Reality vis-a-vis Energy And The Economy
The Market Ticker - Commentary on The Capital Markets
Login or register to improve your experience
Main Navigation
Sarah's Resources You Should See
Full-Text Search & Archives
Leverage, the book
Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions. For investment, legal or other professional advice specific to your situation contact a licensed professional in your jurisdiction.


Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility; author(s) may have positions in securities or firms mentioned and have no duty to disclose same.

Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.

The Market Ticker content may be sent unmodified to lawmakers via print or electronic means or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media, to republish full articles, or for any commercial use (which includes any site where advertising is displayed.)

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must be complete (NOT a "pitch"), include full and correct contact information and be related to an economic or political matter of the day. Pitch emails missing the above will be silently deleted. All submissions become the property of The Market Ticker.

Considering sending spam? Read this first.

2022-01-03 10:00 by Karl Denninger
in Energy , 1281 references Ignore this thread
Reality vis-a-vis Energy And The Economy *
[Comments enabled]

If you have read Leverage one of the key points made fairly early on, and one I've made repeatedly in this column, is this:

Behind every unit of GDP there is a unit of energy.

It has always been thus and always will be thus.  It is akin to the laws of thermodynamics, which you cannot do anything about and it does not matter if you like them or not.  Attempting to go "beyond them" will not only always fail it will hurt in some regard since it will at best be a less-than-optimal experience and at worst will be a death-causing one.

Fracking was considered a "miracle."  It was no such thing.  I noted many years ago during its "heyday" that it was nothing more than a parlor trick: Yes, you get hydrocarbons out of the ground in places where they were formerly uneconomic to attack, but the problem with doing so is that you haven't changed the amount in the ground -- only the speed of extraction.  Therefore if you double the speed of extraction you also double the rate of depletion!

One of the common chestnuts is that we're "running out of oil."  We are not.  There is a crap-ton of oil.  The problem is the cost of extracting it.  We've run out of cheap to get to oil.

Indeed, we have more than 500 years of reasonably-recoverable and consumable fuel that can be used as liquid hydrocarbons and, if you do not care about cost, we actually have an infinite amount!

What, you say?  That's impossible!

My riposte is that you failed high school chemistry class.

Hydrocarbons are simply chains of hydrogen and carbon, when you get down to it.  Natural gas is a simple one; CH4, or one carbon and four hydrogen atoms.  It has much more energy than coal (which is basically just Carbon) because hydrogen has much more electronegative potential, and thus when burned you get much more energy released for each unit of fuel you use.  This has been the primary reason the United States has in fact dropped its per-BTU CO2 emissions dramatically over the last 30 or so years; natural gas has been cheaper than coal.

We don't use hydrocarbons for energy because we're pigs that hate the Earth, in short.  We do so because they are the only reasonable means to get the energy required for modern life in a package form that works.  All the screaming about EVs and similar is nothing more than a bunch of ignorant jackasses who think they can violate the laws of thermodynamics..

You can't.

The person who figures out how to do it, if it can be done, creates a world that is wildly beyond the dreams of Lucas and Roddenberry.  Even in the Star Wars and Star Trek fictional universes they follow the laws of thermodynamics -- in Star Trek they use dilithium as an energy medium, and in Star Wars it is Kyber crystals -- both of which have to be mined, in other words, both of which were created as a result of the formation of planets and stars and both of which are finite resources.

Let's take a simple example: An electric car.  It's "more efficient" than burning gasoline, right?

Uh, nope.

A modern gasoline engine is about 35% efficient in terms of taking the BTUs in the gasoline and turning it into movement.  That's horrible, you'd think -- electric motors can reach 90% efficiency with modern controls (and the motors in electric cars typically are near that range.)

Electric wins, right?


Every transfer or transformation of energy involves loss.

