do They extect us to do? As if it's some one else's problem. What I’m trying to say here is that, I get a sense that some feel like what we have now should be the norm and that they deserve it being so good. It's hard not to go into denial when one is this far down a road that turning back or finding another path looks so daunting.
  The other is, I am struck with how much we, as a culture, have let others, take control of our needs and wants. It is quite easy to let some one else supply our food, and energy. It wasn't that long ago that we as a people grew our own food and helped others get there crops and fire wood in. What I'm trying to say here is that we have let some one else have the control of what we used to control. In the bargain for the convenient, we have lost community.

  3/30/08, 7:56 AM
Panidaho said...

  JMG said:
  "Petroleum provides so much of the energy and so many of the raw materials we take for granted today that the impacts of declining oil production extend much further than a first glance would suggest."
  Just for a bit of mental exercise, I took this paragraph from your latest posting as a challenge and decided to look around this one room where I am sitting and typing on my computer, to try to get a feel for how much of what I can see is made up of, or mostly up of oil. It was an intensely sobering experience, and I didn't even count things that were made up of other substances like wood, but which used fossil fuels for their manufacture and fossil fuel to get them to my home. I also didn't count the fossil fuel component of the energy being used to run those items that require it, like this laptop computer I am using to post.
  On another note, we have an ethanol plant set to open up this summer, not too far from here so out of curiousity I did a little research on the company that built it. I found that they are experiencing some pretty serious financial problems already and they are a new company just getting started in the biofuels business! Apparently, enough of the scientific community has been publishing studies suggesting that biofuels are *not* the wave of the future and the stock market has been crazy enough and corn prices have been rising enough that capital has been hard to come by and expenses are rapidly rising past the point of profitability. It looks like the plant will open more or less on time, but how long it will *stay* open after that is anybody's guess. I'm betting that with a recession economy and concurrent demand destruction, in two years, tops, they will have run through their latest infusion of capital and be forced by lack of profit to close their doors, but what do I know?
  A tidbit of news to help place the whole biofuels situation into a bit clearer focus: even though this company's revenues are in the MINUS single digits and its stock has dropped about 75% in less than one year, an article I read today says this company is still actually "outperforming most of its peers!" So this would seem not to be an isolated issue by any means. Apparently most, if not all, ethanol plants in the US are currently experiencing similar problems. So, unless corn prices take a pretty serious tumble or gas prices rise quite rapidly this year, it is starting to look to me like the biofuels boom may be over before it ever really gets started.
  I wonder what the public mood on alternative energy will look like if that happens. So many have put their hopes and dreams into biofuels and it will not be a pleasant experience to watch them wake up.

  3/30/08, 3:38 PM
Panidaho said...

  Ras, thanks! I joined. I appreciate the heads up!

  3/30/08, 3:39 PM
Lynnet said...

  Wonderful post. I have just one little thing to add: in the current technology, and for the next decade or so at least, ethanol production from grain has such a low EROEI that it's a tossup whether or not ethanol production gives more energy than the cost of the petroleum that went into it. This is just silly. Of all the ways to waste petroleum, using it to make another kind of fuel with no efficiency advantage seems the silliest. You additionally have the costs of water, topsoil, and watershed pollution.
  That's not even mentioning the human cost of skyrocketing food prices, as drivers feed their cars on food that would otherwise feed people.

  3/30/08, 6:35 PM
John Michael Greer said...

  Mark, very much so -- and the sense of entitlement and learned passivity are by no means unrelated. Both are habits of the upper classes that were adopted by people all the way down the social ladder during the decades when energy was absurdly cheap and abundant. Both will have to be unlearned in a hurry by those who want to be alive when the next round of crises is over.
  Teresa, I'm not at all surprised. One of the problems with economic bubbles is that people lose track of the fact that in ordinary times, investments don't make money unless they're invested in something that can actually turn a profit. In the bubble economy of cheap debt, people poured money into all sorts of absurd things. Now cheap debt is a lot harder to get, and a great many projects that looked brilliant when you could soak up unlimited loans look much less impressive.
  Lynnet, no argument there. As panic sets in, people are flailing around and trying to find anything they can use to convince themselves that the age of cheap energy isn't over. Nuclear energy's probably next; my guess is we'll see a crash program to build reactors, which will leave the landscape littered with huge half-completed cooling towers. If the program is big enough, it may just succeed in bankrupting what's left of our economy.
  Our descendants may wonder why the ancient Americans in their last days put so much of their remaining resources into building so many vast, empty concrete structures. Were they temples, future scholars may wonder, erected by the legendary Emperor Dubya in some final, desperate attempt to placate the offended gods? Or the tombs of the American presidents, long since rifled by looters?

  3/30/08, 7:00 PM
Panidaho said...

  "Nuclear energy's probably next; my guess is we'll see a crash program to build reactors, which will leave the landscape littered with huge half-completed cooling towers. If the program is big enough, it may just succeed in bankrupting what's left of our economy."
  Yeah, I think you are right about that. I'm going to have a front row seat to at least some of the spectacle: this area is currently setting itself up to be an alternative energy mecca of sorts. We have nuclear, solar, wind, biogas, and ethanol companies moving into this new "green energy corridor" as we speak. The ethanol plant I mentioned is one of the first to actually come into production, and unless I'm very badly mistaken it will likely be the first of these new companies to fold. The solar, wind and biogas groups are just starting up their permit and construction process. The nuclear group is glad-handing and forging partnerships with companies, government entities and think tanks already here while it breaks ground on its new digs. It looks to me like the goal is to expand our area's nuclear research facilities greatly via these working partnerships and government grants over the next few years. We already had one relatively recent attempt to place a nuclear power plant in Idaho, but it apparently was shot down. My guess is that was just one of many attempts to come.
  While I understand the need and have hopes that at least some of these new startups will help cushion the landing somewhat, I worry sometimes about the strain these facilities will put on our already taxed resources. We're beginning to see the specter of water shortages on the horizon, and there are already places in Idaho with badly polluted areas from mining and factory dairy farms. Unfortunately, the attitude here - like that of many rural areas - seems to be "if it'll bring money into the area, heck yeah, bring it on!" People don't yet seem to realize that many of these industries are heavy resource users and heavy polluters, and one reason they may be moving to Idaho is because laws and oversight on such things are pretty lax still in many areas here. In other words, they may be moving here because other states would expect them to behave better than we apparently do.
  So these companies will come and someday eventually go away - but when they do they will leave behind even more of those interesting concrete structures you mentioned, JMG, as well as at least the potential for some seriously poisoned local air, water and soil for future generations living here to deal with. And we will still be left with the need to seriously change the way we live.

  3/30/08, 8:48 PM
tuttidog said...

  I'm hoping your answer will be be that "political collapse"/"violent revolution" stuff you mentioned. If we can reduce the population and end up with stronger people leading we'll have a much easier time adapting to any problem.

  4/1/08, 1:30 PM
John Michael Greer said...

  Teresa, I'm not at all surprised -- a lot of rural and relatively poor areas are being targeted for this sort of thing just now. I expect that to accelerate as panic sets in.
  Tuttidog, political collapse and violent revolution are distractions from the changes we need. Replacing one set of scoundrels in charge with another, whatever the means of replacement, doesn't change the way people live their lives -- and that's the thing that has to change.

  4/1/08, 5:12 PM

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