An Extension of the World Import/Export Land Model
Posted by Prof. Goose on July 21, 2007 - 11:00am
Disclaimer: While I certainly think I'm qualified to perform quantitative analysis, I'm no expert on the oil industry. I welcome and expect the constructive criticism of the many knowledgeable editors and commenters.
There are many people on either side of the Export Land Model issue: those who think the internal consumption of an exporter will continue to increase at the detriment of exports and those who think there will be enough pressure, be it economic or otherwise, to stifle internal consumption so that net exports don't suffer. I see no reason we won't see both of these situations occurring depending on the specific details of a given exporter. The question, I think, is which effect will be dominant in the aggregate and to what degree? If, after the peak in world oil production, either effect is dominant in the extreme then "bad things" happen. If internal consumption continues to grow, importers will have to drastically decrease consumption. If exporters force their populace to decrease consumption for the sake of exports, my guess is this would initiate or fan unrest and increase instability in the exporting countries - possibly resulting in production loss (i.e. Nigeria) and hence a decline in net exports.
What I've set out to do in this post is to construct a World Import/Export Land Model (extending the work of westexas and Khebab, the most recent of which can be found here) followed by an investigation into one of the possible extreme situations above: the pre-peak rate of change in internal consumption of Export Land continues post-peak.
The Model:
Import Land is defined as the OECD countries minus Canada, Mexico, and Norway plus Asian countries. Export Land is defined as the Non-OECD countries plus Canada, Mexico, and Norway minus Asian countries. "Asian countries" is China plus the countries that are contained within the IEA's "Other Asia" category. The data for each country or group of countries is from the IEA all liquids data.
Data Source Files:
IEA 12 June 2007 Report (PDF)
IEA 13 Dec 2005 Report (PDF)
IEA 10 Dec 2004 Report (PDF)
IEA 10 Dec 2003 Report (PDF)
EIA page on Norway to estimate Norway's consumption. Only piece of data not in the IEA PDFs.
Data was taken from the most recent PDF (of the four) it was present in. Net exports for Export Land is calculated as production minus consumption. Net imports for Import Land is calculated as consumption minus production plus total change in stocks. If the "total stock change" is not added to the net imports calculation, then net exports and net imports between the two lands don't match as they should (See Figures 2 and 3). The aggreement shown in Figure 2 justifies associating the entire IEA "Total Stock Change" category with Import Land. Figure 1 shows the World Import/Export Model for 2002 through 2007.
Import/Export Land Oil Balance 2002-2007:
Figure 1: Import/Export Land All Liquids Oil Balance 2002-2007. Source: IEA, EIA (see above for specifics).
Figure 2: Export Land Net Exports vs. Import Land Net Imports. Source: IEA, EIA (see above for specifics).
Figure 3: IEA Total Stock Change and Misc. Source: IEA (see above for specifics).
Observations:
Export Land and Import Land exhibit a substantial trade imbalance with regards to oil: Export Land produces nearly 3x the amount of oil it consumes, while Import Land consumes nearly 4x the amount it produces. Furthermore, it appears Import Land has peaked and is exhibiting a gradual decline in production. Export Land shows a production plateau over the last few years, but it is far from certain it's peaking. Both lands show increasing consumption.
So, what can be concluded from the data of the last six years? The Export Land plot in Figure 1 shows that although production has stagnated, internal consumption increased just as it has been. The result is a decline in exports, consistent with the Westexas interpretation of the Export Land Model. However, can we say anything as to why production has stagnated? If Figure 3 can be taken to be Import Land's input into oil stocks (and at least through 2006 it definitely looks that way from Figure 2) then it appears sometime around 2003 Import Land started building stocks and then Export land production began to level off. This is consistent with Export Land voluntarily slowing production because Import Land was well supplied. That said, the data from 2007 is showing a net draw from Import Land stocks - a condition that can't continue for long without a need for Export Land to increase production.
A few possible Import/Export Land Model scenarios:
The following does not represent an attempt to accurately predict oil production. Rather, I'm trying to explore the Export Land Model by extrapolating real data. In all of the following plots it is assumed Export Land peaks in 2007 and then sees an exponential decline in its production. The two cases assume a 2% and 5% decline rate for Export Land respectively. In all cases, it is assumed Import Land sees a 2% decline rate in production. Given the real data showing a gradual decline, a rate more than 2% seems unwarranted. As a control, each decline rate scenario was projected both by assuming the internal consumption of Export Land continues to grow at the same rate it has been and also for constant internal consumption.
The extrapolated curves were calculated in the following way. The internal consumption of Export Land was estimated with a linear fit to the data and then as a constant. Export Land exports were calculated as production minus consumption and were taken to be equal to the imports of Import Land. Import land's consumption was then calculated as production plus imports. The results are below in Figures 4 through 7. In all cases Import Land's consumption shows a greater rate of decline than the rate exhibited by the production in Export Land as it is squeezed by Export Land's declining production, constant to increasing internal consumption, and Import Land's own decline in production.
Figure 4: Import/Export Land All Liquids Oil Balance Scenario: 2% decline, increasing internal consumption. Source: IEA, EIA (see above for specifics).
Figure 5: Import/Export Land All Liquids Oil Balance Scenario: 2% decline, constant internal consumption. Source: IEA, EIA (see above for specifics).
I think most people would agree the decline rates assumed in Figures 4 and 5 are the most realistic. However, even with such decline rates Import Land's consumption sees quite a hit. With an overall decline rate of 2% in production and with increasing internal consumption in Export Land, Import Land's consumption declines at 5% and by 2020 is half its 2007 value. Figure 5 shows what happens if Export Land's internal consumption maintains its present value: roughly a 3% decline in Import Land's consumption ensues with a 33% decline by 2020. So, for internal consumption of Export Land ranging from flat to a maximum growth rate of that shown in the past six years and with an overall production decline rate of 2% we see a decline in Import Land's consumption ranging from 3% to 5% with a total decline in 2020 from 33% to 50%. I have a hard time buying that exporters in the aggregate will get away with forcing their populations to actually decrease their overall consumption so that importers can continue something akin to business as usual. I therefore view the above results as a reasonable range of outcomes we might see in a bit more than a decade post-peak.
Figure 6: Import/Export Land All Liquids Oil Balance Scenario:
5% decline in Export Land Production, 2% decline in Import Land Production, increasing internal consumption.
Source: IEA, EIA (see above for specifics).
Figure 7: Import/Export Land All Liquids Oil Balance Scenario:
5% decline in Export Land Production, 2% decline in Import Land Production, constant internal consumption.
Source: IEA, EIA (see above for specifics).
A 5% decline rate seen in Export Land production with increasing internal consumption translates into about a 10% decline rate in Import Land's consumption. Consumption would drop 75% by 2020. Assuming a constant internal consumption translates into a 7% decline rate for Import Land consumption which would be a drop of about 60% by 2020. So, for internal consumption of Export Land ranging from flat to a maximum growth rate of that shown in the past six years with Export Land production declining at 5% and Import Land production declining at 2% we see a decline rate for Import Land's consumption ranging from 7% to 10% with a total decline in 2020 from 60% to 75%. I think it's probable that we would see less than optimal events occurring should a 5% decline rate be attained and the model presented would end up being wildly incorrect by 2020.
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Maybe I'm missing something, but the ELM is a profoundly important idea, and the guest post provides no attribution that I could see. Westexas and Khebab, right? If a guest post doesn't give attribution, perhaps the gatekeeper could provide it in the first comment.
_________
Exxon-Mobil CEO Rex Tillerson says that "the world’s oil would not run out in his lifetime". Means nothing... this guy doesn't buy green bananas.
I so strongly associate ELM with Jeff and Khebab that *I* didn't even notice it. I put something up on the intro page.
I am betting there was no ill intent there...
(sorry, now I am really am leaving damn it.)
Absolutely no 'ill intent' assumed, just that when this is 'reddit'-ed, the attribution goes far and wide!!
My apologies. The above was put together quickly and I didn't even think about it. The first place I read about the Export Land Model was a post of Westexas probably over a year ago. I think the reason I didn't think to cite the previous authors is that, at least at TOD, everyone knows Westexas has been its main proponent.
No problem. I think that there was some kind of reference in the post anyway. Time for my acknowledgments: I built on work by Simmons & Deffeyes, using Khebab's graphs.
Once they exporters stop or seriously slow down exports for any exteneded period of time, the nuclear war will begin.
Putin buzzed London airspace three times in two days with his strategic (that means "possbily carrying nuclear bombs") bombers.
Mostly likely just saber rattling for now . . .
Why is a nuclear war assurred?
When the exporters can't/won't export enough oil to keep the AMerican corporate state going, the natural thing to do would be invade and seize. Sure, none of us here like that idea, but if it would keep us secure in our comfortable jobs and lifestyles, we'd all do what we are already doing but simply with more vigor: look the other way.
