When Things Get Chaotic

I'm reading a good book called "Beyond Oil" by Kenneth Deffeyes, which explores what happens when we start running out of oil. It's not an alarmist book, but rather a detailed discussion by an oil company veteran of what's likely to happen, and when.

An interesting comment in the book comes from Suzy Sachs, a Bell systems engineer. She notes that "systems become chaotic when the load approaches the capacity of the system." (p. 31) In the oil context this refers to price volatility when demand catches up to supply, which is what happened in the Oil Shock era of the 1973-1978. When there isn't excess capacity, the mismatch between supply and demand causes volatility. It's about to start happening again.

The same dynamic is what causes stop-and-go traffic jams on moving freeways - no slack; no buffers. (Technically, it's fluid dynamics.)

Such a situation simply begs for innovation, and yesterday's San Francisco Chronicle obliges by looking in detail at the flip side of the same issue, a cover story on Silicon Valley entrepreneurs who are developing new technologies for alternative energy sources, including solar, ethanol, and algae. The economics here are complemented with an environmental element - these sources are not carbon-based.

Today's New York Times also has a related article - which explores the new technologies that oil companies are using to extract more oil from existing fields. Yields are increasing dramatically in some fields because of the many innovations that petroleum engineers are developing.

When big money is on the line (not to mentioned the future of civilization), innovation is everywhere. Entrepreneurs step up to meet demand and create new demand, and innovation is their means.