We often talk about resource depletion in terms of supply. Except supply is not really depleting, is it. The Earth has the supplies. The absolute amount of oil in the Earth’s crust is vast. Same for critical minerals like iron and copper. The problem is that most of it is inaccessible, and not just at current levels of technology. All oil and mineral reserves are difficult to access, to be sure, yet one can envision technological innovations that would bridge our way to some of them in some technologically advanced future (if we believe in such a future). But imagining and innovating will not be enough to get to the vast majority of geological reserves. Ever. They are beyond our reach. The Earth will never run out of oil or iron because we humans will never be able to get at most of it.
But absolute supply is not what we’re talking about when we talk about depletion…
The question of depletion is much more complicated. It’s not a matter of diminishing levels of what exists, or even what exists within our reach, because “supply” is not merely our ability to get at something… There are oil reserves, for example, that are within our current technological capacity, but we aren’t tapping those reserves. Why not? Because it’s not the absolute quantity nor our technological capability that determines whether we can acquire and use a given resource. We also must be able to afford it. The process must be economical, and for the majority of geological resources, the expense is so wildly greater than any return on the investment that we simply can’t afford to engage in those processes. Worse still, things that once were economically obtainable are increasingly not.
So one question we need to consider is what “economically obtainable” means in real terms.
Well, to begin with, in this current economic paradigm, the suppliers — at every level of the process — need to make a profit on their investment, not merely break even. They need to make more money than they have invested. And because most corporations promise increasing dividends to their shareholders, this profit must increase year over year. This means that revenues must be greater than expenses and that this difference must be increasing every year. This, of course, affects what is considered economic. Something that once generated sufficient revenues to be economically viable may not do so in future years if the revenues are not increasing or if the costs of obtaining those revenues are rising. So economic viability tends to wane in a system of profit maximizing.
And profit mining isn’t the only driver of decreasing economic viability of a process. The monetary system itself is also a motive force, perhaps an even greater one. Dividends are at least voluntary to some degree. You don’t have to make more profit every year. You could be content with the same dividend check every quarter for as long as you own the shares. In fact, this used to be normal, as recently as in my parents’ generation. That’s why government bonds were considered a great investment. They were a guaranteed steady income. That income never increased, but there was very little risk of decrease (in contrast with most stock market investments today, where increases might be great but decreases are even greater when they fall — and they always will fall).
So, increasing dividends is voluntary and a fairly recent financial “innovation”. But another innovation is more to blame. In our modern unsecured currency system, interest is the foundation of virtually all new money creation. And paying back an investment with compounding interest — that is, continually growing interest, not merely a set fee above the borrowed amount — that absolutely requires more revenue to be taken in every year and for costs to be held constant if not decreased. Creating money by lending necessarily requires more return than investment for every dollar generated. Creating money by lending with compound interest requires that you expand your income every year to pay off your debt. Or you go deeper in debt every year. Which means failure eventually…
This means that supply and depletion are functions of revenue growth. We must grow the return on every investment in resource extraction. No resource extraction is done on cash reserves, it’s simply too costly. It is all financed by debt, all of which is compounding every year. Every bit of stuff taken from the Earth’s crust must not only cost less to extract than it will earn in its sale stream, but it must also pay compounding interest on mining, refining, manufacturing and other processes every step of the way. Every dollar spent to acquire a resource and transform it into something sellable is created in a loan that will have greater and greater interest accumulation every year. That’s a lot of cost increase baked into every single thing we do in this economy.
But growth has its limits. The market — that is, you and I — can’t afford to pay continually increasing prices. We don’t have continually increasing income to spend (not unrelated phenomena there). Thus, there is a point of no more return on investment. Which is about where we are now for many mineral and oil reserves that once were viable. The costs of doing business, in a system where money is created through lending with interest, have been rising. The revenues have not. It is no longer cost effective to engage in those activities.
As you can see, the economics of supply is a very different math problem from the absolute or even the technological feasibility of supply. When we talk about depletion, we are mostly talking about the depletion of reserves that are economically viable within our economic system, though the infinite growth fantasists will insist that the peak oil folks and their ilk are mistakenly claiming that “we’re running out of oil”. Not so. Peak oil might have originally been that naïve… But these days, peak oil is not talking about running out oil, they’re talking about running out of of economically viable oil. Very different thing…
You should note that talking about the economic viability of oil is also talking about the viability of our economic system altogether… but let’s skip that for the moment.