Problem is the Anglo-AMerican corporate state is already pretty overextended militarily . . . not to mention dependent on an influx of borrwowd cash to finance more war. ..
So that leavea them with the following situation:
A. Accept the situation, retreat to the Northern Hemishpere. This ensures a 0% chance of success in their view as they would lose oil imports not to mention all sorts of other assets.
B. Launch nukes. This will in 99.5% of the time screw up everything. But from their perspective a .5% chance of victory is far batter than 0% chance.
Remember, these people are convinced they can fight and win a first strike nuclear war.
Those of you stuck in a primary target*, there is no pont in worrying about this. Santa Rosa is a teriatary target so if this happens soon I'll be sure to post here "Hey looks like I was right suckers!" before it all comes down.
*list of primary, secondary, and tertiary targets:
http://www.survivalring.org/cd-targets.php
Perhaps mainly for mental health purposes (Matt would say delusional purposes), I am arguing for Alan Drake's vision of the future--which is based on how we moved people and goods around before we really started the OIl Age.
Unfortunately, as Matt points out, current events tend to support Matt's point of view.
Jeff,
Actually, I would not call it "delusional." You are right, for mental health purposes of the vast majority of people, it is better NOT to think about this.
I have the flexibilty of being able to move anywhere I want as I have enough for a plane ticket and a year of expenses, and I can maintain my current income stream from anywhere so long as BAU continues. So for me it is at least possible to take action although as you know from our private exchanges, it is damn hard to figure out what to do.
Most do not have this flexibility. They are stuck where they are. What good would it do for their brain to digest this stuff? They can't act on the info so they would probably have a mental breakdown if they thought the way I did.
If I was not fortunate enough to have this degree of flexibility in my personal life, my brain would probably find a way to delete or deny this out of existence for my own short-term good.
This is why I haven't sent my sister a copy of Crude Awakening. She's a 27 year old teacher in San Jose. What can she do, realistically speaking, to prepare for all this?
@ the hippies: yes, yes, I know. She could grow an urban garden and hold relocalization meetups! *realistically* that's not going to amount to jack squat in her current location. San Jose is not quite as bad as Los Angeles but I think a quick look at this pic will let you know why I think relocalization efforts in the big cities are pretty pointless:
http://www.lifeaftertheoilcrash.net/postoilbulletin/mapoflosangeles.html
Edit:
Here's a satellite image of san jose circa 1994. It's twice as bad now given the development spawned by the tech boom:
http://upload.wikimedia.org/wikipedia/commons/thumb/2/25/San_jose_ca_199...
There's no point in even trying to seriously prepare in such a place.
Yes, that all falls under basic diasaster prep. I have all of that stuff in spades msyelf, mostly because of the earthquake risk. She does to and even has stuff in her classroom in case the school annnounces a "security lockdown" and they are locked down in the classroom.(They've even had drills for this.)
In terms of a temporary crisis, one that lasts between 5 and 50 days, all of that can save your butt. But that's not what I'm talking about here which is a long term, permanent crisis.
Yeah, cause mankind is so fuckin dumb it'll nuke itself rather than figuring a way out of this mess. Christ, I mean, its a shared fear we all have been having for like 60 years now? But to literally say that its the most probable thing, well, it had to come only from Matt. He's the one who thinks the gov is preparing to change our genes, while creating a terminator robot (LOL) and freaks out because pres. Bush is being substituted for a day by his own vice-president... ('Doh!)
What a doomer! You beat them all, man. Keep it up. Until the bomb goes, that is!
The problem with such apocalyps porn is that it removes attention from serious civil defence for handling reasonable disaster scenarios.
Right.
Because with 20,000 nuclear weapons floating around in an international environment in whichl the critical life support, energy, and trade systems are failing it isn't reasonable to be concerned about nuclear war.
Now, now ... let's not turn TOD into a disasterbation page
This is hysterically funny. When people bring up completely unrealistic schemes such as ethanol, there is always someone like yourself to jump up to defend them and "discuss" them in excruciating detail. But when someone brings up real world facts coupled with opinions about potential conflicts in geopolitics (opinions shared by notables such as Henry Kissinger even about Sino-US competition and West-vs-Islam confrontation), the pro-technology crowd resorts to ad hominems, citing "doomer porn" or "disasterbation" in an attempt to discredit those discussing such dangerous situations. You and your pro-technology "tribe" automatically close ranks and attack those whose opinions dissents without ever actually entering into a rational discussion of these things.
So there is NEVER any open discussion of potential disaster scenarios here. They are always dismissed, out of hand, without regard to historical facts, without regard to human psychology. This absurd whistling-past-the-graveyard behavior is very notable to someone actually looking at the psychology of this site. And you are not the only one doing it either. This goes back to my earlier statements that TOD has deliberately chosen to be wholly closed to any solution except a happy ending to peak oil. Even Don Sailorman talking about a recession gets harsh emotional reactions here, let alone anything worse.
You and your tribe may (note that I didn't say will, just may) be the most harshly surprised of all those reading here though. Let's all pray that your hopes and dreams come true, that there will be no use of 20,000 nuclear warheads, that Hansen is wrong about climate change, that peak oil will be a long slow gentle decline with no loss of exports from the exporting nations, and that the "free market" (ha!) will leap into action and produce miraculous results for you and everyone else in every single looming problem area. Because if all those things do not turn out as you wish, then people like Savinar may have turned out to be optimists. And even if those things do happen, you are probably ignorant of the larger problematic trends in the entire system anyway.
Hell, even when someone does purely statistical analysis of the current situation, such as Stuart or Ace, there is great wailing and gnashing of teeth whenever the numbers indicate something worse than "acceptable". This is why the knee jerk reactions to the export land model, because it highlights extreme rapid change, change that you and your tribe refuse to accept and probably will continue to refuse to accept even if it actually happens, instead invoking your "gods" and wondering if you had just said the right incantations or the right prayers (made the right investments in technology) that things would have turned out ok.
But don't let me stop your irrational bashing of "doomer porn". No, go right ahead! We wouldn't want to even potentially admit to anything except our predicted happy ending, right?
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
Yeah, but it is the purpose of this site to discuss the technicalities of things. We are not know-it-alls, and people may have big doubts. Perhaps someone remembers a killer fact, like "ethanol has very low EROEI and it will consume away food otherwise eaten". And then people discuss the veracity of it. That's reasonable. Rational.
But then a doomtard just comes and says. "We are fukin doomed, this just signals the bombers green light to nuke us all, see those russian bombers? See them? See them? Told ya! Told ya!". It's like listening to Bill O'Reilly, but backwards. Totally irrational. Come on! We could discuss if the bombings could be a choice, but how on Earth could we discuss it? Doesn't everyone understand that a nuclear war is a always LOST war, like, FOR FOREVER? Yeah, we could ramble about the stupidity of mankind, like Einstein did, but what's the point?
And mostly, I believe you can bring it here, for no one will censor you. So what are you rambling about? Problem is, I disagree of instilling desperation. People that instill it are, curiously, not that very desperate at all. I find that these kind of people are just so into their character that they've learned to appreciate the "power" that they believe their words cast like if they are some kind of prophets. They even believe that they are prophets. Their style of writing is also very similar, prophetic, evangelistical, the "all of your sins will be awashed in pain and sorrow" type, the Apocalypse Now. It's oh so christian-nuttie-like that even they don't realise the dumbiness of it. Been There, Done That A Couple Thousand Years Ago, Thank You, Don't Come Back. It's comparable to the idiots of "left behind", but rather than established in a faith-fact, somewhat "based" on science-facts. But the attitude is exactly the SAME.
Where are those knee-jerk reactions? This model is way scarier than the normal simplistic Peak Oil model, and it sounds pretty solid as such. I hope it turns out wrong, but I don't see how. So, yes, things will come out ugly. But to leap-frog and start a nuclear war about it is to deny history. 1973 was way farther of a nuclear war than 1961, which had nothing to do with oil. I Knee jerk react to these kinds of doom-it-all fuck-it-all "prophecies" which are nothing but a projection of our inner id desires to just smash up all the rest of the world.
Happy ending? Every time one comes here with a smug smile and "we'll work it out" attitude, one's completely bashed. Be real!
And calm yourself.
duck and cover ?
Matt, never underestinate the ability and need of power elites to foresee and prepare. Power cannot afford to REact, it has to act, to create a situation rather than wait for what happens. Too dangerous.
Hence preparations for the endgame have been running for years, there simply is no other possibility.
The whole economic malaise did not just happen or fall out of the sky, it was set up and executed.
As a result, there will very soon be millions of newly impoverished Americans who will have no other options than utter misery or donning a cannonfodder uniform. No overextended military in sight.
Some will point to a lack of training for the new recruits, but thorough training only makes sense if you value the lives of your soldiers.
Besides, in WWII two weeks was often all the training provided. How much the US elite values the lives of Americans can be seen in New Orleans. It's all been thought of, the choices have been made.