The best combined-cycle natural gas generating plant has roughly 60% energy efficiency.  These are the most-modern; everything else is worse.  Nuclear is a lot worse, typically, about half that (that is, for every watt that comes out of a nuclear plant as electricity about two more wind up dumped, typically into a body of water.)  So we'll use the best.

The natural gas plant is 60% efficient making the electricity.

The transmission of the power from the generating plant to your house is 95% efficient (5% is lost, roughly.)

The charging of the EV battery is about 75% efficient during normal (slow) charging but this drops wildly when "superchargers" or similar are used.  Such charging is unlikely to exceed 50% efficient due to the requirement to keep the batteries cool.  In short charging at more than "1C" for a lithium cell results in much lower charge efficiency because you are attempting to "overdrive" the chemical process that charges the cell, and doing so radically increases loss.  We'll use 75%.

Assuming you do not let the EV sit (all batteries self-discharge over time) and drive it the next day the loss from self-discharge is very small.  We'll ignore it, and give you the entire 90% "best of breed" efficiency between the battery and the wheels (the withdrawal of said energy, control electronics and motor turning the stored battery power into movement.)

So where are we thus far?

0.6 * 0.95 * 0.75 * 0.9 = 38.5% efficient for the EV assuming the best case, which of course is bullshit, but even if you assume such it is still nearly identical to that of the gas-powered car that cost far less money to buy!  Never mind that there is no economically-viable means to recycle a lithium battery pack in an EV; it is toxic waste when it wears out and inevitably, as with all such things, it does.  Nearly every part of a traditional car is recyclable; the metal the vehicle, including its engine and transmission all is, much of the plastic is, and the starting battery is almost 100% recyclable into a new starting battery.

But while you can't violate the laws of thermodynamics you can deliberately cripple yourself.  We can, for example, make all the liquid hydrocarbon we want out of atmospheric (or sea-sequestered carbonate) sources of carbon.  Indeed the CO2 bottle that is refilled at your local brewery or fast-food store that dispenses fountain drinks was almost-certainly condensed out of the air; that is the most-common means by which industrial CO2 is produced.  The reason we don't do this to make fuel is that you must put the energy back in you wish to liberate, plus something for the inevitable losses which you cannot eliminate.  In short what we're doing is using that which the sun put in via energy rather than doing it ourselves and the reason we do it is that it is cheaper.  That's all.

It does not matter if you like these facts or not; they are nonetheless facts.  No amount of braying at the moon nor complaining by the "green wokesters" will change it.  What you can do, however, is foolishly jack up the price to the point that nobody can afford it, at which point modern society as we know it ceases to exist.

Consider that while you may think it would be great to not have all those vehicles running around spewing CO2 into the air where the CO2 goes into the air doesn't change that it does so, and the "more refined" form energy takes the more loss and less efficient it is.  Electricity is a very highly-refined form of energy particularly when compared to, for example, a gallon of diesel fuel.

The premise that we can shift all our energy needs to "renewables" is pure folly.  We cannot at a price that can be paid by the common person, and whether we like it or not renewables are largely unreliable as well so you must add massive storage costs which makes them even more uneconomic.  While the ultra-rich do not care if their power bill at their mansion goes from $2,000 a month to $5,000, since they make north of a million a month anyway, the common person cannot pay a $500 electric bill that used to be $200.  That's roughly $3,500 a year of additional expense they do not have.  To cut that $500 bill back to something they can afford they cannot have either heat or air conditioning, and might not be able to have hot water!

Years ago I penned a column that was an expansion of part of what I wrote about on energy in Leverage called "Let's Talk About An ACTUAL Energy Policy" that, unlike the woke dreams and fairy tales does not violate the Laws of Thermodynamics nor does it require that we conquer something (e.g. fusion) we do not know how to do.  It does require engineering progress, but engineering is something that humans have always been good at, given the will.  Our landing on the moon is but one example; there were no actual breakthroughs required in terms of what we knew how to do, but engineering, the application and refinement of what we know, was required.  The same holds true here.

