When Idealism Collides with Reality, Reality Wins

Fossil Fuels

There are a lot of people who think that we need to drastically cut down or even eliminate our use of fossil fuels for energy. Our dreams need to be realistic.

Humans have been relying on getting energy from combustion for a very long time indeed. This goes back even further than the species in effect, back when we were called homo erectus, the one that got its name by walking upright.

Our world has certainly changed a lot over the last million years since. There’s so many more of us for starters, by orders of magnitude. There are more coming. The world population grows by 83 million people every day, at a point where we arguably already have a lot more people that can be sustained long-term.

One of the big worries about this is how we will manage to feed everyone or even most everyone at this pace. It’s not the population growth that is the scary part of this, it is how much we’ve depleted the world’s supply of clean water by growing the food we already grow, which will end up crashing and resulting in a mass culling of our population, when we can simply no longer feed them and they die.

In spite of the fact that this gets virtually no media coverage, especially when compared to the constant uproar about climate change, our coming lack of water will seriously limit how much food we can grow, because it takes a lot of water to grow food and massive amounts to grow the amount we grow today, because that requires that we pump huge amounts of water from the ground to do it. That won’t last forever and the tank is already low.

We were supposed to run out of oil already, at least we thought we would a few decades ago. Global oil production has just kept climbing though, and is set to keep doing so until at least 2050. The year keeps getting pushed further out and by the time we get there we’ll likely have found more ways to increase our production and this could go on for quite a while longer.

As an indication of how these things can change, just 10 years ago, people were saying that U.S. oil production is drying up and were predicting a big decline in it going forward. What happened instead is that it increased, and increased by a lot, and is set to keep increasing.

The more people we have, the more energy we will need, so while so many people have an extreme distaste for fossil fuel, it is hard to overstate the importance of them. We were facing nothing short of an apocalypse if it did run out when they thought, and a lot of effort has been put into trying to save ourselves, and so far, we’ve succeeded.

We have succeeded because we found a way to keep the fossil fuels flowing to buy us time so that a true substitute can be found. We might think that we have found this already but we would be very mistaken.

The Reign of Fossil Fuels will Last Much Longer than Most Think

Currently, 82% of the world’s energy comes from fossil fuels, including oil, natural gas, and coal. We’ve made a lot of progress in expanding the use of what we call renewable energy, but our capacity here is still very limited and can only be used as a supplementary source of energy because it cannot really be stored.

As far as what would happen if we lost this 82% right now, this would result in a catastrophe of unimaginable proportions, perhaps even worse than a global thermonuclear war. Both would cause great devastation, but we could at least potentially come back from nuclear war, because we’d at least have the ability to generate a good amount of energy to fuel the comeback.

Losing 82% of our energy would cause us to also lose a lot of the residual 18% because that energy requires a lot of external energy to maintain. This would all mean game over for our way of life or anything resembling it, and game over for the great majority of our population as well.

This won’t happen anytime soon though, but this sort of thing hung over our heads not that many years ago. The new frontier is now cutting down on your energy production, and although the goal isn’t to completely give up fossil fuels, even though there are some that do want this, it is to dramatically cut down on our use of them.

Concerns about climate change already dominate the popular media, but this is even more in focus at this point in time given that we are starting the U.N. sponsored “climate week.” This brings out all sorts of angry people that share a concern for the planet but seriously lack understanding of the practical side of their wishes.

There are some concerns about things like losing land to the ocean as it rises, changing weather patterns, and putting some species at risk. The problem with this has been that these people aren’t looking enough at the consequences of what our cutting back as much as they want on fossil fuels would mean, and these consequences don’t just matter, they are decisive.

There is a big difference between a nice to have and a need to have. Taking positive action on climate change is actually a nice to have, and while some of the consequences of global warming, whether this comes from natural or man-made intervention, will be expensive, this will be far from catastrophic really.

Energy, on the other hand, is not a nice to have at all, it’s an absolute need to have. We need enough of it to survive, and so far, fossil fuels have allowed us to survive. They won’t last forever, but they will last for a few more decades, which will buy us some very valuable time to figure out a real solution to these resources being used up.

Energy demand must always be supplied, and we can’t just withhold it, and the market will ensure that it isn’t withheld. This is not just a matter of preserving our economy, it is needed to preserve life itself.

The economy and life itself, or at least an acceptable life, are very much connected, and a lot of damage can be done in itself by wrecking our economy. Cave people didn’t have much of an economy but they still could burn things for the energy needed to cook their food and heat their caves. If we can do neither, we are in serious trouble indeed.