Oh I believe they have prepard for this. That's why they have the underground cities ready to go.
At the same time remember that everything in life, including the ability of any society's elites to maintain control, is subject to dminishing returns. The NSA's electricity crisis, which has been deemed "catastrophic" is an example of this. The developing space debris catastrophe is another example. I wrote an article about this, it might be good for you to read it and consider my points:
http://www.lifeafterpeakoil.com/Archives2007/blognsa.html
Another example: the elites at GM and Ford have access to all the money and sophisticated computer modeling software known to man. Despite this, they were not able to prepare themselves for what is unfolding.
To a certain degree you are correct. But if things were as cut and dry as you seem to believe, the NSA would not be running into a "catastrophic" electricity shortage. Nor would the system of highly sophisticated space satellites the elites use to control the banking, telecom, and propaganda systems be in as much jeopardy as they are.
The "elites" are "elites" but they are not omnipotent gods. At some point even they lose control of their systems. I think we're reaching that point.
Well, maybe we should define "elites". Nobody at Ford or GM belongs in that group, for starters, nor at the White House. Power and visibilty do not go together. Nobody you can see has anything to say, that's the principle.
Second, is the role of one agency, the NSA, as vital as you seem to think it is? Third, I'd feel safe betting that there is quite a bit of awareness of diminishing returns and receding horizons. That, after all, is how it all starts, the preparing.
The sole important question is: what is needed to hold on to power in a time of forever decreasing resources? Number one is get rid of a whole bunch of people, especially the unproductive large-scale consuming kind.
I don't see how space satellites are part of the equation, far too vulnerable, can't depend on that sort of thing. It's crucial to see where your vulnerabilties lie, and minimize them. Secure communication. Not stuff that can be wiped out by nuclear and/or electron(ic) blasts.
It may seem stupid for elites to wreck the planet with pollution, nukes and bioweapons, but if you look one step further, and accept that it will happen regardless, you see everything in a different light, and use it to your advantage, and, yes, go underground and/or build secure estates on top of the Guarani qauifer.
I'll go read you file.
Now how do you get this "kill the middle class" conspiracy to work togeather with the globalization effort creating lots of new middle class people in hungry countries?
I am sure you have twisted theory that would make for a fun read but it would probably fit beter somewhere else then ToD.
but are gm and ford (and the typical cornucopian) doing anything different than extrapolating past trends into the future ?
* warning(s) *
past performance is no guarantee of future returns
objects in this mirror may be closer than they appear
do not remove this tag under penalty of law
ok, i went a little over the edge on that last one
If this description of the world situation is close to the real situation and it indeed is a large conspiracy it is quite a dumb one. Stupidity and organizational alzheimers do not need a conspiracy to do its non work.
Matt - do you have a reference for this: "Putin buzzed London airspace three times in two days with his strategic (that means "possbily carrying nuclear bombs") bombers." ?
I generally don't buy this nuclear war idea certainly not as a widespread thing, though I don't rule out a tactical strike against, say, Iranian nuclear installations.
UK Telgraph, Spacewar.com, and defensenews.com, among other sources. All linked up near the top of my newspage yesterday and being discussed very actively on the breaking news sub forum of my forum.
It could be surveillance, saber-rattling, Putin's way of saying "say hello to my little friend" a combo of the all of the above. . .
FWIW, one of my mods warned us something big might happen on the 18th or 19th. Putin ended up buzzng them once on the 18th, twice on the 19th.
@ TOD overlrods:
hope this isn't blogwhoring or if it is at least not totally blatant blogwhoring.
Thanks Matt, I'll look at them. If Putin is that mad about the expulsions of his diplomats from London, I don't think UK will be seeing much gas from him next winter. I'll admit I did print out what was suggested for a 72 hour bug out kit from survival ring ...
that and this:
http://www.lifeaftertheoilcrash.net/PostOilBulletin/doomerbike.html
. . . and your short term survival chances are greatly increased.
=)
Matt, please don't take offense, but the traditional view Americans seem to have of nuclear war (and the world for that matter) is so narrow as to be actually funny for foreign observers: you seem to think the world ends at Rio Grande.
The most likely outcome of all-out nuclear war is the US being repopulated by Latinos, Europe by North Africans and Arabs, European Russia by Turks and Iranians, and Siberia by Chinese (unless they are also wiped out, in which case first China will be repopulated with Indians). To avoid such an outcome the whole world should be wiped out. That would mean for the elite staying at the supposed underground cities for a long time indeed.
So IMHO all-out nuclear war is not an option contemplated even by the most imperialistic of neocons (as opposed to limited nuclear war e.g. with Iran).
Their actions indicate they think otherwise. But if you need to ignore those in order to get through the day, by all means do so.
As far as the undergournd cities, here's an article on the ones from the 1950s:
http://www.bbc.co.uk/wiltshire/underground_city/index.shtml
Click on the video and take the driven tour. What they have today must be pretty amazing.
>> What they have today must be pretty amazing.
The peak of bunker building in the UK was in 1954 and then again in 1962.
Almost all of the civil defence structure has been dismantled since the fall of the Soviet Union.
Many big bunkers have been sold off - they now house web centres etc.
The 1000+ chain of 4-man "observation bunkers" have all gone ... mostly demolished, some sold.
The idea of advanced "underground survival cities" in the UK is laughable.
I think TOD needs an automated system of "scoring" posts & posters. This would allow prime posters such as westtexas and khebab to shine through, without having to compete with low grade "noise".
>> Putin buzzed London airspace three times in two days with his strategic (that means "possbily carrying nuclear bombs") bombers.
There is no need to exaggerate a mundane event.
The bombers simply approached Scotland and were then chased off.
The Russians used to do this DAILY during the Cold War.
The recent flights were certainly a surprise - but were probably related to the current UK - Russian extradition row.
Hypeing such trivial events and burbling on about nuclear war and target lists does not help the TOD message or its reputation.
Glad to hear this Prof.! I'm spreading the word and posting snippets and links to TheOilDrum.com material on a very large political board. You know me there as TexEx (your abbreviation) and I wanted to thank you for backing me up there on a recent thread I started highlighting the Updated World Oil Forecasts article by ace a couple of days ago.
I get so frustrated when this issue gets little traction there, and other places. But I'll keep on trying to get people to listen.
Thanks to all of you at TheOilDrum.com for your hard work and dogged dedication to this issue!
I think that a 75% decline in consumption in Import Land by 2020 is a reasonable estimate.
In order to simplify things, it might be useful to look at some reserve and production numbers for the biggest net exporter, Saudi Arabia, and the biggest net importer, the US.
Based on the Hubbert Linearization (HL) models, the US is about 85% depleted, and Saudi Arabia is at least 60% depleted.
Because of a combination of declining domestic production and generally increasing consumption, total petroleum (crude + product) imports into the US have been increasing at close to 5% per year since 1990.
The most recent annual Saudi data are as follows (2005 to 2006, Total Liquids, EIA):
Production: - 3.4%
Consumption: + 5.8%
Net Exports: - 5.3%
So, the expectation in the US is that we can continue increasing out total petroleum imports into the world's largest net importer at about 5% per year, while we are currently seeing a 5% plus decline rate in net exports from the world's largest net exporter.
That's a whole 12.5 years from today
The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is
Rapidly fadin'.
And the first one now
Will later be last
For the times they are a-changin'.
(The Times They Are A-Changin' by Bob Dylan)
Ed
Off Grid, Off Mainland, current profession:Beach Bum
"the American way of life is not negotiable" - George Bush (senior)
Even assuming the US continues to get its current production, minus a slow decline rate. Even assuming that Canada and Mexico are made to understand that a decline in their tithe to the US is not acceptable. Even assuming Iraq sells directly to the US first and only.
That still leaves by my reckoning 7Mbpd for the US to find if the american way of life is truly not negotiable.
Iran total production: 4.3Mbpd
Venezuela total production: 2.8Mpbd
That'll do nicely sir.
I simply do not see anyone going gentle into the good night of 60% reductions by 2020. It won't be uniform and it won't be pretty. Nobody will sit by and see their population falling into oblivion whilst an exporter continues on exactly as before.
Exactly.
They're not going to go gently into the night any more than Japan went gently into the night when FDR cut off their oil imports. The first option would be to seize via force the production fo Iran and Venezuela. Doing this is probably not feasible and they know this.
What options does that leave them with? Yep, as I said before, it's nuclear war. It leaves them with a small chance of victory but in their minds this is better than conceding defeat and accepting a much more humble version of their empire. Crazy to you and me, but perfectly sensible to them.
Matt: The USA in 2007 is not Japan. Yes, they talk about the all-important "empire" because that is what the sheeple want to hear. The whole point of globalization is that the USA as a whole can go down the drain without the elite suffering a loss (actually making a lot of money on the deal). The wealthiest persons in the USA are quite aware of the consequences of the economic policies of the last 25 years in the USA. They don't want an "empire" they want a club (just like the billionaires in Mexico, Russia and Hong Kong).
