Energy, Money and the Commons: The Economy Beneath the Economy

By Matthew Parish

Saturday 19 September 2026

Economics has an unfortunate tendency to begin with money. Prices rise, interest rates fall, currencies appreciate, governments borrow and central banks create liquidity. We consequently acquire the impression that the economy is principally a gigantic mechanism for moving numbers between accounts. Yet underneath this extraordinarily elaborate financial architecture lies something much simpler. Human beings need land, energy, food, water, buildings, machines and knowledge. Without these things, money is useless.

This elementary observation provides the most persuasive starting point for a rather more ambitious theory of the contemporary world economy: that economists have become too interested in financial claims and insufficiently interested in the physical resources and common assets upon which those claims ultimately depend. The theory becomes less persuasive when it proceeds from this insight towards suggestions of secretly engineered oil shocks, tacit Sino-American energy cartels or obscure financial arrangements whereby Japanese reserves somehow subsidise American shale production. Nevertheless, one should not discard an interesting argument merely because some of its extensions outrun the available evidence. There is a substantial idea buried here and it deserves excavation.

The first part of that idea concerns the commons. Some economically valuable things were not created by the person who profits from them. Land is the obvious example. Nobody manufactured the centre of London, Manhattan or Geneva. A landowner may construct a building and thereby create value, but a considerable proportion of the value of his property derives from everybody and everything around it: roads, schools, businesses, public transport, security, population density and the accumulated activities of generations.

This was the intuition behind Henry George’s famous nineteenth-century proposal for a land-value tax. George distinguished between improvements created by human effort and the underlying value of land. If society collectively causes a particular location to become valuable, he reasoned, there is a case for society recovering some of the resulting economic rent.

The digital age has created an analogous problem, although not an identical one. Knowledge is peculiar because it can be shared without being consumed. If I give you a barrel of oil, I no longer have it. If I give you an equation, an idea or a piece of computer code, we can both possess it. Modern artificial intelligence makes this distinction particularly important because AI systems are constructed upon immense accumulated bodies of human intellectual production. Language itself is a commons. So are large portions of mathematics, science, culture and the inherited structure of human knowledge.

There is therefore a legitimate twenty-first-century question about who should receive the economic rents generated when private organisations turn collectively accumulated knowledge into exceptionally valuable machines. This does not necessarily imply that every author, programmer or citizen should receive a microscopic royalty every time an artificial intelligence system produces a sentence. Such arrangements might become administratively absurd. It does suggest, however, that the ancient problem of distributing rents from common resources has returned in digital form.

The comparison with the tithe is intriguing. Historically the tithe was not a sophisticated economic instrument: it was generally an obligation to surrender a proportion of agricultural production to religious institutions. Yet the underlying intuition — that a fraction of productive surplus should be returned to the community supporting the productive system — has appeared repeatedly throughout civilisation. Modern taxation, royalties, sovereign wealth funds and resource-rent taxes are secular descendants of the same broad idea.

There is an important distinction, however, between sharing wealth and assuming that wealth simply exists because a commons exists. Resources acquire economic value through institutions, investment and human effort. Oil beneath the ground is not petrol in a car. An algorithm written on paper is not a global computing network. Land in an inaccessible wilderness does not have the economic value of land beside Liverpool Street station. Capital, organisation and risk remain indispensable.

An equitable system therefore has to divide rewards between several contributors: those who provide capital, those who perform labour, those who accept risk and the wider community whose inherited resources make the enterprise possible. The difficult question is not whether all these parties contribute. It is deciding how much each contributed.

The economy is a machine that eats energy

The second important proposition is easier to defend. The physical economy cannot escape energy. A steelworks consumes energy. A farm consumes sunlight, fertiliser, diesel and electricity. A data centre consumes electricity and water. A city requires continuous flows of food, heat, transport, construction materials and waste disposal. Even apparently immaterial economic activities depend upon a formidable physical infrastructure of fibre-optic cables, semiconductor fabrication plants, satellites, power stations and cooling systems.

The modern financial economy can obscure this reality because money allows claims upon resources to circulate independently of the resources themselves. A trader in London can buy and sell oil futures without ever seeing a barrel of crude. Nevertheless, somewhere underneath the contract lies a physical commodity whose extraction, refining and transportation require energy.

The 2026 disruption around the Strait of Hormuz has provided an unusually dramatic reminder of this fact. The interruption of a route normally carrying roughly one fifth of global oil consumption produced the largest oil-supply disruption in modern history. The consequences travelled rapidly from tankers and refineries into inflation, transport costs, industrial production and monetary policy. The world discovered yet again that financial sophistication cannot abolish physical scarcity.