It is indeed easier to scream at people about them being pigs than to put your nose down and solve engineering problems, especially if you lack the intellectual firepower required to do the latter.  Those who fly all over the world yet scream about fossil fuel use are in that group -- to an individual.  So are those who live in mansions rather than 1,000 sq/ft hyper-insulated homes, have swimming pools and other personal accoutrements.  Fenestration (windows) are energy pigs; the person who claims to be a "green woke individual", if they're not lying, has no business living in a structure with floor-to-ceiling "natural light" that both gains energy in the summer and loses it in the winter, both of which must be reversed by artificial (and earth-damning, by their claims) means.

Perhaps as the self-imposed stupidity begins to bite we will force some of these people to live by their own standards.

I might also grow six heads, but somehow I suspect both are equally likely, and given the public's unwillingness to take the time to understand even the most-basic principles of both chemistry and physics I hold out little hope on a forward basis.

Go to responses (registration required to post)

Comments on Reality vis-a-vis Energy And The Economy
Login Register Top Blog Top Blog Topics FAQ
Page 1 of 5  First12345Last
Stetson 113 posts, incept 2021-09-09
2022-01-03 10:19:53

Time to renew our research into thorium reactors.
Chemman 433 posts, incept 2021-05-03
2022-01-03 10:21:31

TBF most people haven't even taken a chemistry of physics class. Those two classes tend to be optional unless you are going to be a STEM major in college
Mjeff87 3k posts, incept 2021-11-22
2022-01-03 10:47:02

KEi + PEi + Wnc + OEi = KEf + PEf +OEf.

It's that simple. The Law of Conservation of Energy.

Ma Nature is a brutally simple, yet highly effective, machine. She is quite adept at Her job. I flat out laugh at the hubris of man who thinks he can influence Her by action, or lack thereof. She will shake us off Her back same as a dog rids itself of fleas.

That solar, or wind energy, that the masses are so desperate to capture, has a function. It is heating or blowing something. Screw with it at your own peril. Butterfly effect.

Si Vis Pacem, para Bellum

You'll get less than you desire, but more than you deserve
Thombradley 307 posts, incept 2021-11-01
2022-01-03 10:47:10

Read where the EU has put out a draft that posits nuclear and gas fired energy plants may have a place in the prior commitment to be "green" and renewable. Has the greenies up in arms but that is telling me even the nimrods in Brussels realize they are screwing the pooch on energy availability to say, keep from freezing, and maybe getting in bed with Putin isn't such a good idea.

As a cartoon said, "wouldn't it be great if all socialists had to live in socialist countries?"
Edwardteach 393 posts, incept 2021-05-01
2022-01-03 10:47:48

I said something similar when a few years back people started bleating about a "hydrogen economy". Errr...hydrogen is not an energy source, it's an energy CARRIER. To use it, you still need an energy source, and that source is going to be, what exactly? Not to mention that the best hydrogen reservoir you can build will lose about 2%/day, simply because H molecules are REALLY SMALL and will leak through just about anything where two pieces of material come together, no matter how good the weld or how tight the fitting.

One of the chief advantages of ICE, especially in transportation is you are able to carry your energy source around with you. Pure electricity (or hydrogen) doesn't allow you to do that, which creates additional logistical headaches, in addition to the inefficiencies mentioned above.

Know what the chain of command is? It's the chain I go get and beat you with until you understand who's in ruttin command here.
Twainfan2 1k posts, incept 2018-12-04
2022-01-03 11:05:21

Better keep your current vehicle in good shape. With all the car manufacturers claiming they will be 100% EV in the next few years, ICE vehicles will be hard to come by. Talk about a disaster in the making. Either the manufacturers will go bankrupt or most people will have to give up cars. They wont be able to afford them without massive subsidies and the grid cant handle that kind of demand.