Agree with BrianT, and for once disagree with Matt Savinar.
Nobody is going to nuclear war to keep Joe 6 Pack, nascar dads, or soccer moms happy. It is a happy thought to dream of going out in a gamma flash, But the US proles (who could eventually include even people now worth $10 million who are foolish enough to think they are rich) will not have it so easy.
As Memmel has said many times, the easist solution to the import land problem for the US is to progressively impoverish the middle class. If the formerly well off get restive, that is what real ID, Blackwater, the John Warner Defense Act, and Halliburton camps are for. It makes much more sense for the elites of each nation to make war on their surplus populations (see Katrina) than to go around nuking things. A nice "flu" epidemic that insiders are immunized against would be much more useful.
Give the US the class structure of China for example. (And I assure you the the US elites would be very happy about that) US oil consumption would drop well below domestic production and the US would be back in export land for another generation. Greenhouse emissions would go way down, the air would be cleaner, good effects all around. And there would still be enough oil for the elites to have private cars and jets, just like China now.
I don't think the nukes will fly for the sake of Joe 6 Pack.
The impovershment plan can work,and seem to be what the current plan is, but only to a certain point. It's once they've lost control of the things you've listed. The command and control mechanims they're attempting to put into place are as dependent on 3,000 mile supply lines as the crap at Wal Mart.
Again, the NSA's electricity crisis and the emerging space satellite debris catastrophe are but two examples. Halliburton, Blackwater, SAIC, etc. will be running into similar problems.
On the financial front, they've got the massive supercomputers controlling and modeling things but the systems are becoming so complex even the "black boxes" may not be able to model it all out accurately. Here's an example:
http://www.portfolio.com/news-markets/national-news/portfolio/2007/03/29...
As with everything, their control mechanism are subject to diminishing returns. At some point they lose control. Then what do they do? Either launch a bioplague that wipes out 90% of us or drop the nukes and descend into their underground cities.
Well, maybe it is just because I've had a horrid winter, slammed with one nasty virus after another for 5 weeks - or maybe because I am thousands of kms from any sort of nuclear target - but my nightmares always start in Maryland:
http://www.detrick.army.mil/nibc/nibc01.cfm
In the end, which would you use, indiscriminately destructive 1940s technology or a slick 21st century weapon that will spare you and your immunized buddies, and allow you to recycle the property of your victims?
So the "elite" are one homogeneous mass, all in lockstep, completely agreeing, each accepting their own place in the greater scheme of things? They never compete amongst themselves, disagree amongst themselves? They would never fight amongst themselves, even if some have different weapons than the others?
I think the opposite is more likely, that competition amongst the wealthy and powerful is even more intense than amongst the average person, that whatever weapons they think they can get away with using they would, that the modern elite are little different from the royal courts of the Middle Ages, which were rife with their own sorts of intrigue, assassination, and power plays.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
I very much think there are factions. Sometimes they cooperate. More likely during good times when things are getting better for all the factions then during the period we've now entered.
Sometimes, they even breathe. They Conspire. They lure you. They whisper in your ears, I tell you, They are! They exist! They are nowhere and everywhere, and they can hear you, see you, smell you, they know who you are and eventually, when you don't see it coming, they are going to get you! And then you are eaten. By them!
Who? But of course, the Hitlerian GRUES!!
It could easily come to this. Any time you have a highly stressed system and we will catastrophe is just around the corner and will hopefully stay there.
Since the critical issue post peak is the profligate consumption of the first world middle class and the destruction of said class solves our problems we can assume that the only thing that is certain is the US middle class is headed for a very bad hair day.
However the loss of suburbia is not the end of the world its just the removal of a warped way of life that can no longer be supported.
Underlying this is the fact that once resources are limited and the fact they are limited is known we either will have to learn to live on this planet with limited resources or kill ourselves then learn to live on the planet with limited resources. In time the 20th century will pass into history and the damage done will heal and people will probably still be around.
Why launching a bioplague when biofuels production is almost certain to do the job?
And it will not even leave room for conspiracy theorists to blame the global anglo-saxon elite behind it. OK, big agro multinationals are behind the first biofuel plants being built in Latin America, but the locals are certain to follow up big way. Because if Mercosur countries (Brazil, Argentina, Paraguay, etc.) - which today are big exporters of grains, oil seeds and vegetable oils - turn all that into biodiesel (and sugar cane to ethanol), they will be able to run their current infrastructures FOR EVER. Do you think they won't?
So these are my conclusions:
- Once significant biodiesel production capacity has been built, land arbitraging based on farmers' profits per acre will drive the allocation of land to biodiesel crops (soybean, sunflower and rapeseed, SSR for short) or to grain crops.
- From that moment onward, fuel arbitraging will make the price of diesel fuel (however high it goes) set the floor for the price of SSR oils. Land arbitraging in turn will set the floor for the price of wheat and corn.
- There is a food Export Land Model, where food exports will be falling not because rising internal consumption, but because of ever increasing feedstock and land diversion into biofuels production.
- Poor food importing countries, and poor people in general, will be priced out of food.
- The world is NOW at peak food.
- Demographic scenarios of 9 billion people don't stand a chance.
- To minimize future (next decade?) starvation, people should be encouraged to:
Stop building, particularly suburban houses that imply a loss of farmland.
Stop procreating at higher than the replacement rate.
(In case someone feels that the second recommendation is against the command "Be fertile and multiply; fill the earth and subdue it.", it's clear that, given that the Earth surface is finite, the command cannot possibly be interpreted as "multiply indefinitely" but rather "up to the point you reasonably fill the earth", leaving room for food production and waste disposal, among other things. And it's clear that we are in the best case at that point right now, and more likely way past it.)
Actually this may be a considered a unintended side effect of the global economy. We have worked hard to increase the wealth worldwide and despite its problems in general the world is a lot more wealthy now. But commodities of all types have not kept up with the growth in demand and thus we have export/import land models across effectively all commodities including water.
So I think with a bit of work you can identify numerous export/import land problems all over the place. On top of commodities you have this enormous market for finished goods and the manufacture of these has become interlocked with tons of dependencies.
The intrinsic problem goes right back to lack of resources we built on the concept that resources would always grow this has proven to be false ( surprise ).
True, and eventually the export/import land model is another view of the "Limits to Growth" problem.
My point is that it's happening with food right now, which is certainly a more crucial item than metals or even oil. Peak food is now and it means peak people! The third horseman is coming back riding on biodiesel!
Matt,
I think you are ignoring the demand side. Oil is mostly used for transportation and we know how to build vehicles that go much farther on a gallon of FF then is the current CAFE standard. And, we have CNG powered buses that have been on the road since 1996, which could also be fueled by methane from various bio sources, including sewage and farm waste. The resulting seat miles per gallon equivalent would be vast. When I was a kid growing up in Atlanta, the bus system used electric buses that ran on city streets with overhead wires for power. Light rail systems work too and don't require the massive construction of heavy rail subways, etc.
There are many small electric scooters available, which could be charged quite nicely by solar PV panels. Of course, they are made in China. Look under scooters, electric on eBay:
http://sporting-goods.ebay.com/
We also know how to make electricity from solar energy with several different technologies besides PV. We know how to heat hot water and keep houses warm in winter with low grade solar thermal. We know how to convert plants into other useful forms of energy, including burning wood to drive steam electric generators.
What we apparently don't know how to do is get the politicians off their respective butts to take the necessary steps. A few years ago, TVA proposed a wind project located about 20 miles from my house. The NIMBY's killed it. Now, there is another wind power project proposed even closer to my house, but again, the locals have probably killed it. Our local county politicians knuckled under to the real estate types that are afraid the tourists and summer home people will dislike the view and go somewhere else. These idiots probably won't wake up until gasoline hits $6 or $8 a gallon. They deserve a depression and about 20 years of unemployment, as I've had to live with.
E. Swanson
There is also the practical problem of subsidizing domestic consumption without external revenues to do it with. These countries are completely dependent on their exports for everything. They simply cannot afford to just give away the oil. Without the oil revenues, the economy will fail and there will be no use for the oil.
A more reasonable view is moderate declines in consumption in Export Land, with more severe declines in consumption in Import Land, with net exports diminishing, but not going to zero for a long time. If they ever do go to zero in the next 20 years, we will have a war. That is for sure.
Correction. We already have a war, but this would be a bigger war and one without pretense.
CLZ09 - Love your screen name! That is one of the few December contract years I have never played.
Hi WT. See my comment towards the top about me forgetting to cite you. Not intentional, just didn't think about it.
The 75% decline by 2020 is the worst case scenario above. However, even in the milder cases there is no rosy picture. I have my fingers firmly crossed that RR, Euan Mearns, and a few others here are correct that we have a few more years so that I can make it out into the job market and have a chance to make money before peak.
I don't know if you ever seen the movie, "The Graduate," but I'll pass on one word of advice: Energy.