Let’s consider the economics of our various energy resources.
Some forms of oil are simply too expensive to extract and refine within our economic system, so we subsidize this process through our governments so that economic activity can continue. Similarly, most nuclear power generation falls outside economic feasibility and is subsidized heavily. However, the returns of energy are great enough to make up for the financial losses, so we pay for it as a society that needs energy (as all do), paying corporations to keep the supply going — and also paying them to pay back their loans and pay out increasing dividends and executive bonuses and so on and on… Makes nuclear seem a poor investment of our tax dollars, doesn’t it… And, in truth, in the rest of the world, economically unviable forms of energy are generated under direct government control, no profit-mining middle-corporations taking from the pot along the way.
“Renewables” require just as much subsidizing as the mineral-fueled energies, though most of the cost comes at the outset. Hydropower is cheap now that we have built all the dams and electrical transmission infrastructure, but that was all done at an economic loss almost exclusively through public expenditure — ostensibly for the public good, not for private profit (with a good deal of “nudge, nudge, wink, wink” in those pork barrel projects). The whole system was turned over to private corporations only after the considerable initial expense was covered. We see the same story with wind energy. Wind power delivers a good deal of energy return on investment, but it is uneconomical if infrastructure is factored into cost. Hence, today’s wind build-out is as heavily subsidized as hydropower’s was in the last century. Same for solar. Solar panels are wonderfully cheap to install, but the distribution grids are quite expensive and don’t exist in many of the places where solar works best, like sunny and generally empty deserts. (Don’t get me started on the maintenance of all this stuff… at a profit… not likely…) So, the transition to renewables is largely being done on public investment — as it should be — and then the infrastructures are turned over to profit mining private corporations — which maybe should not be a thing. But that’s how our system works.
However — and this absolutely needs to be stressed — none of this activity is energetically or economically self-creating or self-sustaining. The build-out of systems and infrastructures, the maintenance of grids, the manufacture of things that use all these energy supplies and drive energy demand — none of this can be accomplished through electricity. Hence none of it can be accomplished through electrical power generation… Nothing but oil can actually run our economic system. Electrical power generation does not mine, does not transport long distances or heavy loads, does not refine or manufacture. It runs electrical machines. All the electrical power in the world cannot even produce the tools and infrastructures required to generate electricity.
When we talk about energy, we’re talking about oil. The math in this case is quite simple: Peak economically viable oil equals peak energy equals peak economic activity. Full stop. (Crash…)
So are we at peak economically viable oil? I would say we’re damn close if not there.
Yesterday, the Brent cost of a barrel of oil was around $62. The Brent cost is the average sale price of a barrel of oil. It is about the average return on investment (not profit, but gross sales revenue). So what is the investment cost? As you might imagine, that varies substantially. Some kinds of oil are much more costly than others. Oil drawn from legacy conventional wells has an average break-even cost of about $10/barrel. That is, they need to make $10 on the sale of each barrel in order to recover expenditure on the extraction and processing. This is the oil that we were burning through in the latter 20th century. Unfortunately for oil extractors, these wells are beginning to deplete — in actuality, not just economically — and we are not finding any new ones that are this economically rewarding. Because there probably aren’t any new ones. We’ve covered all the cheap spots quite thoroughly in our mad dash to gas up our economy.
So that’s the most cost effective oil. By comparison, new US shale oil wells have a break-even cost of about $60/barrel. As you can see, with the average revenue of oil at $62/barrel, a new shale well is going to have very slim margins economically. If Brent falls just a little bit, then the cost of extraction is greater than the potential gross revenues. It is an economic loss. Even in the best conditions it is barely breaking even.
But what are the energetic rewards? Is it worth it to suck up the economic loss in order to generate abundant energy?
