THE GROSS SOCIETY - Afterburn: Society Beyond Fossil Fuels - page 13

A five-to-one profit ratio might be spectacular in the financial world, but in energy terms this
is alarming. Everything we do in industrial societies—education, health care, research, manufactur-
ing, transportation—uses energy. Unless our investment of energy in producing more energy yields
an averaged profit ratio of roughly 10:1 or more, it may not be possible to maintain an industrial (as
opposed to an agrarian) mode of societal organization over the long run. 14
None of the unconventional sources that the petroleum industry is turning toward (tight oil, tar
sands, deepwater) would have been developed absent the context of high oil prices, which deliver
more revenue to oil companies; it's those revenues that fund ever-bigger investments in technology.
But older industrial economies like the United States and the European Union tend to stall out if
oil costs too much, and that reduces energy demand; this “demand destruction” safety valve has (so
far) set a limit on global petroleum prices. Yet for the major oil companies, prices are currently not
high enough to pay for the development of new projects in the Arctic or in ultra-deepwater; this is
another reason the majors are cutting back on exploration investments. 15
For everyone else, though, oil prices are plenty high. Soaring fuel prices wallop airlines, the
tourism industry, and farmers. Even real estate prices can be impacted: as gasoline gets more ex-
pensive, the lure of distant suburbs for prospective homebuyers wanes. It's more than mere coincid-
ence that the US housing bubble burst in 2008, just as oil prices hit their all-time high.
Rising gasoline prices (since 2005) have led to a reduction in the average number of miles
traveled by US vehicles annually, 16 a trend toward less driving by young people, 17 and efforts on
the part of the auto industry to produce more fuel-efficient vehicles. 18 Altogether, American oil
consumption is today roughly 20 percent below what it would have been if growth trends in the
previous decades had continued. 19
To people concerned about climate change, much of this sounds like good news. Oil companies'
spending is up but profits are down. Gasoline is more expensive and consumption has declined.
Hooray!
There's just one catch. None of this is happening as a result of long-range, comprehensive plan-
ning. And it will take a lot of planning and effort to minimize the human impact of a societal shift
from relative energy abundance to relative energy scarcity. In fact, there is virtually no discussion
occurring among officials about the larger economic implications of declining energy returns on in-
vestment. Indeed, rather than soberly assessing the situation and its imminent economic challenges,
our policy makers are stuck in a state of public relations-induced euphoria, high on temporarily
spiking gross US oil and gas production numbers.
The obvious solution to declining fossil fuel returns on investment is to transition to alternative
energy sources as quickly as possible. We'll have to do this anyway to address the climate crisis.
But from an energy accounting point of view, it may not offer much help. Renewable energy sources
like solar and wind have characteristics very different from those of fossil fuels: the former are in-
termittent, while the latter are available on demand. 20 Solar and wind can't affordably power air-
liners or eighteen-wheel trucks. Moreover, many renewable energy sources have a relatively low
energy profit ratio.