In regard to the Net Export decline rate, I have seen HL plots on six of the top 10 net exporters, and all six are at or past their respective 50% of Qt marks. Two of the top three, Russia and Norway, are more than 70% depleted.
And IMO, Russia is the big problem. If, as current data suggest, their oil production is declining, I expect them to show a 10% or so annual production rate decline.
WT: Another thing to keep in mind is that if current trends continue, China's economy will be approx 35% larger than that of the USA by 2020.
I agree Export Land insights are very important.
By the way, the World Bank has been encouraging developing countries, including oil exporters, to deregulate downstream fuel prices and increases taxes on petroleum products.
This link summarizes their view and provides links to some of their research.
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTOGMC/0,,contentMDK:20...
How high will the price of oil have to go to destroy three quarters of existing demand in Import Land in just 12 or 13 years?
Probably something over 60 dollars a barrel seems to be enough. So far we have not proved we can even handle 60 long term.
sorry mark, but for all your hard work, there is no way i can read these charts, the fonts are too small.
I'll fix them, but in the mean time I suggest right clicking and hitting "view image." If you then click it, it will expand.
On my monitor, it's already maximized, so I didn't think folks would have problems. Sorry. It will be a couple of hours though, as I am on my way out the door.
I think the problem is that the image widths were set to 80%. It would probably help if you went in and set them to 100%.
In a basically one-industry economy such as that of most OPEC nations, consumption cannot continue to grow indefinitely at the expense of exports, because the country would have no income if exports go to zero.
Steverino, the graphs are ok if you open a word document, copy and paste the post.
The simplistic Export Land Model (ELM) for a hypothetical country at peak production/peak exports in year zero:
http://static.flickr.com/97/240076673_494160e1a0_o.png
The crux of my argument was, and is, that cash flow from export sales will initially increase, even as exports decline, which will probably cause an acceleration in the rate of increase in domestic oil consumption in exporting countries--at least initially.
Another crucial point is that the model suggests that the net export decline rate will accelerate with time, from 15% per year on the model, for the first half of the decline (Phase One), to 45% per year on the model, for the second half of the decline (Phase Two).
My working assumption is that Phase One = increasing cash flow and Phase Two = Declining cash flow. However, IMO, any attempts to increase exports by reducing domestic consumption in Phase Two will be largely ineffectual, because of the thin margin between consumption and production and because of domestic political factors.
I agree that in the early years, exporters will be able to make more, exporting less. But as exports approach zero, the nation won't be able to afford its own oil or other needed consumer goods. Iran can subsidize consumption now, but eventually something will have to give.
True, but even in the worst case scenario above, net exports don't go to zero until 2020. For the cases where the decline rate is assumed to be 2%, Export Land would still be exporting substantial amounts in 2020.
Steverino -
My browser always cuts the right side off of wide charts, so I:
right click on the chart
save image on my desktop
minimize TOD and open it full size and readable there
It would be nice to see if their is a way to include another factor into the model. Decline rates from depletion estimates are easily added whats not in the model is the response of Export Land as production goes into decline. The response is the amount of investment they decide to make to limit the decline rates or maximize production.
As your model points out even if they maximize production the overall next exports will continue to decline leading to a high price environment and in fact they will decline at a rate far faster than large new projects can readily be put online.
Considering it is aready 2007 and you have a decline in exports at 75% by 2020 you can see that effectively any day now we will enter a world where net exports can no longer satisfy demand in a business as usual case and its obvious that even if you assume that technology could solve the problem the investment needed in the oil industry would take a large percentage of the worlds economy.
This is critical since it means that post peak spending large sums of money to maximize production in post peak regions does absolutely no good. Outside of investments made in the past and projects finishing now its useless to continue to make big investments with marginal returns.
This is incredibly important since the time scales of export land make any attempt at large investments in oil
useless.
Any large project started now would not finish before we have transitioned to a world that can live on a lot less oil so the payout of the project is in serious doubt.
Expensive projects like the oil sands will probably quickly start having large losses and expansion will almost certainly stop and the entire feasibility of the project is in question.
Underlying this is EROI but you can see the the EROI issue explodes quickly and viciously on the seen as export land progresses. This mean we can expect to see a accelerated decline rate as oil production ceases to get investment and declines at a rate close to the natural decline rates of the fields. The underlying reason is the Oil industry needs cheap oil and growing economies to function once this no-longer holds the oil industry itself is not viable.
The effects of this are on the same order of magnitude as the simple export land model and can be modeled simply as a exponentially increasing decline rate post peak.
Mark B.,
Thank you for all the hard work you've put in to this project ! It's really great to be the recipient of so much quality research, and I'd like to include WestTexas and Khebab on the thank-you.
If this is correct, and I believe it is, there will be a severe recession/depression in the world economy, starting next year. I'm not sure that the world has ever had a resource based depression, its new territory. And, what's worse, it has no provision for "above ground considerations" like the attacks on the Mexican pipelines, a war with Iran or Venezuella, or terrorist attacks on shipping facilties and pipelines.
Every day it seems more and more imperative that we start on mitigation now. Its the national security and economic security of the whole OECD. Alan Drake's electrification of rail and streetcar plans are the best idea's going for immediate mitigation in the US.
Bob Ebersole
Mitigation?
People won't start thinking about it seriously until oil is $100. By the time there have been some meetings and investigations, the price will be $150 or $200. This will bring down the whole financial system, at which point you an forget about any significant mitigation efforts. Heck, you can forget about keeping order in the cities at that point.
And that's only if the nukes or bioweapons aren't launched sometime between $100 and $200.
Sir, you are getting me depressed. I was already thinking about this almost every day. But i am prepared i believe.
No kidding... as if we didn't have peak oil, climate change, and economic meltdown to worry about, according to chimp we need to add certain global nuclear war to the mix. Come on....
I tend to think it won't be global nuclear war just protracted limited exchanges generally using neutron bombs if possible.
Probably less than a billion direct deaths from the nuclear exchanges.
Considering all we are facing the nuclear part will probably not be that bad. For nuclear war it probably will be fairly sane. Some strikes in the middle east, china, maybe Australia and a few American cities. Plus say Moscow struck and a couple of cities in Europe. Its hard to say but I don't see and all out exchange. And this is more extensive then I what I think we will see. The reason is simple you just won't have the oil to run massive armies to try a conventional war post nuclear exchange so they will be punitive. So overall I expect nuclear to be on a small scale
so its not a huge issue.
Unless of course your under one when it goes.
Excuse me memmel,
but doesn't that paint the one scenario in which it's truly no issue at all?
:)
I stand corrected.
You are joking, aren't you ... aren't you ...
Not really old style MAD was based on the concept that the winner would eventually march in and control another country with a large conventional army powered by oil.
With the lack of oil we need to change the way we fight nuclear war. And since its more focused on securing or denying resources its not in the interest of the players to escalate to MAD.
We are close to figuring out how we can fight nuclear war without completely destroying the combatants or at least keeping the probability of MAD low. The missile defense systems are a big part of this.
I suspect more than a few people are excited about this opportunity.
Such a promising beginning, but then you don't attempt to answer your own question. You introduce the idea that state policies could affect export levels — as in stifle internal consumption or invest in upstream development or allow ExxonMobil to operate in your country e.g Libya — and then go off an draw your conclusions from the high-level data and curve fitting alone.Re: The Export Land plot in Figure 1 shows that although production has stagnated, internal consumption increased just as it has been
Yes, subsidies on consumption accounts for much of this. In principle, these could be rescinded or weakened, a policy that would increase exports if production did not fall concomitantly. See recent events in Iran.
Re: It appears sometime around 2003 Import Land started building stocks and then Export land production began to level off. This is consistent with Export Land voluntarily slowing production because Import Land was well supplied. That said, the data from 2007 is showing a net draw from Import Land stocks - a condition that can't continue for long without a need for Export Land to increase production.
See OPEC — the forthcoming September 11th meeting ought to be pretty interesting, especially with prices about $75/barrel. The OPEC basket price has never been higher. Yet demand grows.
My objections generally are because I insist that models of the oil supply or future exports should make some attempt to include crucial aspects of the Real World rather than work from a small set of simplified assumptions. You've made more of a start here than others have, but you could have gone much, much further. I don't blame you, such an effort would be a lot of work at a large consultancy like IHS Energy or Wood Mackenzie. One thing you could have done is examine a few specific countries to get some feel for what a full-blown model would look like.
Dave, appreciate the comments.
You more or less answer this point yourself below:
I recognize the amount of time required to do this "right" and I don't have that time. For me the choice is to do the above simply and gain some insight or not do it all. I would have to be paid to spend the countless hours researching every country involved so that a more nuanced and realistic model could be constructed.
Mark, I thought it was a hell of an effort either way. It raises a lot of great questions and contributes to the extant research.
One can't do it all, but one can contribute to the discussion...and that is exactly what you have done.
Thanks
Very well done... I only wish I could see the figures a bit better.