Again, it varies. To look at the energetic return, let’s look at energy returned on energy invested (ERoEI). Common wisdom says that the break-even ERoEI on any form of energy is 7:1. That is, you need about 7 units of energy generated for every 1 unit expended in the generation process. ERoEI on oil varies from 4 to 30. The depleting legacy wells generate higher returns because it takes much less energy to acquire, refine and transport this oil. Back in the day, when all one needed to do was stick a pick-ax in the Texan soil and high quality oil gushed out, there were dozens of units of energy returned for each unit expended. This is not true even of the legacy wells today because they are running low and because they are located all across the globe far from refining infrastructures and far from markets that are buying. So more energy is expended to process and transport the oil these days, even for the high quality legacy oil wells.
But the story of 21st century oil is even worse. That vaunted shale oil revolution of the late aughts? That would never have existed without enormous public investment in the way of subsidies coupled with even more enormous loans that we are now seeing will never be repaid. New Mexico, home of one of the largest booming shale oil plays, sees oil company bankruptcy busts on an almost weekly basis… The reason is that shale oil barely breaks energetically even, averaging around 10:1, with many plays well below that break-even ERoEI of 7:1. That means it takes more energy to extract shale oil than the energy available in shale oil. It is not energetically viable.
(In fact, it is neither economically nor energetically viable. Isn’t that just madness!)
You see, unlike the older oil deposits, shale oil deposits are not liquids under pressure that will flow out at the least break in the rock seal on the deposit (usually a salt dome, but you don’t care about that…). Shale “oil” is actually a mix of fluids of various compositions spread out in tiny bubbles throughout the rocks. It does not flow. You have to pump it out. Or forcibly expel it — which is what hydrofracturing is, pumping high volumes of water into the rocks in order to force all fluids out. As you might expect, far more than hydrocarbon chains are brought to the surface in this process. These extracted fluids need considerable processing to get rid of the gunk, including the polluted water, and to turn what oil there is into usable form.
This is both economically and energetically costly; and, of the two, the energetic loss is harder to bear. We might be able to mine the oil at public cost. Because, really, money is just an agreement on paper. We can agree to spend it on things that benefit us all, and we don’t pay any real material cost. However, energy is based in the real material world. We can’t just conjure it up like we do money, can’t just agree to spend more energy than we get back. An energetic loss is not only unaffordable in a finite material world, it’s impossible. Or at least it’s suicidal. So, we will never expend more energy on an energy generation process than we reap from that process. And this is the primary reason that shale oil is already a bust. We’ve thrown billions of dollars at it and it kept limping along, but we don’t have billions of barrels of oil to throw at it. And that is what a low or negative ERoEI is – oil thrown at extracting some other form of energy. In the case of shale oil deposits, it’s high quality oil thrown at trying to get at low quality oil. That this ever made economic sense shows our level of oil desperation…
All those economic and energetic numbers — slim margins, increasing costs — are rather unsettling. But the truly scary thing about these numbers is that they, as a rule, do not include the biggest costs: the sunk costs of the infrastructure necessary to production, such as roads, machinery, refineries, distribution networks and so on, never mind places for labor to live or the training and general education necessary to engage in these activities.
These sunk costs are not sunk for new wells. Drilling an offshore well, while considerably costly, is a negligible expense compared to its necessary infrastructure. The offshore well is useless without distribution, for example. And if you don’t have people who can do these jobs — whether because the job is located in the middle of the ocean or because nobody in a given place even speaks the language of the oil extraction corporations — then the job will not get done. And don’t think that machines are going to save us from the labor or distribution problems. Machines don’t manufacture or run themselves. In fact, that’s just adding to systemic complexity, with concomitant increase in cost. Which comes down to more oil spent chasing oil…
And none of this cost, economic or energetic, is included in those ERoEI numbers and break-even cost estimates. When we include all the costs of energy extraction and processing in the equation, when we truly tally up all the infrastructures and systems that are necessary but not normally included in corporate accounting, then we see that this whole system has been running at a deficit since its inception. And that deficit is borne by us. Which would be almost acceptable if we were just supplying ourselves with energy, but that’s not what is happening. A very large portion of this mostly public expenditure is going to support private gain. We are throwing oil and dollars and our own laboring bodies at enriching the shareholders and owners of corporations that are engaged in energy production. Does that make economic or energetic sense to anybody?
