Books: The downside of oil dependence

Thomas Homer-Dixon's "The Upside of Down" warns that western economies are about to take a hit.

Television personality Paula Todd recently hosted the National Business Book Awards, held at Toronto's tony Windsor Arms Hotel. At one point during the ceremony, Todd observed that big news trends often appear in the business press first, stroking the egos of the reporters and editors in the room, who nodded sagely in agreement while sipping champagne. Her comment was somewhat worrying, however, considering the winner, Thomas Homer-Dixon's The Upside of Down, is a warning that western economies are about to hit a patch of intense economic readjustment as global warming, peak oil and resource depletion combine to create what will be the largest “discontinuity” to ever hit western financial markets.

Energy, of course, is the master resource in a society. For the past 150 years, our civilization has been expanding at the expense of intensive exploitation of fossil-fuel resources, which have, to this point, been fairly easy to produce. As Homer-Dixon points out, easily refinable, light, sweet crude oil, at least in the early days of the petroleum age, provided an energy return on investment (EROI) of 100-to-1. That era, however, is rapidly disappearing as the world's reserves of light, sweet crude run down, to be replaced by unconventional sources of crude like the Alberta oilsands, which sports a much less potent EROI (less than 5-to-1).

That change in the trend of EROI—frompositive and growing to negative and shrinking—is an epochal change for any society, says Homer-Dixon. Ask the Romans. A good chunk of Homer-Dixon's book is an explanation of the thermodynamics of the Roman Empire, an empire powered by the solar energy that fell on the fields and was converted into food and animal energy. Grain was the oil and gas equivalent of the day, and the flow of energy from the fields of conquered territories fed the development of the complex and sophisticated core of that society. Eventually, though, the energy needed to march armies farther and farther from the centre crossed a threshold, and EROI turned negative. It wasn't long after that that decline set in, and the whole thing fell apart.

The same thing may be happening today, says Homer-Dixon, one of Canada's leading public intellectuals. His acceptance speech at the book awards was a warning that Canadian business leaders and politicians need to begin thinking seriously about the energy challenges ahead. He even announced he would put his $20,000 prize toward a new think-tank he is starting to deal with the issues raised in his book. Let's hope those in attendance weren't left too light-headed by the rich food and drink to actually read the book. If Homer-Dixon is right, we're in for a rough ride that's not in any way conducive to sipping champagne in fancy hotels on a Monday afternoon.