Summary: If fossil energy such as oil is so unbelievably awesome in what it can do for us, it won’t make much of a difference if, for instance, oil doubles in price... or if it goes to $200, $300, or even $500 per barrel, right? That’s still a huge bargain for the capacity to do so much work. Right? Not necessarily. The reason is our existing underlying infrastructure, homes, industries, transportation supply chains, mechanical processes and all else, depend on built machinery that requires a huge amount of joules/kWh fossil energy input to substitute for each joule/kWh of human labor from our former, sunlight-based system. As energy prices go up, there is a “multiplier effect” which substantially reduces wages (or profits) and increases the price of stuff. If the cost of energy rises enough, many parts of our economic system would become money-losing propositions. As we were building these systems, we naively believed the price of energy would stay low; we expected abundance and low prices indefinitely. In the above graphic, notice the impact that a doubling of energy price from $.05kWh to $.10kWh has on an energy-intensive technology (automated milking, in this example). What had previously provided the highest combination of wages, profits and cheap goods now shows less profit than the intermediate-energy-use technology (parlor milking) and even hand milking becomes competitive with the most energy-intensive technology. And, at 15 cents per kWh (or higher, which is where we are heading in coming decades), the benefits become drawbacks (i.e. losses). Think about this. With high energy prices, automated milking would cost significantly more than hand milking. At 15 cents per kWh, parlor milking is still profitable. But if energy prices rise and rise, at some point that, too, would cost more than hand milking. In any of these scenarios you have to add in the now-higher cost of transportation and refrigeration (which is also linked to energy price). This is why in olden times the milk man delivered milk every day from a source no further than a couple of hours ride in a horse and cart. As a rule, the more units of mechanical labor we added to replace the tasks humans formerly did manually, the higher the benefits when energy was (is) cheap, and the steeper the profitability decline when energy became more costly. High energy-intensive activities in modern civilization include air travel, aluminum smelting, cement manufacturing, fertilizer production, and many chemical industries. There exists a large misunderstanding about the difference between “technological inventions” per se and “inventions that are scalable and affordable.” One of our friends makes home tinctures from plants, and
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