Thermodynamic Oil Collapse

SRSrocco Interview with Louis Arnoux

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Thermodynamic Oil Collapse

After careful analysis the critical time horizon of 2030 was brought forward to 2022. A scientific paper is currently being prepared that should be peer-reviewed.

A lot of the finding's need to remain confidential until that paper is published.

An unavoidable amount of energy is lost during the production of oil as shown in blue. On top of that is the increasing energy lost due to exploration, extraction, transport, processing, and distribution as shown in yellow.

Whatever's leftover is shown in red and there won't be anything left by 2022.

When this threat is added to climate change, air pollution, ecological threats, and global debt it creates a perfect storm.

Until now people have only been talking about peak oil but we can now determine that date more precisely. It's not a question of a slow decline in oil availability over the next century rather we have five years to reach 0% and then face the aftermath.

People have not woken up to the reality.

scraping the bottom of the barrel

This is a similar chart showing the increasing cost of energy production.

The Dragon King is a counterpoint to the low probability high impact Black Swans, they have high probability and high impact.

The average barrel of oil contains 6.22 gigajoules of energy but can only deliver a maximum 4.4 gigajoules if everything is done efficiently. Approximately 1 billion people are involved in oil production to some extent.


  • 1745 Oil industry started in northern France mishlebront. Schrimberge is a large oil service company. Initially people collected oil using shovels and carts.
  • Techerville 21m well dug by Drake.
  • Spindletop 347m well on US Gulf Coast. 100k barrels per day. Harder to find.
  • Now we have to go far away like Alaska, Siberia or 300km offshore Brazil where there are hurricanes. Then we have to go deeper, after 2km of ocean there is 2.7km of prestalt to reach oil which is dangerous.

The Kashagan oil field has cost $50bn so far and is only now producing oil after 15 years.

Add oil becomes harder to extract more energy is consumed during its extraction.

There's a very short time left before things get ugly.

People speculate that the price of oil will rise to $100 then $150 a barrel as demand increases but the opposite will happen.

Imagine the world is very clever and we get to 2030 at which point the oil industry cannot deliver oil to the rest of the world that has any useful energy left. There is oil left but to process it would use all of its energy.

If a barrel of oil has no energy left after processing then it is worthless so it follows if there's no economic value then oil production will cease. The world doesn't run on oil, it runs on processed oil.

When there's no economic return the oil remains in the ground. The decline in the oil price has nothing to do with supply and demand.

20161020 05

Financial investors are really disconnected from the physical reality. To give the illusion of growth federal and central banks have propped up the economy with massive amounts of monetary premium debt.

It has inflated the value of paper assets including stocks.

Chaotic Thermal Decline

To date no one has put forward a solid theory of value.

Economists have the concept of a constant dollar as a way to track value over time. it takes into account inflation and deflation and is shown as the rising green line. it's not really constant but flexes like a rubber band.

Gold and the amount of energy and a barrel of oil are other measuring sticks of value that don't change over time.

on the vertical axis is GDP per head or the wealth created

The dotted blue line is the price of gold in grams.

Wealth created from oil initially follows the green curve then climbs steeply tracking gold until peak oil production and Nixon drops Bretton Woods agreement. Wealth creation during the 80s dropped to 1900 levels.

With massive debt new oil fields were discovered and brought online. The surge in oil wealth created prosperity until the late 90s when it crashed again to 1900 levels.

All the money printing glosses over the fundamental issue that wealth is created from oil derived transport fuels.

The consequences of the fizzling out of oil energy are reflected in the chart.

If it is oil that creates wealth then the GDP should track the red line. The reason it doesn't is because of global debt, a world living on unsustainable credit.

Chaotic thermodynamic decline

Most western countries are part of the old industrialised machine follow a similar pattern to the USA. Japan was able to come from an undeveloped country to quickly follow other industrialised nations.

China appears to be powerful but in terms of GDP per head it hasn't really taken off. Without the key ingredient of oil, China will have a hard time competing especially when the majority of the population are not happy living in poverty.

Unless we very quickly change the way we handle energy globally the world is going to hell in a handbasket.

thermodynamic relatives of wealth

This chart is in running dollars, based on the world GDP figures available from the World Bank.

In red is the cost of a barrel of oil knowing that after 2012 it's going to decline.

The blue line is simply one divided by the other calculated per head based on United Nations demographic data. The trendline robustness is represented by The regression coefficient R squared. The closer to one the more accurate the regression line.

global thermodynamic decline

Ramifications for the Global Economy

If no solutions are found the global economy will grind to a halt. in 2015 the world bank reported global GDP dropped by 6%, never has it done that since world war 2.

Things are falling apart quickly and the majority of people have no clue.

You may think the solution is to move to a rural town and learn how to become self-sufficient growing your own food.

Currently renewables produce 3% of our global energy needs but they're not growing fast enough, they are too costly, not efficient enough and take too long to implement. The energy required to replace a whole system is also high.

Any solution needs to meet a number of requirements:

  • 100% direct solar or biomass. not wind.
  • > 80% energy efficiency.
  • decentralised.
  • cost < $0.04/kWh
  • not produce CO2
Don't miss Paul Counsel's webinar on what you can do to protect the value of your existing wealth.
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Brought to you by Michael McDonald, founder and editor of Zen Notes.

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