Britain’s short-sighted mistake in the 1960s was not so much the scrapping of a technology that had first seen the light of day in 1802, than in the technology it chose to replace it with.  Where most of Europe opted to replace steam with electric locomotives, the UK government chose a combination of diesel and diesel-electric trains as a supposed “interim,” to eventually be replaced by electric trains sometime in the future.  It didn't happen.  When I did my brief stint working in the railway industry in the early 1980s, we were still hauling 1960s diesel multiple units up and down the South Wales Valleys – often cannibalising engine parts from units that were beyond repair in order to keep the remaining units running.

Even with new investment either side of privatisation in 1996, the bulk of Britain’s railways continue to depend upon diesel.  This is unfortunate to say the least, since electric railways are more efficient and vastly better for the environment than electric cars; so that, with an electrified network of trains and trams, most of our journeys might be made on mass transport.  It is also unfortunate because the quantity of diesel fuel available to us, following the global peak in oil extraction in 2018, will be declining at around five percent per year from now on.

As with much else that governments are responsible for, ours chose to kick the problem into the future rather than commit to the high levels of public spending required to fix it.  The result was that a supposed transitional technology became permanent, so that in future Britons will be paying ever rising prices to travel by rail or for goods transported by rail.

It was only a decade after I watched what turned out to be one of the last working tank engines, that the western states were shocked by the OPEC oil embargo.  For the first time since the start of the oil age, people began to contemplate life after the oil had run out.  Of course, back in those days Britain had a thriving coal mining industry which could comfortably manage a transition back from diesel to steam trains.  And many rail enthusiasts advocated exactly that… although in fairness, few took the suggestion seriously.

One reason for this is that it takes a lot more than coal to operate a steam railway.  There is a whole support and logistics infrastructure to maintain and operate steam locomotives that is entirely unnecessary to operating diesel trains.  Boiler makers, for example, are redundant in a diesel system.  So too are the network of water towers and troughs that refill the engines on the move.  In wasn't just the steam locomotives that had ended up in scrap yard, their supporting infrastructure had gone with them.

Fortunately, 1973 had been no more than a dress rehearsal.  The opening up of the North Sea – along with US deposits in Alaska and the Gulf of Mexico – provided the western states with a 25 year buffer in which to transition railway networks to electricity before diesel became too expensive to be viable.  But once again, governments chose to kick the can down the road and leave it to people in the future to deal with the problem.

And so here we are.  The crisis is not, you see, about “running out of oil.”  All that is required to undermine any economy is that its primary source of energy falls into decline.  Throughout human history, food had been the primary energy source.  And throughout human history, declining food supplies have always been the primary reason for civilisations to collapse.  Indeed, set aside your ideological biases for a moment and you will find that every political revolution was preceded by rumbling bellies across the mass of the population.

Unlike those earlier civilisations, ours is based primarily on fossil fuels rather than food.  As a result, instead of a few hundred thousand rumbling bellies, we are looking at some eight billion – almost all of whom depend upon a globalised industrial agricultural system which is absolutely reliant upon diesel-powered machinery and transport, together with oil-derived pesticides, herbicides and fertilisers.  In order to keep that system going, in the face of declining oil extraction, everything else which uses diesel is likely to be curtailed.  Not least because even the venal governments of the modern era understand that allowing millions to go hungry seldom turns out well.

Just like those railway enthusiasts in the early 1970s, who imagined we could simply revert to steam power, there is a strand within environmentalism which imagines that declining oil extraction won’t be a problem because we can simply go back to a rural idyll in which horses become our main means of powering transport.  This though, is impossible for exactly the same reason we cannot go back to steam.  According to the British Equestrian Trade Association, there are just 847,000 horses of all kinds in the UK.  Most are ornamental.  Few are of the heavy breeds required for work.  As I noted in my 2015 book, The Consciousness of Sheep:

“In the years prior to the First World War, despite the introduction of steam powered machinery, a million working horses were still essential to agriculture and industry.  By the end of the Second World War, the number of working horses had fallen to just 20,000.  By the 1950s working horses were all but wiped out.  Today some – largely ornamental – ‘heavy’ (i.e. working) horses are employed in museums, and enthusiasts keep heavy horse breeds going.  Almost all of the… horses in the UK today, however, are entirely unsuited to providing agricultural or industrial horsepower.”

Nor is it just the absence of the horses that makes it impossible to go back.  As with steam trains, there is a whole infrastructure and logistics chain behind the horses themselves.  With the exception of a handful of enthusiasts, not one of us knows how to harness a team of horses to pull a cart or a plough.  Even fewer know how to make those items.  Even as late as 1945, an army of blacksmiths and farriers was on hand to keep the horses working.  And who knows how to make carts and wooden ploughs these days?  By the time we bred the horses, trained the workforce and re-created the infrastructure, most of us would have starved to death – Soylent green would be a more realistic feeding option!

Which brings us to the other leap backward that humanity has embarked upon; the attempt to run our civilisation on renewable energy – something we haven’t done since the seventeenth century… and it goes without saying that there were 7.5 billion fewer of us in those days.  The energy – sunlight with a bit of gravity thrown in – may be renewable, but the technologies are as much a product of a fossil fuel-powered industrial economy as the internal combustion engine, television and smartphones.    Without the globalised infrastructure and logistics chain, wind turbines and solar panels would be of less use than the ornamental horses that remain to us today.  And the Achilles Heel of that globalised infrastructure and logistics chain is the now ubiquitous microchip; without which the entire system goes down in short order.  There isn't a modern electricity grid on the planet which can run without computers.

