Lest we forget to look over our shoulder,
We forget our fear, our energy nightmares.
As many readers will know, the German energy industry goes through some rough patches at the moment. Generating electricity is not as profitable as it once has been. That is partly the result of subsidsing renewable energy that cannot be sustained financially. It also has to do with bigger things.
The industry is changing rapidly. Prices for oil and gas have gradually crept upwards. This has to do with peak oil and peak gas. The production maximum for oil has already been reached and will soon be reached for gas reserves world-wide.
The increasing CAPEX costs of oil and gas exploration and production are passed on to the customers. First they are passed onto physical traders and then to customers. It is important to mention that this is not regionally-restricted, oil is a global commodity so peoplewill pay the price eventually. The difference is to what extend oil is subsidized and/ or taxed by countries in a specific geographic area.
Oil will be much more expensive then in the past.
there was charcoal, after charcoal,
then there was oil, and oil was followed
by a world without limits.
Simply put, we face increasing costs in exploring and producing oil and gas because of our inability to find cheap new reserves to replace declining output from old ones.
An acknowledgement of truth and of reality
Higher prices will, in time, lead to greater changes in the social structure of European society – in one way or another. This will brought about by restricting use of these precious energy-rich resources, paying for these resources by increasing labor productivity, which is higly unlikely due to demographic changes in the European ‘core regions’. Governments could then take on even more debt to pay for it. Alternatively they can get hold of the resource wealth in other countries which comes with enormous defence and security costs. This will, in one way or another, lead to a restructing of society.
Taxing the living hell out of us
Taxing incomes of workers belonging to the middle class will become the issue of the day. As income taxation creeps up, the middle class will increasingly get squeezed and finds itself between a rock and a hard place.
This will inevitably lead to a shrinking middle class and possibly declining work incentives due to the burden of taxation, because of a system of restribution to share the (energy) wealth. When the financial administration or the tax redistribution mechanism fails, so does the system of redistributing the energy wealth, and by proxy, financial wealth through fiscal levers. Voting has very little to do with it. A declining share of the population, in particular the now infamous ‘Generation Y’ born between 1981 and 2000 will be unable to support the system, and even if they wanted to, they could not. They will turn inward and look for guidance in their family and the regions. The Mayan civilization 2.0 fall from grace, but with more creature comforts beforehand.
Cumulative pain and remedies
This accumulated wealth resulting from generations of growing labor productivity, it will be targeted by the state more and more – to crack open a few more oysters.
People’s circumstances will divide society. There will be a smaller group who (can) think long-term, who have invested their energy into conserving things. There will be a much larger group of people who will target that wealth. What will be their resource compensation? Thus, democratic processes become completely ineffective.
What then matters to society are people’s relations, contacts, loyalities, their work experiences and knowledge. What matters are real skills to offer. When there is resource scarcity, people need to have generalist skills and specialization has many disadvantages. New networks will form that are in line with NEW energy requirements. That will be a long-term process, it will divide and it will shape us. The emergent structures will appear a dozen or so years after the next financial crisis post 2018. Society will try to optimize the energy systems and network infrastructure, to keep the highest standard of living for as long as the TV stations have electricity. The population will see a slowly reduced standard of living.
Innovation will become more costly for businesses and there is less capital available for research and development simply due to lower growth and because low hanging fruits have been picked. Then again, research has become more capital-intensive and offers lower return on investment. The past shows war has driven technological innovation, but without demographic favors and a youth bulb this aien’t going to happen. Conflicts historically arise when there are many young men.
The transformation will be slow, with some major fault lines.
Energy is the key to transforming our society. It forever will be.