Nevertheless, this is the first time I've seriously considered this issue of exports declining as exporting countries export less to meet their own needs. I believe after reading this that it's a very real and serious concern for those of us in oil importing countries (especially the US since we import so much of our oil).
I appreciated this effort to expand the implications of the ELM model; what occurred to me as I read it was, since Saudi Arabia is the largest or second largest of the Exporters, perhaps an in depth exploration of that country would be helpful, touching on such issues as population growth, illegitimacy of the regime, possible effects of elimination of subsidies, etc. Mark B, perhaps you and Jeff Vail could collaborate on such a topic...
You know, although I agree that the most realistic and accurate model would incorporate these "real world" aspects, my model is more robust than you've made out here. For each case, the predictions provided represent a large range of possibilities: namely any for which the constant decline rate in production is roughly correct and for which the internal consumption of Export Land is anywhere between constant and increasing at the same rate as it has been. If you read the article, you would note I didn't claim this was how it had to be, but that those were the cases I was looking at. This range of possibilities for the internal consumption, although not directly answering the question I asked at the beginning, does provide allowance for the real world rearing its ugly head. Instead of providing a single anwer, I present a wide range of possibilities out of recognition of the fact that I don't know exactly how the real world will react.
How any discussion of this nature can fail to mention price beats the heck out of me.
Why not stick with the applied physics?
I agree up to a point about price, it is definitely part of the discussion. Price is one thing that can affect supply, 'Export Land' policies are another.
However, I think Mark has done a good job improving my understanding of what may happen by using real world figures. Nobody can know for sure what the future will be, but maybe we can work out what it won't be.
This discussion today is really only about the absolute best case for SUPPLY ... so price is not really an issue.
We are moving to an energy supply constrained world ... by the looks of it much quicker than most expect ... our governments don't know how to deal with this, they only know how to (almost, some of the time) control growth.
Post-peak supply will never be more than is shown in the graphs above ... at any price ... supply could be/probably wiil be a lot less!
The oil exporters in the Middle East need oil for their own consumption just to survive ... it is about the only energy resource they have ... when their oil runs out they are in very big trouble. So, if somebody takes the long view (20 years or so) there won't be many exports from them, they will just leave it in the ground ... maybe by not investing in the infrastructure.
Also, demand can't exceed supply ... which has massive implications for any importing country because on any scenario I have seen, at some stage, at best, we will have an ongoing year after year after year contraction of world economies ... not the growth we in the 'first world' are used to.
Low levels of economic activity is what the other three quarters of the world's population are already living with however (that includes OPEC)... probably we need to quickly learn to live like them.
Xeroid.
Emphasis added.
I totally disagree with this. The US government knows exactly how it is going to deal with this and has been preparing for years. Very simply, they (because I include non-goverment organizations) are going to fuck over everyone who is not part of the government and private power structure. They saw what was coming down long before TOD and the other peak energy sites existed.
If you believe that morality and honesty are the basis of actions rather than greed and power, I'd suggest you read Crossing the Rubicon by Ruppert, Fitts' book length post at http://www.dunwalke.com (a longish read) and http://www.truthout.org/docs_2006/0719071 about Cheny (a short read).
I was drafting an email to a friend regarding the future. Part of it was to connect the dots. Here are a few of the ones I included. Sorry, no attribution or why I see them as important:
Changes in bankrupcy laws
Tax breaks for the well to do and corporations
Plunge Protection Team
Government, corporate and private debt
Privatization of public infrastructure
Off-shoring of manufacturing and research
A "service" economy
Consolidated MSM
An unsustainable current account deficit
Intentionally stirring the international geopolitical pot
False government statistics
Fed monetary inflation & ceasing publishing M3
Illegal immigration
Executive orders regarding martial law and the suspension of
the Constitution
Construction of new, huge detention camps
The Fed legislative, FEMA and DHS reaction to Katrina/NO
Lack of action to deal with resource constraints
Biofuels/ethanol
North American Union (NAU)
The powerful people and organizations know with a certainty that the coming problems cannot be mitigated. Period. Even Matt/Chimp doesn't really get it.
Todd
I think the Swedish government knows how to handle this but I cant say if its due to PO or simply that most of the PO mitigation efforts makes economical and environmental sense.
Authorities are being rationalized with a goal of making it easier to run a buisness.
A long time socialist policy for cash sustainance is being replaced by a policy for more jobs and its being fairly successfull.
The government debt is being repaid fairly fast.
Taxes changing the structure of the energy market are kept and election promises for lowering the gasolene tax are postponed.
There are serious efforts to enlarge the investments in rail and road infrastructure with non tax money.
There are lots of work done with lowering the CO2 emissions, and some work in climate change adaption.
Infrastructure maintainance is taken seriously.
3 out of 4 parties in the government now support new nuclear powerplants and the fourth accept life lenght extensions, upratings and prospecting for uranium ore.
And the air is easier to breathe when a 12 year socialist (not especially communist-socialist, more old-buddy-power-network socialist) rule has been replaced with one that renews large parts of the state and the way it works.
There is political competition about formulating actual soultions to these kinds of problems. Enough people care about what happens in a few decades to make it important for politicians to have real solutions for somewhat abstract problems.
I know lots of more things could be done and that makes me optimistical. If climate change and peak oil become large problems within a few years we can have a notisable positive effect for tens of millions of people and more if we invest and grow in capability.
I expect the Swedish society will make private and public investments in the low hundreds of billions during the next two generations within areas relevant for PO and GW. But thats only my thumb, not a calculation. And if becommes realy urgent and there is need for mobilization effort it becommes impossible to guess.
Magnus,
I have no doubt that other countries will deal with peak resources differently than the US...and far more positively. My Spanish and German are rusty so maybe I should learn Swedish just in case.
But seriously, I would take the time to read the links I posted above to get a more realistic picture of how things will probably playout in the US. Power and greed are major issues that will propell the US toward a conclusion that benefits those in public and private power - not the people.
Todd
English is ok if you have skills and are looking for a job.
I am sure greed will be an important factor in Sweden and we dont have much power. Hopefully there will be lots of small and large fortunes made while society adapts to a new situation. Hopefully we will handle this well enough to get skilled people to move over here since manpower is one of the limiting factors.
Magnus,
I doubt Sweden needs expertise in polymers, resins, adhesives and synthetic rubber from someone as old as I. Yes, I've managed process development groups, started up new facilities and been a plant manager but...I'm pushing 70. However, I'll tell you seriously, were I 30 years younger I might really pursue an off-shore move to a country like yours. I very much respect what your country is trying to do.
Todd
Todd
As soon as Sweden starts to look real good, or sufficiently better than other places, a 100 million people will want to move there. And they have no defense to speak of, and moreover a coastline that couldn't be adequately defended by the entire US Army.
Sweden is just another highly capitalist eternal growth society that tries to make money off its specific qualities. And that will not work. They're as leveraged as all the others in the formerly rich part of the world.
We are witnessing the collapse of the entire system, not just of parts of it. Long as it's about making money, they're missing the boat.
Hindering immigration is probably depressingly easy if the common moral degenerates down to the ethnic clensing level. The worrying thing is not if the coast line can be defended but if there should be a want for doing it and a flood of refugees. If people would want to roll out the razor wire and start to mass murder it would be major disaster since such a country would not be nice to live in.
Making money is important since that is one of the major tools for getting things done. Money will be made as long as there is change leading to constructive things being made. This does of course not guarantee that the sum of the wealth will increase since some of the investments might end up as useless. The ToD and other debates indicates that a large part of the US infrastructure and schooling might end up useless. Bad for you but its not the end of money as tool for running an economy. There are also billions of wasted investments in Sweden and billions more will be wasted since it is impossible to accurately predict the future. But if you invest everything in one prognosis and one solution for logistics etc you can end up hurt by loosing a very large sunk investment. Such single mindedness is ok for a corporation that must be best in the world in its niche but its not good for a country that ought to provide an environment for buisness and subcultures to grown, prosper and die.
And regarding the last part I get mixed signals about USA. Booming business and a continent of variation but at the same time a suburbia that seems to be standardized and malinvested. Its hard to understad you from the other side of the atlantic.
Magnus,
HeIsSoFly is quite correct about probable immigration to
your country. I live in the UK, and for some time my wife
has been suggesting that we buy a property in Sweden, as
she thinks that it is a nice, safe, stable sort of place
that she would like to live in.
When things start to fall apart in countries that have
not made adequate preparations for the forthcoming energy
crisis, very large numbers of people in Europe will also
wish to avail themselves of your hospitality.
There is no way that a country with a population of just
over 9 million people will be able to keep the British,
French, Italians, Germans, Russians, etc. out.
It hardly needs to be pointed out that all of these
countries are much better armed, and more aggressive than
the peaceable Swedes.
...keep the British, French, Italians, Germans, Russians, etc. out
The French should be in as good a shape as the Swedes (and their wine & food is better :-). Other than a nuke allergy, the Germans are doing a large number of things right. Limited natural resources, but they are maximizing what they do have.