Well, obviously, those who gain are quite happy to parasitize the system… which means parasitize us…
So, our high energy economic system is not economical. Economic activity really only comes about through substantial public investment. But there is another big variable in the equation, one that also is rarely included in calculations. Because supply is not pumped out into a vacuum. We don’t churn oil and other resources — including our lives and our viable planet — into profits for elites without the other half the equation. And that is demand. There has to be a market. There must be revenues, sales. And in this system of loaned investment money that accumulates compounding interest, the market must be perpetually growing.
But what is the market? And how does it grow?
These are questions that are superficially easy to answer. But those facile answers are incorrect. Generally, the market is assumed to be consumers of stuff, and this market grows with increased consumption. But that isn’t what is happening.
Recent market growth is not driven by end-use consumerism. A quick look at New York Stock Exchange trends reveals that growth in the 21st century is mainly in the extreme proliferation of FIRE sector industries — all those loans, for one thing, but also the explosion of insurance and the endlessly upward-spiraling costs of real estate. Growth is also fueled by increasing systemic complexity. For example, every task done by a machine rather than a human has increased economic activity exponentially (at the cost of depressed wages and unemployment… which is not parenthetical, as we’ll see below). Then there is the rise of bullshit activity, the expansion of doing things that do nothing. Or almost nothing. This includes quite a lot of “administration” which produces nothing to consume but does consume quite a lot of energy and resources, that is, economic activity. Ironically, another growth sector is simply cleaning up after all the messes created by the parasites. Disaster recovery, health care, adaptation to climate change, coping with the ever-growing mountains of waste — all this generates massive gains in economic activity. And while it does technically qualify as end-use consumerism, it is not voluntary nor is it truly growth in the sense of an increasing market. It is using up resources and labor merely to replace what we already had, what has been destroyed by the system that created it.
And then there’s planned obsolescence, wherein everything we make is designed to die quickly. Or worse, while the thing is still quite functional, it will be made useless by “upgrading systems”. This often happens in less time than it took to source the materials, manufacture, and then sell a thing. This is a huge drain of resources and energy, but an enormous boost to the economy. And it, too, is involuntary consuming of energy and material and time merely to remain where we are.
So much of our economic “growth” is actually nothing more than treading water, trying to stay afloat in this sea of increasing debility. It’s the Red Queen race, running twice as hard only to stay in place. Only it’s not just that we’re not getting ahead, we are falling behind, and not just losing the race, but losing our lives.
And yet…
All this “growth in the market” is insufficient. The economic system is still stagnating, grinding slowly to a halt. Why? Because this market isn’t real. The real economy died quite a while ago. This happened at about the same time as oil became economically and energetically unviable, but that isn’t the whole story of economic decline. If it were, if there was actual rising economic activity around the diminishing supply of oil, a market with demands, with energetic needs, then we would have found a substitute for oil. Truly, if there was a thriving market, oil wouldn’t be economically unviable (though some processes would still be energetically unviable). The cost of extraction and production might rise and rise and rise, but as long as demand remains high, extraction would remain profitable. (Until we truly reached the end of the reserves… because this is a finite resource…)
It does not seem that peak oil, an insufficient supply of energy, is the culprit in the stagnation. In fact, I tend to think peak economically viable oil is just another symptom, not the cause. Where do I see cause?
Of course, you all know the answer. It’s in that parenthetical on depressed wages and unemployment that is not parenthetical at all, but the central issue… We have reached peak demand.
The costs of material production of everything — from oil to houses to eggs to medical care — is more than we can afford. The wages that we earn in this system are insufficient to buy our needs, never mind our desires. We do not have the money to spend within this economy. We now meet many of our needs outside this economy, or at the very fringe edges, through exchanges that do not involve money, do not contribute to economic activity, do not lead to a sale of stuff, and so do not drive production, supply, stuff.
This is not unexpected nor unusual. This is how a system like ours behaves. This is its natural life. It starts on this path as soon as some people begin to take more than others. Wealth concentrates in fewer and fewer hands. And while monetary wealth is not materially limited — we can print infinite dollars (or thereabouts) so that everybody has money to spend even as the elites acquire orders of magnitude more — this is still a zero-sum game. Because to have more, others must have less, for one thing. But more importantly, monetary wealth is not real, wealth. It is only a claim on real material value — which is finite. As the volume of money increases in a materially finite system, the value of money, its ability to buy stuff, decreases. In other words, the more money we print, the more things will cost. We may all be billionaires in a money-flush system, but eggs will cost thousands of dollars, a barrel of oil will cost millions, and houses will cost hundreds of billions. Everything will still be unaffordable. Except to the very few gazillionaires at the top of the monetary pyramid. And they don’t buy very much stuff…
We have come to the end of market demand.
