Peak Oil, Peak Debt, and the Concentration of Power

While one may dispute that economic growth depends on petroleum, it does depend on increasing consumption of something. For decades or centuries, we have maintained growth first by meeting needs, then by creating new needs, then by bringing non-monetized cultures and non-monetized domains of our lives into the money domain. Community, for example, can be stripmined just as coal can: turn the functions of story-telling, dispute resolution, child care, elderly care, recreation, entertainment, into paid services. But in either case, material or social, this process is reaching its limit. We are indeed entering a time of Peak Everything.

The crisis in money is related to the crisis in energy, the environment, and everything else. The difficulty in finding a substitute for oil, for example, is born of economics. Imagine what we could have accomplished if the millions of scientific careers and hundreds of billions of dollars that have been devoted to petroleum and nuclear power over the last fifty years had gone instead into developing “alternative” energy technologies.

Imagine if, at the dawn of the environmental movement in the 1960s, we had launched a global scientific effort exceeding that devoted to the space race to create a pollution-free society. It did not happen, and with good reason: there was no money in it (given the kind of money system we have had). Compared to the technologies of Big Energy, there is little profit to be made in the alternatives. The alternatives are not conducive to economic growth, and will never flourish in a money system that compels and depends on growth.

Sunlight, wind, conservation, geothermal energy, and more controversial technologies like cold fusion, Bedini/Bearden devices, and so forth share an important characteristic in common. Their energy source is more or less ubiquitous, so that users needn’t be dependent on an ongoing supply of scarce fuel. They are, in an important sense, abundant.

This feature puts them at odds with our money system, which depends on the creation and maintenance of scarcity. To profit from something, say energy, it must be scarce: high-tech pharmaceuticals, for example, rather than ubiquitous weeds and folk medicine.

The same is true of information; hence the strenuous efforts of music, book, and film publishers to create artificial scarcity in digital content through copy protections and intellectual property law. They are fighting a losing battle: when the marginal cost of production for any product approaches zero, the natural price point tends toward zero as well. The first copy of Microsoft Word costs hundreds of millions of dollars to produce, but each subsequent copy costs virtually nothing.

Alternative energy sources are similar: the initial cost may (or may not) be high, but once the installation is complete, ongoing costs are extremely low or zero. By returning energy to a non-monetary realm, they actually contribute to economic de-growth.

Think about that next time you read economic arguments about how to “stimulate demand” and “reignite economic growth.” In the present system, in the absence of growth, unemployment, poverty, and the polarization of wealth intensify. In the present system, economic well-being is incompatible with post-carbon energy technologies.

A cynical observer, looking at the history of the suppression of alternative energy technologies, might conclude the same attempt to create artificial scarcity is happening in energy as it has in digital content. However, there is no need to resort to conspiracy theories to explain it; mere economics will suffice. Let’s consider an example.

It is not too difficult to build houses that require almost no external power source for heating and cooling. By using construction materials of large thermal mass, geothermal wells, and passive solar principles, a house could, with sufficient PV (photo voltaic) power, be comfortably independent of the energy grid. Why aren’t they being built this way?

One reason is certainly the habits and culture of the building industry, but the main reasons are financial. (1) For starters, future energy savings are generally not fully capitalized in a real estate value appraisal. (2) But even if they were, our interest-based system, with discounting of future cash flows, only motivates the initial investment if it generates savings above the rate of interest. (3) Finally, the existing energy system enjoys a high level of hidden subsidy due to the externalization of its environmental and social costs.

The first point is easy to explain: assuming a 2.5% interest rate, the net present value (NPV) of $1,000 in annual electricity savings is $40,000. Rarely, however, does that modest level of energy efficiency contribute nearly that much to a house’s value.

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