https://surplusenergyeconomics.wordpress.com/

Posted on June 11, 2026
20
A CRISIS IN CONTEXT

Foreword

By definition, news has to be new, and there’s nothing novel now about salvoes being traded across the Persian Gulf, or parties to the conflict alternately blowing hot and cold about negotiations.

With each day that the Straits of Hormuz remain closed, though, a severe supply shock looms nearer.

The financial markets, it seems, have become bored with the war in Iran. Investors’ thoughts now are focussed instead on how much capital to invest in proven, sure-fire money-spinners like space tourism, mining asteroids, manufacturing on the Moon and building data centres in space.

AI investors continue to pour gargantuan amounts of capital into a project which, whatever its technological merits may or may not be, makes completely unrealistic demands for energy, water and raw materials.

It might seem logical to wait on the autumn’s events before committing yet more capital to the farther reaches of “tech”. But logic seems to have become deeply unfashionable in the financial markets of the 2020s.

Our source texts here aren’t the giants of sci-fi, but Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds. We’re deeply mired in the same crowd psychology that gave us Dutch tulip bulbs and the South Sea Bubble.

1

These bubbles are, of course, long-ago references, and readers were understandably divided about the merits of our previous discussion, in which we took some preliminary steps into the more distant history of material economic prosperity.

Whilst some found merit in investigating the pre-1980 back-story to SEEDS, others felt that this was something of a distraction from the enormous turbulence of our times.

If there remained much to learn about the current economic and financial predicament, trying to track prosperity trends back to the early 1800s might indeed be somewhat self-indulgent.

But this isn’t the case. We already know most of what we need to know about what’s happening now.

Financial innovation, and supposedly ‘limitless’ technological possibility, are, at best, distractions from contemporary realities.

There’s been a fundamental rebalancing – in fact, a wholesale skewing – of the relationship between greed and fear. Greed has been endorsed at the highest levels of society, and fear has been dismissed as something that’s distinctly lacking in good taste.

2

Delving briefly into the past, we’ll use a trio of preliminary charts from the long-range SEEDS project to set the context here.

Annual growth in aggregate material economic prosperity speeded up dramatically after the Second World War, reaching levels for which there seem to have been no precedents at all (Fig. 1A). Population increases followed a similar course, but have lagged trends in prosperity (Fig. 1B).

During the 1960s, the world’s average person was getting more prosperous at a rate of about 3.0% per year. By the 1990s, that had turned negative. Even if rates of population growth now dropped sharply, this ‘average’ person would still carry on getting poorer (Fig. 1C).

For anyone who knows that the economy is an energy system, it doesn’t take much of a stretch to link the dramatic expansion in prosperity after 1945 to the arrival of (then) low-cost oil and natural gas as successors to coal. Latterly, the proportionate costs – the Energy Costs of Energy – of hydrocarbons have been rising relentlessly, and nothing has been found to take over from them.

These graphs are a useful corrective to the myriad claims that renewables are going to give us a seamless, growth-continuing transition away from fossil fuels. There are very good reasons why no huge and profitable renewables majors – no Standard Solar Trust or Gulf Wind Inc. – have taken over from where John D. Rockefeller and the Seven Sisters left off.

Whatever view one takes about the merits of carrying surplus energy research back as far as we can, these illustrations surely tell us something fundamental. This is that the impetus initially imparted to the economy by the harnessing of fossil fuels, and especially by the advent of hydrocarbons, has been fading out, not over years, but over decades.

This might be welcome news for anyone for whom environmental deterioration is the primary concern. But the idea that we can find new sunlit uplands of growth now that the carbon impulse has faded is strictly for the birds.

Fig. 1

3

Turning from the past to the present, the next set of charts illustrates the economic and financial predicament in 2026.

It’s going to be assumed, for present purposes, that readers are familiar with the connection between energy and material economic output, the role and critical importance of the Energy Cost of Energy, and the way in which the principle of money as claim connects the parallel physical and financial economies within an inherent tendency to equilibrium between claim and substance.

Rising ECoEs, as well as widening the gap between total and surplus energy, also impair the economics of top-line energy supply through a process whereby, just as producer costs are increasing, so consumer prosperity (and hence affordability) declines. Over a very protracted period, total energy supply has barely kept pace with growth in population numbers, whilst surplus (ex-ECoE) energy per capita is trending inexorably downwards.

This must mean that prosperity per person deteriorates from a very long plateau of stagnation, whilst the real costs of energy-intensive necessities are continuing to rise markedly.

It’s probable that very large numbers of people are already unpersuaded by the notion of an implicitly temporary “crisis” in the “cost of living”, and sense, not just that the costs of essentials are on a secularly rising trend, but also that their own means – their shares of prosperity – are failing to keep pace.

We’ve only managed to prop up the apparent affordability of discretionary (non-essential) products and services through super-rapid debt and quasi-debt expansion, and this has created enormous disequilibrium stresses between the underlying “real” economy of material products and services and the parallel “financial” economy of money, transactions and credit.

These stresses are illustrated in Fig. 2D, in which the trend in real-economy prosperity is lagged against the transactional activity recorded as GDP.

The forces of moment here are that an ever greater level of inter-economy stress bears down on an already grotesquely inflated aggregate of claims. This, in short, is how the financial system fractures.

Fig. 2

4

“The future”, as Mickey Newbury put it so long ago, “is not what it used to be”.

The forces now at work go far beyond the mechanical processes just described. Unapologetic greed has long been endorsed as an acceptable norm, and all notions of rebalancing towards greater equality have been dismissed as a heresy peddled by “the left”.

On the immediate horizon are the unfolding consequences of supply shortages which, at the very least, will trigger a spike in inflation. At that point, decision-makers will be torn between combatting popular discontent and keeping the credit-driven simulacrum of ‘normality’ in place.

Against a background of intensifying resource competition between governments, a moment is reached at which somebody losses patience, somebody succumbs to political or financial vertigo, and the fallacies of perpetual stimulus and limitless technological innovation are exposed.

A happy ending isn’t outside the realms of the possible, and is likely to involve greater localism, the failure of top-down, centralised institutions and through-necessity rejection of the doctrines of consumerism.

The problem, as so often, is getting to there from here.