This is partly the fault of those bent on wealth concentration. To increase their wealth, to keep revenues above costs, they have held our wages below the average cost of buying the stuff they sell. They have foisted all expenses of their various industries onto us. They have taken from the system until there is nothing left to take.
But this is also just how a profit-driven economy works. Those seeking to take more than they put into a system may have the best intentions, may seek to minimize the harm and spread the benefits, but it will do no good in the long run. The end is the same no matter the beginning intent. And it’s a not-so-long run when parasites fueled by dense energy sources run the system. This is a finite planet. This is a zero-sum game. In these conditions, real wealth will quickly concentrate in fewer and fewer hands. More and more people will find themselves pushed out of the system. The center will, inevitably, not hold.
This has happened, repeatedly in history, and, I believe, somewhere around the end of the 20th century to our own particular profit-driven economy. There is now not enough demand to drive supply because most of us are hovering around the edges of poverty if not squarely there. And there aren’t enough wealthy people in the world to constitute a vibrant market for anything.
We read daily about the declines in oil exploration, in the lack of research, in drilling new wells. This isn’t only because there is less oil, nor even because it is more costly. It’s because the demand for oil is dropping. Make no mistake, we are still driving cars. We must in this ridiculous system wherein our homes are far from everything we need. Work and school are many miles away away. Many of us commute for an hour or more twice a day. But though work is normally the longest trip we regularly make, nothing is close to home. By design, our homes are zoned off from all our needs. And so we continue to drive — to the grocery store, to the restaurant, to the library, to the hospital — but we are no longer driving for pleasure. We’re not traveling. We’re transporting ourselves from one need to another. And aside from these needs, we are actually going fewer and fewer places every year. Yes, we continue to drive, but we are, inexorably, using less gasoline. The year 2019 was actually peak gasoline use.
And no, most of us are not replacing gasoline engines with electric engines. We’re in that Red Queen race. We can’t afford a new car…
Which is the point. We aren’t buying new cars. Or new appliances. Or new homes. Or new anything. Not voluntarily. We sometimes are able to replace the stuff that died. But more and more, we try to keep things working without any new expenditure. Because we don’t have anything to spend. So we are not buying stuff. We are not driving the market.
And oil companies know this.
It’s not and it never has been our personal driving, the transport of human bodies, that drives oil demand. It’s the manufacturing of stuff, the extraction of stuff, and the transportation of stuff. The demand for oil is the demand for everything. And the demand for everything has faltered.
The reduction of drilling is because oil companies know that we’ve reached peak demand. Oil companies know that we don’t have the money for stuff, meaning stuff is not going to be sold, meaning stuff is not going to be produced and transported, meaning the demand for oil is decreasing. And oil companies are not going to spend their own money on production that will never generate revenue.
They will spend public monies… but not on exploration… they’ll take those subsidies and spend them on executive “compensation” and investor dividends.
Now, for some of us, this decline in demand is great news. Because no demand means that economic activity slows means that the parasitic destruction also slows. But even those committed anarchists among us (of which I tend to count myself) are nervous about this involuntary contraction due to demand destruction. Because there will soon come a point at which the whole system unravels. Probably catastrophically, if the past is any indication of what is to come. And the greater the complexity of a system, the greater the likelihood and magnitude of catastrophe. When demand falls too low, then businesses fail. When enough businesses fail, then a whole chain of failure will follow and it will be very difficult to reverse this trend. Because it’s all interlinked.
And nearly all of it is bound up with oil.
So, I almost sympathize with the frantic public officials who are proposing “solutions”, meaning trying desperately to prop up demand and keep economic activity going. Meaning keeping that oil flowing. But none of these proposals will work.
Solutions to the problem of declining demand that involve printing money won’t work. Whatever the volume of money in the system, it will always be too little for most of us because more money is just going to increase costs. While we might all be billionaires, those billions would be meaningless. With increased costs of everything, we still would be constantly struggling to pay for necessities, just at much higher levels of spending. This is what I imagine as nightmare inflation.