The Russians should be able to supply their internal needs for several decades yet.
Best Hopes,
Alan
You are welcome. If you think you will be less welcome in the future come over early and start socializing with your new neighbours. Its even better if you bring something usefull, for instance UK experience with PPP financing of infrastructure leading to businesses increasing the total ability to get things done.
I dont think our neighbours will go down the drain and most people like to stay at home as long as it is possible. If we exports lots of efficient cars and lorries, energy saving technology, steel products, district cooling systems, energy pellets, tree fiber products, electricity and so on more people will be able to stay at home. And you got to be able to visit and have an exchange of culture and goods since the exporting will be less meaningfull if we cant get paid for it.
I am advocating a stronger Swedish military but not turning our country into a WW3 fort. We ought to think thru the structure of procurement and human resources, join Nato formally and continue to integrate with our Nordic neighbours. Its much more likely that Swedish forces would be needed to help Swedish and EU trade partners and other EU countries then repelling an invasion.
And if it would go to hell our usefullness is in providing goods and services that needs a funtioning society to be produced. If someone rolls over us there wont be any electricity to export, no bofors guns, no mass produced hybrid lorries, no Gripen fighters and so on.
I'm not sure what "discussion" you are referring to, but I mentioned subsidies in my remarks above. If that's not price, I don't know what is.
That said, there is a general lack of appreciation for economics in these export models. I've said some rude things about economists from time to time because they've decided to ban scarcity (of available production, i.e. a falling rate, not the reserves volumes) from the discussion. That doesn't mean economics shouldn't play an important role in peak oil discussions.
When the NPC says, as they did in their report, that peak oilers pay no attention to demand and price, this always makes me wince, because there's more than a grain of truth in it. I've tried to correct this deficiency from time to time — with little effect.
Dave,
You're sure right about the economics. When I hear predictions of $200 oil, I wince. Ten dollars a gallon is going to make trash out of every prediction, plus the OECD economies, and armed robbers out of soccer moms.
Dave,
I was referring to the original piece, not the thread that followed.
For instance, here is a dynamic that comes to mind quite quickly.
In an oil-scarce world, exporters obviously find they get more bang for their barrel on the world market than before. It's quite reasonable to suspect -- and there is already evidence for this -- that exporters might decide that there are so many nice goodies (and necessities) available for the price of that barrel that they would rather trade it for that stuff rather than burn the barrel themselves. Not everybody in the exporting nation might agree, however. But that's a different story.
Secondly, depending on how prices behave, exporters in decline like Mexico could find that the economic effects of depletion are offset to some extent at least by higher oil revenues.
What does Mexico look like at $200 a barrel? at $300? The gringos will pay it, it seems. How does this affect various mitigation scenarios for Mexico?
For what it's worth Dave, IMO your pieces have improved steadily over the past year. Very solid work. You do your readers a service.
The problem is your looking on the import nation side at crashing economies and effectively the loss of the suburban lifestyle with the attendant chaos so the demand side will actually be highly variable. I think we are way to certain that the importing economies will manage to continue to function in a expensive oil regime esp if widespread shortages are occurring. We might see 100+ oil then it probably will crash back to 60 or lower as economies start faltering before rising again if they hit some stability. So price will be all over the map. It was during peak whale oil so we expect the same wide swings in price as oil becomes scarce.
These price swings are part of the reason I think we will see massive pullback in investment in oil infrastructure since know one will actually know what the real long term oil market is.
However the petrochemical service component and probably enough for air travel and commercial trucks should remain no matter what but this is a much smaller market than what
we have today.
What we lose is the middle class suburban market for transportation once this market is gone and it should go fairly quickly the remaining oil market should be able to use the remaining oil with out it going over 200 a barrel.
And note that at about 10 dollars a gallon or so lots of sources are competitive with oil just the volume has to be a lot less. In a sense the market naturally works to remove the least effective and largest use for oil which is American suburbia. Once this is gone then we actually have a relatively stable market remaining with supply and demand fairly balanced.
In general, at higher prices and lower supply, the least-value-created uses of oil (or whatever else) will disappear. We keep hearing these arguments that "oil makes plastic, and therefore you won't be able to buy your artery stent made from plastic, and therefore you will die of a heart attack" type arguments. There will always be enough oil to make small, high value items such as these, excepting generalized breakdown.
The low-value uses of oil I see are:
1) driving long distances in low-mileage cars
2) heating overly large, centrally-heated and not very well insulated houses
These problems are actually rather easy to solve, over the course of ten or twenty years. In the shorter term, you can just move closer to your workplace, switch to space-heating, and replace your car with something that gets at least 35 mpg. In the longer term, the easy solution is rail-based transit and a city structure designed for rail-based transit, ie high-density clustered around train stations.
It is often hard for Americans to visualize anything but the suburban automobile slum, even if they don't like it. Americans almost immediately gravitate toward their impressions of "small town rural America," apparently not realizing that the desire to live in "small town rural America" is what drove the creation of the automobile slums in the first place. Those suburbs USED TO BE small, rural agricultural towns, and this is as true of the former orange groves of Orange County (now a suburb of Los Angeles) as it is of the colonial farms of Westchester County (now a suburb of New York).
Living in the automobile slums is bad enough with a car, but without a car? No wonder people panic!
I say: take a beautiful city built before the automobile age, and imagine it with subways, streetcars, and trains connecting city to city. How about Venice? I think Venice would be a nice template for our cities of the future. Or Vienna? Or Paris?
I say: take a beautiful city built before the automobile age, and imagine it with subways, streetcars, and trains connecting city to city
How about New Orleans ? Add 35 miles of streetcars to our existing 14 miles.
Prior to Katrina we were tied with New York City for fewest miles driven by residents. My neighborhood is the car use equivalent of Manhattan, but a much more beautiful and human scale version. Different solutions, equal results.
Best Hopes for Beautiful TOD,
Alan
Your objection is similar to Dave Cohen's: the model is too simple/ not realistic. See my reply to him above.
Cute.
Mark, ignore those kind of comments. You were very clear about what this analysis was and wasn't. I think it's very instructive.
One of the factors that makes the situation so explosive is the pressure that politicians in oil-exporting countries are under to continue to supply oil to their own populations at subsidized prices. And that's true whether or not the governments in question are democratic. Even dictators have constituencies. The West will want Iran, Iraq, Venezuela, Mexico, and the others to let domestic prices rise in order to curb demand and maintain high levels of export; but leaders who go along with us are likely to wind up on the end of a rope.
Good work. I had started to consider evaluation of the "Import Land" model to work with the "Export Land" model. The values calculated above represent the total that represent the average of all lands or countries.
The export land model is being worked to examine 10 individual exporting countries. The import land model also needs to be drilled down to examine possible effects on individual countries or regions. This further detail may provide indication of price movements. From the 2006 British Petroleum Review of World Energy, The US and Europe/Euroasia each consume approximately 25% of the worlds production of liquids, Asia Pacific consumes approximately 30%. The respective production is 8, 22, and 10% of world production. Thus the US and Asia Pacific import about 67% or their consumption while Europe/Eurasia imports about 10% of Europe/Eurasia consumption.
In the future, if a single country or region increases their consumption, it will come from reduction of another countries share of the net import/export. This reallocataion of supply will be determined by market price (or war). Assuming that China and India robust and expanding economies will allow them to outbid other consumers, the largest reallocation of resources will come from the largest current users (US comes to mind).
My assessment is that crude oil will be $400 per barrel to make a sigmificant (50%) reduction. This $320/bbl increase is an additional $8 per gallon resulting in $12/gallon of gas. People will respond by car pooling (factor of 4 reduction) or buying more fuel economical autos (factor of 2 reduction). Of course the resulting recession/depression may have an impact on oil consumption also.
These models need to be drilled down further to individual companies or investments. Exxon Mobil as an import company model produced 0.41 million barrels per day in the US compared to total product sales of 2.7 and 7.2 million barrels per day, US and world, respectively. I consider the Exxon production of oil in a foreign country the equivalent of imports considering the security of the license arrangements (Venzuela and Russia/BP). This means that Exxon Mobil imports 85% of oil liquids in the US and 94% of oil liquids in total world operations.
Extension of the oil import model to the company level may provide guidance for investments.
IMHO a lot of people are missing the most important part PO in the US. Business’s that sell goods and services on the discretionary side of the economy are going to be out of business. My customers are going to be gone. Paying 6, 8 or 12 dollars for gas, is just out of the question for most people making under 40k a year. Yes it will happen, but there will be millions out of work. There is no working at home or bike riding to work. The government will probably find something for all of us to do, as it can not have 15 to 30% unemployment.
I have this summer seen four low budget plays utilizing a lot of low cost or volunteer work and surroundings inherited from earlier generations. It cost discretionary money to see them but its not especially expensive. A depression will mean lots of changes but this kind of culture can probably survive a lot as long as people dont starve since we need to fill our days with meaning and meeting other people.