We Can’t Just Wish Fossil Fuels Away

We can’t just wave our magic wands and conjure up a world in which fossil fuels are not needed right now, and it’s not a matter of being able to ramp up other energy sources quickly enough to pick up the slack. The only dependable non-fossil energy we have is nuclear, and even spending trillions on that takes years and still wouldn’t be enough, and too many people are against nuclear these days for us to even make a real start.

We will need either this or some new technology to survive long term, when fossil fuels run out, as you just can’t do it with wind or solar. Our economies need a constant and reliable energy supply, and intermittent forms just won’t do. These ones depend on the sun shining or the wind blowing no matter how many we build.

Many speak of fossil fuels as being on their deathbed, and the sooner they go the better, but whether we like it or not, they will be part of our world for at least a few decades.

Renewable energy is really growing at a fast pace now and this is expected to accelerate. To give you an idea of just how much replacing they have to do and how far that this has to go to get there, in 2050, fossil fuels are projected to still provide 74% of our energy needs, according to McKinsey. That’s 31 years from now and that’s not even close to being gone, just toned down a bit.

Renewables will have grown during this time, but so will oil, gas, and coal. Coal has almost peaked and will actually start declining a bit in the next 5 years, but according to the EIA, coal will still be ahead of renewables in 2040. Oil and gas will be much further ahead, and with both still rising.

This is not the picture that people in support of climate change dream about, but this is the reality, as horrified as some people may be by it. Renewables are not on the brink of taking over, and while one day we may come up replacements for fossil fuels, we have not found any yet and it may be a long time before we do.

This is all based upon the free market, or an energy market that has been interfered with already but not that substantially, but can’t we just interfere with it more to bring down these numbers?

This is exactly what people want to do, and this is the aim of the summits that countries have over this, and we might not even get what is so wrong with this approach if we don’t appreciate how this would all cash out. We need a few simple lessons in economics to start getting it though.

For starters, restrictions on trade of the magnitude needed to really curtail energy consumption is going to really constrain our economies. We might not think that this is a big deal, but although this might reduce our carbon footprint, it also can do some serious economic damage. This is especially true when our guns are aimed at industry, as they usually are.

Seeing our economy in shambles is not the biggest problem though, even though we could dial up a pretty big and long recession if we had the will to do it. Energy is pretty important, and is right at the bottom of the pyramid of things important to our survival, below even food and shelter, because both food and shelter are dependent upon energy.

If we expect that our population can grow and our carbon footprint can be substantially reduced and these things can happen together, we’re going to need to rethink things. Energy will become more expensive, but even more importantly, serious interference will cause serious energy shortages, and this is not something we ever want.

As the price of something goes up, consumption decreases. We might then think that if we put the price of energy up a lot, we would decrease the demand for it a lot as well. That’s the goal, so this may seem like a good idea.

When we do this on purpose, what we create is a shortfall equal to this reduced demand. Our carbon footprint has gone down in accordance, and if we’ve gone a good job and lowered it by, say, 50%, this means that we now have a 50% energy shortfall, which should actually scare us far more than climate change.

We could get by with a certain amount of this, if people drove their cars less for instance, or take other measures which would cut down their consumption in a manner they would find at least somewhat acceptable. This is not a big percentage of overall consumption though. Most of this would not be just flesh wounds like this but would cut to the bone.

We also need to keep in mind that our need for energy will be increasing each year, including our need for fossil fuels, so this all gets added to whatever energy shortfall that is accumulating.

The numbers that get thrown around here as far as what we need to do to successfully fight climate change, like reducing things by 80% by 2050, are just crazy. If fossil fuels would represent 74% of our energy needs by then, and we cut that by 80%, that works out to losing 60% of our energy sources.

This would simply be catastrophic, although we’d never get anywhere close to this because they would be storming the Bastille long before we lost anywhere near this much.

In the fairy tale version of this story though, we just pretend that there are no such shortfalls and there is no meaningful downside in fact. This is purely the stuff of science fiction though.

The problem here is that while we may want to exclude evidence that conflicts with the mainstream view, we do not want to turn our heads from the economic consequences of our grand schemes. Otherwise, the movie may not end the way we expected.

Ken Stephens

Chief Editor, MarketReview.com

Ken has a way of making even the most complex of ideas in finance simple enough to understand by all and looks to take every topic to a higher level.