Heads of the G7 nations commit to end fossil fuel use by the end of the century. No commitment needed – it will happen without them. The world’s remaining petroleum reserves will be nearly useless economically if we carry on like this.

1. global energy consumption and energy reserves today

Some years ago certain websites published future projections of global energy consumption and the rate of discovery of new oil and gas reserves. One could see that the historical rate of increase in known (proven) reserves was keeping up with global energy consumption. It seemed like good news until some of the technical experts in oil and gas exploration and production pointed out that for the past 100 years the cost of finding and getting the energy to the consumers was increasing steadily as a proportion of the estimated energy reserves. So a few of these smart guys re-calculated the data and showed that when you do the accounting correctly and subtract the costs of exploration and extraction from total energy reserves available, the net increase in reserves for sale reached a plateau in about 2008 but consumption kept increasing. This realization set off a spree of future energy purchasing that shows as a peak in oil and gas prices in 2008. Then the global financial crash curbed energy consumption for a short while and the prices dropped. After that more credit was made available through the world’s reserve banks and both energy production and consumption recovered somewhat.

2. production of shale oil and gas – false economy

 At that time the US government injected large amounts of interest free cash into exploration and production of shale oil and gas. The returns on shale oil and gas investment is short term only and doesn’t make economic sense. But that was ignored because the US government apparently only needed a short term supply. To those in the know, the plan was to reduce dependency of US consumers on foreign imports, irrespective of the fact that shale oil and gas producers would never be able to pay off their debts. That didn’t matter – the US government aggressively promoted and financed the local industry on the understanding that debts would never be repaid. As a result the shale companies would simply be allowed to borrow more money to keep production going and ignore the massive debt they incurred as a result. This would never have been tolerated or even dreamed of in previous decades. Having thus become the largest oil and gas producer in the world (with a false economy) the US helped drive up global production between 2008 and 2014 and prices recovered somewhat as a correction after the crash of 2008.

3. global energy production suppressed

National oil companies in OPEC countries operating under Sharia Law were prevented from printing money out of thin air as the US banks did and so they were disadvantaged in competition with the international companies like SHELL, BP and Exxon Mobil. So they struggled to expand or develop new fields or wells during the recession years between 2008 and 2014 when demand was suppressed. In 2014 Saudi Arabia broke from past traditions and agreements with OPEC countries. They stepped up production with no regard for the effect that would have on countries operating under Sharia Law. The sudden increase in production by the US and Saudi Arabia, in the middle of a recession, resulted in a drop in energy prices that resulted in more hardship for certain OPEC countries and especially those trying to bypass the petro-dollar in their trade. There was method in their madness – the US government – that played every trick in the book to hinder countries that try to bypass the petro-dollar.

4. global energy reserves in decline

The effect of the slump in energy prices has been to mask the fact that correctly calculated past and future projected total energy reserves available for sale has reached a plateau and will begin to decline from now on. I can’t find the latest information on global energy consumption and the rate of discovery of new oil and gas reserves. Oil companies and institutions no longer seem to publish information that does the accounting correctly and projects the data into the future. It’s almost as if the topic is now taboo.

While we are still in a global recession with energy prices relatively low, global consumption is still rising slowly but quite in proportion with population growth only. This indicates that the rate of industrialization on a global scale has reached a plateau. Populations are still growing slowly but the proportion of middle-class people is not keeping up, it’s declining. This applies mostly in the Western world but also to a lesser extent in the East. This situation doesn’t look like too much of a problem, except that people are no longer looking at where we are going.

5. Major problems for exploration and extraction 

Profits from energy sales are not high enough to finance exploration, drilling and building facilities to access new fields and sources of oil and gas. Projected costs of exploration and production as a fraction of total energy reserves available in the world for sale has reached a plateau. Instead of new energy reserves coming into production, the older wells are just being pumped faster and foolishly cheap shale oil and gas fields are surviving without any hope that they will ever be able to run profitably. The only thing keeping shale oil and gas production going is the fact that there doesn’t seem to be any plan for payback time. The banks will have to call on the public depositors one day to rescue them with massive so-called bail-ins. Not only that, but one day soon when countries operating under Sharia Law decide they’ve had enough of the petro-dollar and the free money for the international companies and when the BRICS countries are ready to launch their alternative system for international trade and commerce using currencies backed by gold, oil and natural resources, which all the OPEC countries will love, the US petro-dollar will slowly fade into redundancy.

5. running the wells dry much sooner

 When the new system comes into effect the normal market forces of supply and demand will again determine energy prices, and then more exploration, drilling and building facilities and infrastructures to access new and more remote or difficult fields might resume to meet demand. That doesn’t mean energy prices will be more affordable. In fact the figures we use to price energy or commodities is not what counts but the rate at which companies can pump oil and gas and the number of people who need energy. If the new system of trade and commerce encourages population growth and industrialization on a global scale to increase simultaneously, as we saw in the previous century, the rate of total energy production would have to increase much faster than today. That can happen as long as we don’t need to preserve resources for the long term future. If we happily pump oil and gas as fast as needed to supply expanding demand we face the prospects of running the wells dry much sooner than currently projected. Again, this situation we are currently facing does not go away in the new trade system – the less accessible, non-conventional sources of oil and gas are still remote and technologically challenging. The work (manpower hours) and energy expended as a fraction of saleable energy extracted will still only increase with time. Nuclear energy production is an alternative but even there, nuclear fuel supplies are just as limited as oil and gas and also becoming harder to find and more costly to refine. We could go back to the days of unlimited coal powered generators and accept that clean air is no longer an option for the world if we still want energy. 

6. Big Trouble ahead!   

The new system for international trade and commerce doesn’t look that good. It looks like it might just aggravate an energy and pollution problem people have masked and governments are sitting on, hoping the smart guys are not talking to anyone. Remember, projected real total energy reserves available for sale has reached a plateau and will begin to decline from now on. At present the data indicates that consumption is increasing slightly faster than reserves being discovered and proven. That’s based on the false economy. Using correct accounting that subtracts consumption of energy to find and extract energy reserves the graphs would look rather worrying. That spells Trouble ahead!  We just don’t know about this because we are not watching the game.