There is consequently merit in thinking about economics partly in energetic terms. Every physical transformation has an energy cost. Aluminium must be smelted, fertiliser manufactured, computers cooled and people fed. Improvements in energy efficiency can therefore produce genuine economic surpluses because society obtains more useful output from the same physical inputs.

Yet one must resist carrying the analogy too far. Money is not literally energy. A dollar is a claim recognised within a social and legal system; a joule is a physical measurement. Dollars can be created by a central bank. Joules cannot. Money can disappear when a bank fails or an accounting entry is cancelled without violating the laws of thermodynamics.

Treating money as though it were physical energy therefore confuses metaphor with mechanism.

Money is information

There is another proposition in the original theory that requires still more qualification: that turning money into anonymous digital tokens somehow makes financial relationships irreversible or renders digital finance incompatible with an analogue world. The opposite may be closer to the truth.

Money has always been an information technology. A banknote communicates that its bearer possesses a generally accepted claim upon goods and services. A bank account records a relationship between an institution and a customer. A government bond records an obligation between debtor and creditor. Digitalisation merely allows these relationships to be recorded and transferred more rapidly.

Tokenisation changes their architecture but does not necessarily destroy their reversibility. A token can represent an anonymous bearer asset, but it can equally represent a precisely identified legal claim. Digital ledgers can record ownership histories more comprehensively than cash ever could.

The genuinely important question is therefore not whether digital money is incompatible with physical reality. It plainly is not: virtually every advanced economy already operates predominantly through digital financial records while successfully buying and selling physical things. The interesting question is whether increasingly complicated layers of financial claims can become detached from our understanding of the underlying physical economy. Here the criticism has force.

Finance can create claims much faster than society can create houses, electricity, wheat or copper. When asset prices rise, people may feel wealthier even though the productive capacity of the economy has barely changed. Credit can temporarily reconcile the difference. Eventually physical constraints reassert themselves through inflation, shortages, defaults or falling asset prices. Energy is one of the principal mechanisms through which reality returns to the balance sheet.

Hormuz and the return of physical economics

This makes the recent Hormuz crisis particularly instructive. There is no need to suppose that the shock was secretly engineered in order to recognise its transformative economic importance. Indeed, absent compelling evidence, the proposition that it was deliberately engineered should be rejected as speculation rather than incorporated into economic analysis.

What matters is what the crisis revealed. Before the disruption, roughly 20 million barrels per day of crude oil and petroleum products passed through Hormuz. Alternative pipelines, inventories, changes in demand and production elsewhere prevented the initial interruption from producing consequences quite as catastrophic as the raw numbers might have suggested. Those buffers were nevertheless finite.

This is precisely what an energy-centred interpretation of economics would predict. Markets are extraordinarily ingenious mechanisms for adapting to scarcity. Higher prices reduce marginal consumption, encourage substitution, redirect shipping, release inventories and make previously uneconomic production profitable. Yet markets cannot instantaneously manufacture pipelines, refineries or oilfields.

The market can reorganise physical reality. It cannot repeal it. That distinction also explains why energy efficiency matters so much. An economy that can produce the same quantity of useful goods with 20 per cent less energy has achieved something real, irrespective of what happens to financial prices. The saved energy can be consumed elsewhere, conserved or translated into lower production costs.

There is therefore an enormous incentive for businesses to devise arrangements that share the gains from efficiency. Long-term supply contracts, profit-sharing arrangements, energy-performance contracts, joint ventures and other mechanisms can distribute risks and rewards between producers, financiers and consumers. One need not invent an entirely new economics of “collaborative Ways & Means” to understand this. Capitalism has been inventing contractual mechanisms for sharing risk for centuries.

What may be changing is their relative attractiveness. When energy becomes volatile and capital expensive, contracts that reduce uncertainty become more valuable. A company capable of guaranteeing energy savings and accepting part of the risk may outperform a conventional supplier that merely sells equipment. Cooperation can therefore become a competitive advantage without requiring the disappearance of competition.

America, China and energy dominance

The geopolitical component of the theory requires particular care because there is a mixture of demonstrable fact and considerable conjecture.

American “energy dominance” is not imaginary. It is explicit government policy. The Trump administration established a National Energy Dominance Council in 2025 and instructed it to increase American energy production, improve infrastructure, encourage investment and use energy resources as an instrument of economic and national security. The Department of Energy has subsequently incorporated these objectives into its hydrocarbon strategy. It would nevertheless be a substantial leap to infer from this that Washington and Beijing are pursuing a jointly coordinated hydrocarbon strategy. Their interests overlap in some respects because both benefit from avoiding catastrophic energy-price shocks. Their interests diverge sharply in others.