I say we make the greenies go out and rotate those windmills by hand!
Semil 5 posts, incept 2020-03-25
2022-01-03 11:05:24

The key is coming up with a means of explaining this to the sheeple.
Tsteve 14 posts, incept 2018-07-22
2022-01-03 11:35:37

Fantastic! Thermodynamics is one of my favorite topics! (Along with mass balance equations.) Thanks for the post.

Karl's estimate on EV efficiency is quite accurate - and if the rare earth metal production costs are included, the efficiency gets considerably worse.

Also on a vaguely related matter: I work extensively with hydrogen gas. It is one of the most difficult to control, it leaks easily, and collects in unexpected places (like under the tops of cabinets). I seriously can't envision widespread use of H2 without frequent mini-Hindenburg events...smiley
Tickerguy 200k posts, incept 2007-06-26
2022-01-03 11:36:20

Hydrogen also has a wildly dangerous LEL/HEL pair.

"Anyone wearing a mask will be presumed to be intending armed robbery and immediately shot in the face. Govern yourself accordingly."
Evergreen 377 posts, incept 2021-12-26
2022-01-03 11:43:38

Rules of life:

Pork chop on floor gets snarfed by dog.

Renewable energy proposal gets snarfed by voter.
Ajkalian 215 posts, incept 2015-09-16
2022-01-03 11:46:46

Hydrogen also has a wildly dangerous LEL/HEL pair.

For reference, here's some more common LEL/HEL pairs:


Veeger 1k posts, incept 2013-02-13
2022-01-03 11:48:59


Mafs is hard...

I remember the Diamond Princess.

Slowly at first, then all of a sudden.
Bzelbob 500 posts, incept 2021-09-12
2022-01-03 11:49:09


My high school physics teacher started every class by writing that at the top of the blackboard in all caps.

Whenever someone did a problem and assumed "miraculous gains" somewhere, he would just silently point at the top of the board.


I'd sure hate it if somebody spray paints that on the side of Al Gore's private jet.... smiley

"Threats are illogical. And payment is usually expensive." - Sarek of Vulcan
Kgavitt 36 posts, incept 2022-01-03
2022-01-03 11:54:02

"It is akin to the laws of thermodynamics . . ."

To put what has been posted above in simpler terms, it isn't akin the laws of thermodynamics, it is a first order corollary of the laws of thermodynamics.

To effect change, you must do work.
Czyhorse 63 posts, incept 2010-06-11
2022-01-03 12:09:39

****slow clap*****
Well said, sir!

Unfortunately, idiots never let facts get in their way of feelings, so we continue to develop EV because it's "cool" and makes us feel good.
Superdude 1k posts, incept 2009-06-16
2022-01-03 12:19:42

I think some of you missed a point.


If I can control something that you use in everyday of your life, I own you. I can tell you how much to pay me. Then when you ask "Energy is so much, I can't afford. Why is that?" I will say "It's my enemy that is causing this." "We need to control them too." I will then have allies supporting me... And it keeps building... When they grow weary of fighting and ask the same question again..
"Your using too much and hurting the earth, we need to limit your travel." "Why do you hate the earth so much and want to harm others? " They have done this with Oil, Natural Gas, Electric Nothing different
Winesorbet 1k posts, incept 2010-08-23
2022-01-03 12:19:48

Great analysis as usual

This is a very good blog focused on this type of analysis
Hanssachs 171 posts, incept 2021-06-24
2022-01-03 12:43:42

I think it was Amory Lovins who used to talk about negawatts, the energy that could be saved by spooling up conservation. That the eco-weenies aren't serious is reflected in the subsidy of electric transportation (disclosure: im a fan of the plug-In hybrid where capital investment offsets some of the inefficiency of running a car on gasoline only to turn that beautiful motion to heat when braking) instead of a crash program to insulate the living hell out of houses so as to cut energy expenditures.

