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Energy is a commodity we use as ingredient for every action everywhere any time and in large quantities. We total underestimate the energy consumption of our lives and economies. Therefore we have not a clue on the effect of higher energy prices on our lives and economies. This is caused by the fact that we have taken cheap energy for granted in the 20th century. We don't think much about energy availability and energy prices. This is strange as the impact of both are huge on our lives and economies and these two (availability and prices) are very strong interconnected in a free market where supply and demand makes the prices.. It's getting more strange the moment we really start to understand that our current energy system is totally based on finite resources and the spread between consumption growth and discovery decline becomes wider each year. It's getting even more hard to understand if we start to know that all new discoveries are much more harder to explore (which ends cheap exploration) and mostly are of not regular qualities (which ends cheap refining). The story behind this picture is called PeakEnergy: first we gets the easiest to explore and refine quantities, and as they are used, we go on the more harder to explore en refine quantities. We're somewhere in the neighbourhood of PeakEnergy. It's not important if this moment is coming somewhere sometime in the future or we've already passed it. When your operate an energy system fully based on finite resources PeakEnergy is inevitable. The curve of fossil energy exploration is not a gradual growing and declining bell curve as we wish for. The line is in reality quite different. The first part of the traditional PeakOil bell curve is right: a gradually year by year growing production line. But than the line flattens for a few years and goes very hard down. This issue of hard to explore and hard to refine of the second half is responsible for this plateau and than rapid decline. We never thought much on the economics of the second half of our energy system. We just assumed that the second 50% would be easy as the first 50%. We thought that the Western World was superior and that the East and South never would be developed, not even in a hundred years. But we start to realize that these two perspectives were huge misconceptions. The result of our laziness in energy exploring en demand scenario development? Fossil energy of $ 147 per barrel is something like that. An oil price of $ 147 per barrel has proven not to work for our economic behaviour that is completely designed in the early nineties by an oil price of $ 12 per barrel. Besides hard to explore and hard to refine there is another wild card that influences this energy situation very much. The fact that the emerging world emerges 'a little bit' faster that everyone ever excepted. Everybody who visits the cities of the former so called Third World knows sees that they outperform the cities of the so called First World very much. China is the largest car manufacturer and largest car consumer of the world. All these cars needs a fill up at least once a week. China is taking online a huge coal fired power plant every 2 weeks and all this power plants needs their huge amounts coal 7x24 hours a day. Coal will become the most expensive power generation fuel of the world. Just by the huge increase of coal fired power plants. Where all this coal must come from is not clear to anybody. All listed coal reserves are heavenly overrated. The coal can be there, but it's not economic for exploration and the accessible coal reserves deliver each year lower quality. This simple fact mathematically delivers much more volume to explore and to transport. Less quality needs more energy/cost input for the same amount of energy. Energy is a scarce commodity. We use finite resources if they are endless. We have no clue on real economic explorable reserves. We never thought about harder to find and more expensive to refine issue. We just don't think very much on energy. It's just there. A similar point of view we had on the credit issue. There we hit the wall severe and within a very short time frame, therefore hitting the wall is the right description of our awaking on credit. And the end of it is not even close To be honest we hardly no what has caused it and how it can be solved. Energy is even more important than credit and we're just ostriches that think that putting the head in the soil will change our energy situation automatically. Noting change automatically and certainly not for the best. The times of cheap and abundant energy is over. The new reality is that energy is getting scares very rapidly. Scarce due have used the easy to explore, easy to refine reserves first. Also scarce due huge demand growth. The old (fossil) energy model has had it best time. An energy system that's is based on finite fuels has no future. Once used, they are gone and we need to find new once to keep up with demand and that hasn't happened the last decades. Our energy experts are all people of the energy industry. Do you really think they want to see the reality? They will pick up any pink news they can get for several reasons. These are: a) getting employees and shareholders for the last hours of the fossil period than will become hard, and b) alternatives are competitors and no one in the world will stimulate the creating of competitors. We just listen to the bubbles of the oil/gas industry, while everybody in the world can do the math on a small napkin that energy will become very expensive due higher exploration costs, higher refining costs, higher transport costs and fast growing demand. The West just have some problems with realizing the concept that it's no longer the reference point of the world. That makes everything even harder. Plus we all (West, East and South) like our energy fairytale too much: it describes just the situation we like in our dream state of mind on energy. We need to wake up and do some independent thinking and research. Otherwise high energy prices will squeeze us out and we just don't know what to do than just economic decline (with all it turmoil). The awaking regarding credit by the the financial crisis hit us overnight (Lehman collapse). The response was simple: just printing more money. But higher energy prices will drain us slowly but certain in our 'not a cloud in the sky' energy dream. The solution of the energy crisis is not simple: Energy can not be printed overnight. Energy is scarce is a very valid statement.

Author: Gijs Graafland

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