The very fact that microchips have become ubiquitous has helped – until now – keep the price affordable.  Economies of scale, coupled to low wages and lax environmental standards, allow them to be produced cheaply and in high volumes.  And note that a large part of the chips that are produced are needed to maintain our existing infrastructure and logistics chains – including the ones required to manufacture microchips.  So under no circumstances should we do anything so foolish as to seriously disrupt the supply of and demand for microchips.

According to a recent Reuters report:

“From delayed car deliveries to a supply shortfall in home appliances to costlier smartphones, businesses and consumers across the globe are facing the brunt of an unprecedented shortage in semiconductor microchips.

 

“The shortage stems from a confluence of factors as carmakers, which shut plants during the COVID-19 pandemic last year, compete against the sprawling consumer electronics industry for chip supplies.

 

“Consumers have stocked up on laptops, gaming consoles and other electronic products during the pandemic, leading to tighter inventory…”

This, of course, is the consequence of the lockdowns and restrictions put in place in response to the SARS-CoV-2 pandemic.  As Matthew Sparkes at New Scientist reports:

“The covid-19 pandemic caused an initial slump in car sales of up to 50 per cent, because few people were travelling anywhere and confidence in the economy was low. Car companies reacted by slimming down manufacturing and reducing orders for parts. This included huge numbers of computer chips, because modern cars contain dozens of them to control everything from braking to steering and engine management…

 

“At the same time, there was a rush for home office items like laptops and smartphones, vital because many people transitioned to working from home. There was a similar rush for games consoles, so that people had something to do to keep their minds off the global pandemic.”

More worryingly, microchip manufacturing was already close to capacity prior to the pandemic; as Sparkes explains:

“Other data shows that the chip industry has been edging closer to its full manufacturing capacity for some years now, so in a way this could have been expected and there wasn’t enough of a buffer in place to handle fluctuations in demand. “Chip famines” have happened several times before, often due to disasters, but also sometimes when new technology requires updated factories.

 

“In any case, factories are ramping up capacity now but this will take time to have much of an effect. It can take 26 weeks to create a chip and there are more than 1000 steps in making some products.

 

“In February, US president Joe Biden signed an executive order that will see $37 billion spent on bringing manufacturing capacity to the US. Again, this will take time.”

Forward planning comes with problems of its own though.  At its simplest, do we expect the patterns of demand in response to the pandemic to continue or do we expect them to reverse once a responsible adult comes along to declare the pandemic at an end?  One clue is that car sales had been in decline for several years prior to the pandemic.  Indeed it is only the leasing Ponzi scheme – in which people pay less per month but more overall – that has kept the flow of new vehicles going; even as most people’s prosperity has been falling.  So should – as the politicians and economists are encouraging – industry ramp up production of microprocessors for cars?  Or should manufacturers anticipate ever more remote working, and instead focus on chips for PCs, laptops, tablets and phones?  Getting it wrong means flushing millions of pounds, dollars, euros and yen around the u-bend.

Despite the wishes of governments and central banks, the trend to home working looks set to accelerate for simple cost-saving reasons.  Obviously, the cost of running a car can be eye-watering once you add the costs of fuel, tax, insurance, maintenance and parking.  Moreover, the difference in blood pressure between making the leisurely stroll from breakfast table to home office is vast when compared to the two hours sat in heavy traffic before getting to the office.  But cost saving is also an issue for businesses.  Commercial rents have remained stubbornly high in the years since the 2008 crash.  And for many businesses, rent is second only to staff costs as a call on income.  Having been forced to send the workforce home, and having discovered that the workforce is still productive; many more companies have announced plans to increase remote working while cutting the need for office space.

Add into the mix the coming oil shortage as the industry attempts to make up the twenty percent of production lost in 2020, and it is unlikely that the days of happy motoring are returning any time soon.

Nor is oil the only essential resource in short supply as the pandemic enters its second year.  At least in the short-term, mineral resources are going to be harder to obtain as mining companies try to anticipate demand as economies begin to open up again.  This means, for example, that the Biden Administration’s plan to spend $2tn on their version of a green new deal will most likely founder on higher resource prices.  As the International Energy Agency noted last year:

“As the Covid-19 pandemic has pushed many countries into some form of lockdown and hit mining operations across the globe, the risks around clean energy supply chains, including those of minerals, have come into sharper focus. Peru’s copper-mining activities, which are responsible for 12% of global production, ground to a halt because of the country’s confinement measures. South Africa’s lockdown disrupted 75% of the global output of platinum, a key material in many clean energy technologies and emissions control devices, although the country later allowed mines to operate at 50% capacity. Although prices for many important minerals have fallen as global demand has slumped, recent developments have highlighted a number of reasons why the world should not take secure supplies for granted.”

In its way, the pandemic impact on supply and demand across the economy is as artificial as the OPEC oil embargo in 1973.  But let us remember that it took until the mid-1980s to recover from that supply-side shock.  And in those days we had the advantage of untapped and relatively cheap oil deposits nearby.  This time around we face a depleting planet that simply cannot provide the energy and mineral resources needed either to maintain the current arrangements or to build out the touted renewable plus hydrogen alternative; still less an infrastructure and logistics chain to enable it.

We will one day unlock, of course.  Either governments will contrive an end to the pandemic, or the economic impacts will become too great for us to continue to restrict the economy.  But with shortages appearing across the economy – as everyone tries to second-guess what the post-pandemic economy will look like – the one thing we can be sure of is that there will be no going back… either to the old or the wished for new normal.

Author

Tim Watkins, residing in the UK, is a social and economic scientist with a background in public policy research.

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