The United States is a major hydrocarbon producer and exporter. China remains heavily dependent upon imported oil while simultaneously investing enormously in electrification, batteries, solar generation and other technologies intended partly to reduce that dependence. Contemporary American and Chinese energy strategies may therefore occasionally produce similar preferences — particularly for price stability — without being aligned in any organised sense.

This is an important distinction. Two elephants drinking from the same lake both have an interest in preventing the lake from disappearing. That does not mean they have signed a secret treaty.

There is nevertheless an intriguing possibility that the interests of major producers and consumers create an informal preference for an oil-price corridor. Producers dislike prices so low that investment becomes uneconomic. Consumers dislike prices so high that they produce inflation and recession. Governments dislike both extremes. The resulting political economy may sometimes resemble an implicit “collar”, even though no institution has formally created one.

Expressing such a corridor in thermal units — dollars per million British thermal units, for example — can also be analytically useful when comparing oil, gas and other sources of energy. Calling this a new “PetroMMBtu standard”, however, risks making an analytical convenience sound like an established international monetary regime. There is presently a considerable distance between those two things.

Japan and the limits of the theory

The most speculative element concerns Japan. Japan unquestionably sits in an unusual position within the international monetary and energy systems. She possesses enormous overseas financial assets, has historically accumulated substantial US Treasury holdings and remains highly dependent upon imported energy. It is therefore perfectly reasonable to analyse Japanese reserve management and energy security together.

It is a much stronger proposition to say that Japan is effectively exchanging Treasury reserves for deliberately overpriced crude under an Enron-style tripartite prepayment arrangement that permits the Federal Reserve to finance ExxonMobil and Chevron shale production at zero financial cost.

Such an arrangement would require substantial documentary evidence. It would involve identifiable transactions, counterparties, balance-sheet consequences and regulatory records. Without these, it should not be treated as an explanation merely because it elegantly connects several otherwise puzzling observations.

This illustrates a broader intellectual danger. A theory becomes seductive when it explains too much.

The world economy contains millions of interacting decisions. Oil companies hedge production. Central banks manage liquidity. Governments hold reserves. Commodity traders use derivatives. Japan imports energy. America exports hydrocarbons. China accumulates strategic resources. Once all these activities are placed on the same diagram, patterns inevitably appear.

Some patterns reflect causation. Others reflect common incentives. Still others are coincidence. The discipline of economics consists partly in distinguishing between them.

The useful theory underneath the grand theory

Once the more ambitious claims are removed, however, something worthwhile remains.

The conventional separation between energy economics, monetary economics, finance, technology and geopolitics has become increasingly artificial. Energy prices affect inflation. Inflation affects interest rates. Interest rates affect investment. Investment determines future energy production. Energy availability constrains artificial intelligence and industrial expansion. Technology changes energy demand. Governments intervene in all these markets for reasons of national security.

These are not separate systems. They are different descriptions of the same civilisation.

The idea of the commons adds another dimension. Land, natural resources, inherited knowledge and public infrastructure all generate rents that private actors can capture. A durable political economy needs some way of deciding how those rents should be divided without destroying the incentives that cause people to invest, innovate and take risks.

The answer is unlikely to be a universal tithe. Different commons require different institutions. Land-value taxation may make sense for location rents. Royalties or sovereign wealth funds may be appropriate for natural resources. Public investment in education and research may be the most sensible return on intellectual commons. Competition policy may prevent technological platforms from monopolising collectively generated knowledge.

Energy belongs in this discussion because it exposes the difference between financial wealth and physical capacity with unusual clarity. A society can create trillions of dollars of financial claims by altering numbers in computers. It cannot create a trillion barrels of oil, a trillion tonnes of wheat or a trillion kilowatt-hours of electricity by doing the same thing.

That does not make money fraudulent. It means money is an accounting system for claims upon a world that remains stubbornly physical.

Perhaps this is the most useful reformulation of the original thesis. The central economic problem of the twenty-first century is not that digital money has become incompatible with an analogue universe. It is that our increasingly digital civilisation may occasionally encourage us to forget that the universe remains analogue at all.

The screen tells us that wealth consists of numbers. The refinery, the farm, the power station, the semiconductor factory and the cargo ship remind us otherwise. Behind every financial economy lies a physical economy; behind the physical economy lie energy, resources, human ingenuity and institutions; and behind many of those resources lie commons that nobody individually created.

The interesting political question is how the surplus produced by their interaction should be divided. That question is ancient. What has changed is the extraordinary scale of the surplus — and the extraordinary complexity of the machinery through which we distribute it.