This is not new technology. You could build passive solar houses with 70s technology where thermal mass would maintain a pleasant indoor temperature with up to three days of no sunshine, even in winter. But it requires planning, site evaluation, and a reliable unit of currency so you're not forced to assemble houses as quickly as possible to earn any sort of return. Untying money from energy in 1971/1973 has led to much strife.

Nature bats last. She bats 1.000, too.
Eventhorizon 35 posts, incept 2018-05-23
2022-01-03 12:44:05

Excellent ticker, as usual, Karl.

It's utterly depressing to talk to my fellow physicists about these issues. They all get thermodynamics in an abstract way, but not in practical terms. Worse, they're also exceptionally bad at understanding the macroeconomic implications of the BS they're peddling to our students. 99% of them believe in solar + wind + storage and fully electrified future, electricity prices be damned.

Here's another point. Most people understand that outsourcing is due to cheap labor, but are oblivious to the cheap energy arbitrage that is underneath it all. All the cheap Chinese crap we buy is made with cheap electricity from coal. As we ramp up our renewables driving energy costs higher and higher, expect outsourcing to get WAY worse. Ditto with food prices. Just imagine EV farming combines. Madness.
Edwardteach 393 posts, incept 2021-05-01
2022-01-03 12:44:17

Hydrogen also has a wildly dangerous LEL/HEL pair.


Know what the chain of command is? It's the chain I go get and beat you with until you understand who's in ruttin command here.
Ingar 691 posts, incept 2017-02-14
2022-01-03 12:44:24

@Veeger My head be hurtin' after tryin' to do mafs. But I can vote. Early. And often.
Dingleberry 880 posts, incept 2011-11-06
2022-01-03 12:44:28

I've been watching the slow-motion train wreck, formerly known as "education" for decades. It is utterly shocking how far and how fast it has declined. Testing eliminated or diluted. I suppose high schools no longer teach physics or chem like they did then I was young. Most college degrees now conferred with zero analytical coursework. And we wonder why the millennial "thinks" like a millennial. I can only imagine how the zoomers will turn out.

In order for fairy tales to be believed, the masses have to become ignorant, if not downright stupid. The latter increasingly so and obvious.

We have watched math (the primary language of physics) become fairly extinct in the classroom, and now being attacked as racist? Of course this is insanity. Math represents actual reality and why science uses it.

EVs have always been a toy for the well-heeled to virtue signal at taxpayer expense. Part of the globull warming...excuse me.... "climate change" scam.

Wonder what will happen to the roads (made of what again?) when these multi-ton EVs start to really impact them with their heavy batteries?

Wonder what will happen when the electric grid gets overloaded because everyone has one charging in their garage?

What will happen to the batteries when millions of them crowd landfills?

I've had some discussions with those that are pro-EV. I no longer do. The EV crowd are no different than the Covid Karens in their absence of logic and utter intolerance of anyone disagreeing with their delusions. Despite the endless broken promises of cheap EVs, auto driving, etc. Reality doesn't exist to them.

The masses are on an express train to economic suicide. And we are all onboard. 607 posts, incept 2021-12-17
2022-01-03 12:44:46

While the ultra-rich do not care if their power bill at their mansion goes from $2,000 a month to $5,000, since they make north of a million a month anyway, the common person cannot pay a $500 electric bill that used to be $200. That's roughly $3,500 a year of additional expense they do not have. To cut that $500 bill back to somethin they can afford they cannot have either heat or air conditioning, and might not be able to have hot water!

This is the crux of it all: those in influence/power simply do not care about the common man and, as we have seen by many of the policies pushed (monetary, "pandemic", immigration/"H1B" [non-]enforcement, etc), can reasonably be claimed to despise him.
Njca 274 posts, incept 2018-10-16
2022-01-03 12:44:57

But with an EV, you get to drive to Whole Foods and Trader Joe's confidant that you are saving the environment, unlike those ICE driving neanderthals. Feelingz, nothing more than feelingz....
Login Register Top Blog Top Blog Topics FAQ
Page 1 of 5  First12345Last