The Most Important Graph in the World

Saturday, December 25, 2010

Merry Christmas from LOVESalem HQ

Nice writeup on Energy Descent and the New Reality here. Excerpt:

Oil IS our economy. It is what makes global trade at this scale possible and why it makes “sense” to ship raw materials from Africa to SE Asia for processing and then to the US for final sale, grain from the Ukraine to be fed to cattle in Brazil to end up in $.89 cheeseburgers in the US, and the 1500 mile side salad. That fact – that Oil is Everything – means that watching the price of crude, or just the pump, is rather important for predicting when the next recession, or rather the deepening of the current one, will hit. Since we hit Peak Oil in 2006 the New Reality is that energy economics are now ruthlessly driven by supply and demand. Now that we are Post Peak, there is no significant means of mitigating price by upping supply to meet demand; when demand increases, price MUST follow suit soon after as supply is fixed and slowly diminishing.

Supply v. Demand: a graphical depiction...

What became painfully clear to us all, is that there is a price ceiling that our economy is able to support. In 2008 it was somewhere near $110/bbl or $4/gln of gasoline. Beyond that point oil/gas pushed the expense side of doing business too far (and had the psychological impact of drastically reducing consumer spending) and we smacked into a New Reality that energy was perhaps more expensive than we could afford; that we couldn’t afford to do *everything* we wanted as a global community.

And then we learned another reality about our current economy. GROWTH is IMPERATIVE. Chris Martenson in his Crash Course will explain this far better than I can, but in long and short the rate of our economic growth MUST EXCEED the interest that is due on everything we, as a global society, “own”. As soon as the economy fails to grow faster than the interest that is due on the all the zillions of loans –from credit cards to government bonds– there is literally NOT ENOUGH MONEY to pay the banks and massive foreclosures begin to happen. This is also why we continually here that 1-2% growth “isn’t enough”. Check your car/mortgage/credit card bill for your interest rate if you wonder why not.

So everyone alive has know nothing but the fact that Oil IS the Economy, and that the Economy MUST grow. But there is no more cheap oil, and the Economy CAN’T grow – at least not until it bottoms and the Peak is a lofty mountain indeed. The Old Reality is over. Welcome to the New One. The next century or so will be dominated by series after series of recessions, which will relax the demand pressure on the price of energy enough to allow a brief “recovery”. But as soon as the economy recovers enough it will inevitably hit the energy price ceiling (which is now lower than the last one due to all the bankruptcies that occurred in the last recession which lowered the overall size of the economy by destroying “wealth”) and we will enter a new recession. This is the economic reality of Energy Descent: series after series of recessions interspersed with brief “recoveries.” . . .

So, here comes a pitch: Because we just installed a nice solar-electric system here at LOVESalem HQ, we got a nice offer from the installing company, SunWize: If you tell 'em we sent you when call them out to do a survey for your home's solar potential, they'll give us $50 after they evaluate your solar potential. If you end up installing a system, they'll cut us a check for $200 per kW of capacity that you install.

So what's in it for you? Well, if you're unsure about doing a solar install, just post a note in the comments with your email; when I screen the comments I'll see it and contact you, and you can come over and look at what we got installed and you can see all the papers we got as part of the install, and what it cost, and how we addressed the costs, tax credits, etc. (And I won't post your contact info.)