Energy in the Economy of Abundance

It has been said that just as water will always flow downhill, economies flow toward abundance. Though we are accustomed to focus on scarcity, it is really abundance that has driven today’s global economy. Despite our focus on peak oil, food shortages, drought, and a host of other problems of scarcity (and they are acute problems), our economy at large has been driven by abundance, where everything becomes a commodity. The automobile industry was made possible by the abundance of labor, manufacturing, and petroleum. Perhaps one of the most abundant commodities - corn - is in one quarter of the items in the average supermarket; everything from cardboard to breakfast cereal to to glue to chicken to toothpaste. Our economic world revolves around abundance.

But despite this abundance, we tend focus on scarcity. Since the Club of Rome’s Limits to Growth in 1972, we have become increasingly alarmed at the notion of population growth and the limits of our ecosystems. Indeed, many forecasted the doom of the human race in a future of depleted resources, sky-high commodity prices, peak oil, and international conflict. It stands to reason that there is only so many places we can go on earth and once we use it up, we’re out of space. The tragedy of the commons dictates that, as resources deplete, things go terribly wrong. It’s common sense.

Only it hasn’t happened.  Today, prices are lower on many staple commodities than they have ever been (as an overall function of income). Households in the developed world spend a lower percentage of their income on food than they did 30 years ago. Things are getting better, not worse, and there certainly has never been a period in human history of more abundance, as a population. Commodities that were once valuable (like salt) have become so cheap they are almost free, and our services economy (as opposed to manufactured goods, things we make) affords a virtually limitless opportunities.

And therein lies the problem for energy management: we’ve bet on the wrong horse.

It’s true that we live in an age of abundance, but we also live in an age of diminishing returns on energy. Oil is becoming more expensive and risky to extract. When a commodity gets scarce, we pay more – up to a point where we replace the commodity altogether. In my grandparents’ day, everything was made of metal. Today, these objects are made of plastic, often so cheap they’re disposable. We simply found a cheaper alternative of manufacture. What we need to do is bring this economic philosophy to the energy debate. Despite what we often think, energy is plentiful, a zero-cost resource that is in every ray of light, every movement of the waves, and in every convection within the earth. Indeed energy is, for our purposes, limitless.

So why are we hanging on to the old notions of scarcity? We’ve become a global society crippled by the tragedy of the commons, and it will only get worse – once we reach peak oil (unless of course we’ve reached it already), oil and all its derivatives will become increasingly and prohibitively expensive. We can defer this effect through subsidies, technology, and even international conflict, but in the end the increased cost of oil is an inevitable function of economics. This will reach a point where it can no longer be afforded by anyone and a shift to another energy source must happen. This is the primary reason why we will never actually run out of oil – it will simply become so costly to extract and consume that we will find more abundant alternatives – the natural progression of any commodity.
Instead, we should be bringing the notion of abundance into the energy debate. We justify billions of dollars every year on scarcity – easy oil is a thing of the past so we are going to greater lengths to find it, either 5,000 feet below the Gulf of Mexico or tearing up vast expanses of Alberta Oilsands. Costs are escalating on all fronts – we have passed the point where this becomes economically and environmentally unsound and its time we let go of our singular gaze on scarcity and move on.

As long as we are actively pursuing an energy economy based on on scarcity (e.g., the oil economy) our only advantage will be energy reductions and energy efficiency. With an energy economy based on abundance however, efficiency is no longer a necessary cost.  The alternative energy sector has been seeking out abundant sources of energy for decades – it has been a central tenet of US Administrations for decades. But I’m talking about a more intrinsic shift than a market one – we need to be aware of the unerring truth that what is scarce will ultimately increase in cost and will be replaced by something abundant. We should use this fact as a bellwether for what is to come – sooner or later – to the energy debate.

When it comes to energy, change is an economic certainty as we move towards an economy of abundance. It’s just a question of when.