The Age of Centralization

…The greatest product of oil, however, is wealth. As J. Paul Getty advised: “Formula for success: rise early, work hard, strike oil.” This wealth is due to the phenomenal returns from oil, known as EROEI, energy return on energy invested. Unlike coal, which had to be physically lifted from the ground, oil often flowed to the surface under pressure. Returns of over 100 times the energy invested to drill a well were not uncommon in the early days of oil exploration.

It is this bonanza of essentially unearned natural wealth that has formed the basis of much of the 20th-century improvement in human living conditions. Cheap oil forms the basis of the current US food production chain and any number of other systems: “Crude oil has been critical for economic development and the smooth functioning of almost every aspect of society. Agriculture and food production is heavily dependent on oil for fuel and fertilisers. In the US, for instance, it takes the direct and indirect use of about six barrels of oil to raise one beef steer. It is the basis of most transport systems. Oil is also crucial to the drugs and chemicals industries and is a strategic asset for the military.” (emphasis added)

Here, then, we can find the economic support for the excess of centralization that must otherwise collapse the societies that it plagues: the extraordinary profits from oil have paid for the hypertrophic governments that afflict us. All of the uneconomic activities of the US Federal Government and its economic distortions could be borne as the wealth increased. Indeed, governments know that their uneconomic behavior needs SOME external input to support the system, and the militaries of many nations have launched invasions seeking control of oil, including Imperial Japan and Nazi Germany; oil lifting costs of $1.50 a barrel in Iraq certainly did not deter the US invasion in 2003, an invasion originally to be paid for from Iraqi oil revenues.

The bonanza from oil, however, is at an end. Sometime between 2005 and 2008 the world produced more oil in one day than ever before, which total was not matched afterwards; this is the concept of peak oil. The oil that remains is less easily produced, and the EROEI is much lower; thus, the subsidy to uneconomic ways of living must be reduced. This is particularly threatening to the Federal Government, which thrashes about, attempting to continue the status quo. It will likely seize larger quantities of wealth from an economy in shock from declining energy inputs, faster collapsing the ability of the economy to support it. As Herbert Stein said, “Things that cannot go on, don