British Petroleum (BP) publishes its Statistical Review of World Energy, venting out a few catchy phrases that the mainstream media mindlessly repeats. This time the catch-phrase was: “overall energy consumption is growing faster than renewable energies put together”. This discourse is naturally convenient to those set on promoting fossil fuels and/or detracting renewable energy. But is BP really a trustworthy source on the matter?
Professor Steve Keen may be the first mainstream economist to address a fatal flaw in economic theory: omitting or minimizing the role of energy. Keen has developed a production formula incorporating energy, not as one factor of production along with capital and labor, but as the indispensable flow activating both.
Economic theory has failed to incorporate the role of energy in production for two centuries since the Physiocrats. In this video I derive a production function that includes energy in an essential manner. It implies that economic growth has been driven by the increase in the energy throughput capabilities of machinery.
Anyone with any sense for global economic trends ought to be worried. The signs are everywhere of a serious deflationary crisis.
Why are commodity prices, including oil prices, lagging? Ultimately, the question comes back to, “Why isn’t the world economy making very many of the end products that use these commodities?”