On the other hand, solutions that involve producing less stuff while remaining committed to the current system also won’t work. This will merely continue to depress demand so that no business would be able to make a profit over production costs and production would stop. This, unfortunately, would accelerate that catastrophic crash, a hard wall against all economic activity, including transitioning to an economy of lower emissions. This is nightmare demand destruction.
Of course, the current official policy in the US won’t work either. In its trademark ignorantly myopic fashion, this administration advocates simply for more drilling. As if stagnation is a problem created by the regulations on emissions. However, “drill, baby, drill” has zero chance of happening because oil companies will not be drilling in the face of profitless ventures.
More drilling does not mean more revenues. There has to be demand, and unless the Trumpies are going to start handing out universal basic income and regulating costs to keep life affordable, then there will be no demand no matter how great the oil supply. And I’m fairly sure the oil corporation bean counters would not give the green light to more drilling even if there was more money sloshing around. Any halfway intelligent accountant can see that increasing money supply does nothing to decrease the relative cost of production nor to increase consumer spending — because more money just raises costs across the board.
It all comes down to the fact that, within the context of wealth concentration and increasing poverty, there will never be a magical cost of crude that will be cheap enough to drive demand and yet high enough to drive production.
Because Goldilocks is a fairy tale…
And this is why our system will fail… is failing… And it was failing from the moment we circled the globe in this dominance system… Because at that closing of the circle there were no more cheap resources to steal nor free labor markets to enslave. From that point the profit motive, and especially the growth paradigm, was a zero-sum game with most of us ending up on the losing side. And when the vast majority of us are becoming impoverished there is no growth, there is no profit, there is no market. And most particularly there is no oil-based energy — which drives everything in our economy.
There actually is one solution that will work though, and that is to use what we have left to localize and de-corporatize our economics. Of course, within the system this is no solution at all. It will destroy the system. But it is a path that will allow it to die without taking down the planet in its inevitable death throes. Because at the end, what remains will be too small for the crash to affect too much.
But, make no mistake, there will be a crash. We are already skidding our way to the end. Wouldn’t it be better to pump the breaks, swerve around, and plow into this nice cushy sand bank than it would be to keep driving off the rocky cliff?
Localizing is that sand bank. Localization decreases our need for transport oil, our need for anything from elsewhere. Localization opens up flows of local wealth, creates local jobs, fosters invention of local ways to meet needs. If we are to survive the crash, then we must decrease the momentum carrying us forward. We need to slow down, of course, but we also need to become small again, human again, no more corporate adventurism. We must directly feel the hurt of failure so that we are less likely to take high risks or spread great harm. We must profit directly from the work that we do and eliminate the unbearable parasitism that drains the Earth’s resources. And most importantly, we must make reality-based decisions that may not be financially profitable but that will lead to increased real wealth — health, well-being, connection, resilience and durability.
But whether we act sensibly and start a controlled descent or just lean into the nosedive (which is where I think we’re heading), we have passed the point of no return. We have passed peak demand, meaning peak production, meaning peak economic activity. And oil companies know that… They are doing everything in their prodigious power to maximize short term profits in this moment. They are handing themselves windfall after windfall. They are constantly pushing to keep the cost of oil high, but not so high that demand implodes entirely…
But they are not drilling new wells…
From this, we might take a sort of grim hope…
And go gird our communities round about with those sand bags…
Because they know, we know, the crash is coming.
©Elizabeth Anker 2025
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ABOUT THE AUTHOR
Eliza Daley is the pen name of Elizabeth Anker. Elizabeth worked in geochemistry at the University of New Mexico and has degrees in math, history and journalism. She was the owner of Alamosa Books, a now-closed children’s bookstore in Albuquerque, New Mexico. She’s taught science to elementary school kids and freshman geology at UNM. She had two books of poetry published by Indiana University Press and is an award-winning musician and composer. She is also an avid gardener, baker, and home-maker who believes firmly in creating place. She currently publishes the blog
By My Solitary Hearth and writes for All Poetry as Elizabeth Murmuring. Her work can also be found on Resilience.
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