Previously:
Summary
As most people will be aware, if energy prices rise, the price of raw materials like iron also rises and that in turn means the price of energy will rise. But, also indirect costs like school teachers will also rise as they require higher pay to pay for higher energy and goods manufactured with higher energy costs, so that the effect of raising energy has both direct and indirect costs.
Because the price of energy has been very closely linked historically to (inflation adjusted) GDP there is very good reason to believe that as energy costs raise, the amount of energy going into producing energy also raises, so there must be a point where if the cost is too high, so that the energy going into producing energy becomes too high, that there is no net production of energy.
For a while I’ve been trying to use an approach I call “enerconics” which uses energy value as a unit of economic activity rather than money to work out the effect of changing from low cost energy sources to high cost ones and also by implication to work out when an energy source is no longer a net contributor to an economy.
After getting stuck on how to interpret the energy value of energy, I’ve finally found a way round that issue which tentatively allows me to start making predictions about the effect on the economy of higher energy prices. It turns out that in a modern economy where about 25% of the economic activity is involved in producing energy and food-energy, that the effective limit on the cost of energy is that if “stable” energy costs rise to 4x the present cost, then the economy suffers irreversible hyper-inflation leading to a total collapse.
However a note of caution: I was tempted to start with a normal warming “not being an expert”, but I can’t pretend to not be an expert – because I am the only person I know to have written about this subject – instead I’ll just say this is work in progress.