I have seen some ideas on how to make these local initatives workable even if the future will be poorer. It will be intresting to see if they will happen during the next 10 years or so.
Regarding the local government I expect there will be lots of work during the next two decades since there are enourmous ammount of work to do to handle climate change and more expensive fossil fuel. The problem right now seems to be to educate and encourge people to start new careers with the things that need to be done. There is a lack of the kind of people needed to build new infrastructure, reinvest industries and save energy.
Magnus,
As usual, you are 100% correct.
The sad truth of business as usual is that young people are preparing for the following "careers":
1. Lawyer (We already have two million lawyers in the U.S.)
2. Clinical psychologist (Depressed people cannot drive to see their therapists with gasoline at over six dollars per gallon).
3. Management and administration (Good luck!)
4. Finance (Become obscenely wealthy. . . yeah, right.)
and on and on it goes. Everybody wants to work in the discretionary economy. Almost nobody wants to be an engineer. Nobody, but nobody, wants to be a farmer. A few intelligent people learn to become bicycle mechanics. In the U.S. people want to be celebrities or minicelebrities--work in the TV industry or manage a resort, something like that. Oh I forgot: "Life coach" that is another occupation some people aim for, while others want to be sex therapists.
I think you Swedes have much more good common sense than most Americans.
We have for a long time had the same trend in Sweden but farming has never got out of fashion although a lot of the interest is in hobby horses. We were one if the last european states to industrialize and there is still a very strong cultural connection between the urban population and rural culture. One trend changer has been quite odd, the reality TV show "farmer seeks wife" making farmers working 14 h/dag 7 days/week hot.
Building and factory worker careers have been hurt from at least four directions.
Unions have made it harder for young people to enter the professions. The economical side is high entry vages and there is a more subtle part in working against use of free labour such as building students building real houses and thus competing with the professionals. This might be changing and if its not its a good reason to hit the unions over their heads with a big cluehammer. Excluding new people is good for you in the short run but in the long one you will age and your organization die out.
Lots of industries were outcompeted in the 70:s, 80:s and 90:s making people believe that industry is dead. There is massive production going on but its not as visible as before. And there has also been chrashes in the building sector with massive layoffs leaving holes in the age distribution of the workforce. And there is less time available for introductory jobs on the workplaces.
Children have been excluded from workplaces for safety and productivity reason and perhaps also since there is better childcare. Seeing workplaces has been replaced with seeing TV. Now when I got a TV again I have noticed the great children TV show Discovery with heavy machines, dirty jobs, people welding on cars and bikes, etc. I would have absolutely loved that one between 8 and 14 and it is still fun.
There were consensus that the future were in intellectual work. Unfortunately our socialists set volume targets and not quality targets and reshaped schools to get everybody ready for university studies and then made the university courses easier. Since everybody is equal everybodu should do the same thing and if everybody cant lower the goals. This were the logical extreme end of a policy initiated in the early 70:s. And lo and behold after loosing last years election the socialist party acknowledged that their school policy since 30+ years had been crap.
A minority of companies have reacted on this by starting their own schools and those have been very good and valuble as a model for the current boom of non municipialy schools.
We are still hurting. The quality of engineering students is probably still going down due to bad policy and bad math skills. It will take a decade or two to change this since it is a slow system to get more of the scools to become better and then train a new generation. For the next decade it would be great to get healthy retirees back into work and hopefully into some schools. If you got a good idea on how to do that please share it.
I like the idea of getting retired people back to work.
We need more--many more--petroleum engineers, chemical engineers, petroleum geologists. People in good health can work at such occupations well into their ninth decade. The universities are not providing the young people with skills that are needed. Perhaps some of these elderly engineers and geologists could get "honorary" Ph.D. degrees and then teach in the universities.
Few things worry me. The lack of engineers and other practical people is very high on my worry list.
The children of my friends are all going to law school or to get a Masters of Business Administration in Finance or a Doctor of Education degree to be a school adminstrator . . . . What a waste of resources!
In the town where I live there is no bicycle mechanic within nine miles . . . but there are a hundred lawyers at least.
Don in general how many gallons of oil are in a lawyer when they are rendered ? Also their bones make good fertilizer.
Just thinking of a way we can use everyone in our new economy.
I was looking at Iran today, just to get up to day on the gasoline rationing.
Putting up the Family Jewels for Sale
And
Open market gasoline supply inevitable: Iran MP
It looks like they are going to try to get rid of subsided fuel??
Export Land at work
Ed
Off Grid, Off Mainland, current profession:Beach Bum
I think global tensions over fuel trading will make Iraq look like a picnic. From Australia's perspective
1) northwest LNG will be rerouted to the southeast as a diesel replacement in trucks and for electrical generation. Export contracts will be reduced or not renewed.
2) China's early coal peak see her lean on Australia to increase exports. Chronic drought will make Aussies wonder if this is an 'own goal'.
3) Australia and Canada will team up to control not only yellowcake sales but uranium enrichment and reprocessing, perhaps using lower capital cost technology. Their growing domestic demand will cut heavily into exports.
This will also happen fairly quickly as early signs are showing.
Savinar ...give it a rest dude.
Go post "we're all gonna die" at LATOC and see what that does to your readership.
I agree with you marginally, but switch to decaf bud.
The top two articles on Friday's news update are on the coming nuclear war.
The third is on the coming gene specific bio-plagues.
Followed up by how california is going to "collapse like neutron star" once the hayward fault goes off.
As far as my readership is concerned, it is higher than ever. The parent site is averaging 7,500 visits and 15,000 page views while the forum is averaging another 15,000 page views per day as well. That's 30,000 page views per day all together so I'm doing somthing right over there.
Mark B,
Thank you for extending the brillant work of Westexas and Khebab. I made a point a few days ago which I don't think was very clear and may impact your scenarios.
The majority of export land is coming from national oil companies. Assuming export land is close to but not quite at peak, oil production now is a cheap as it will ever be. At and post peak, massive funding would be required to maintain production level, and in fact almost no amount of effort or expense will allow a post peak increase, only a slow decline.
This will require the national oil companies to invest an exponentially larger amount into maintaining production. By virtue of being a national oil company, as the percent of revenue is diverted to production it is diverted from government coffers.
In addition to the increase of consumption by export land, which quickly decreases export, reduced oil revenue and increased production expense will force the governments to choose if they want to continue current social programs or invest to maintain production. If they choose production over social programs, the natives may become restless. If they choose social programs over production, exports collapse even faster.
I am not sure if your numbers and projections factor in the financial delimas which export land must face, but I don't see any good outcomes.
Thanks again for your contributions,
EJ
I think there are several lines of Economic reasoning that support the Export Land Model causing imports to drop quickly. The first is that net revenue of an inelastic good is increased by decreasing supply.
The second is that goods produced using oil are always going to be worth more than the oil itself (this is why it was ever worth importing oil, otherwise, importing oil would be uneconomic). Turning oil into cars or software engineers is worth way more than shipping the oil directly. Thus as exporter economies grow, they grow more profitable, not less. (Unless they just waste the oil on useless consumption).
Exporter Economics
Net Revenue = Price * Production Rate
Price Elasticity of Oil (if someone has a better source please post it.)
http://www.iaes.org/conferences/past/philadelphia_52/prelim_program/d00-...
Long Run -0.4065
Short Run -0.2668
From Wikipedia price elasticity article here
http://en.wikipedia.org/wiki/Price_elasticity_of_demand
“When the price elasticity of demand for a good is inelastic (|Ed| < 1), the percentage change in quantity is smaller than that in price. Hence, when the price is raised, the total revenue of producers rises, and vice versa.”
What is being said here is that Net Revenue is going to increase by taking the good off the market, because price rises faster than production is dropping. Essentially, OPEC can just keep raising the price until elasticity gets up to -1.0 and importers start substituting. In prior years, non-OPEC supplies created a possible substitution. But now non-OPEC has peaked. And importers have not yet understood how that is going to change “The Fundamentals”.
H.T. Odum discusses import and export policies in “A Prosperous Way Down”. Here is a quote.
“Nations with oil reserves still near the surface and emergy yield ratios of 50 to 1 or more should use their oil at home to benefit most. Oil-rich Near East countries are developing the refineries and manufacturing to use their own oil more. This may eventually reduce the availability of cheap oil to other countries. Currently they export at market prices that divide the emergy benefit with their customers. As the Persian Gulf war showed, developed nations with military power probably would not allow them to do otherwise”.
Jon Freise
Analyze Not Fantasize -D. Meadows
What I wanted to see here was when the exporting countries would transition from Phase I (revenue increasing with declining exports) and enter Phase II (revenue decreases).
I used the price elasticity model to calculate the increase in price from holding oil off the market. I used 42 Mbpd production as the base case. Then as production declines I calculate the expected price using the elasticity function
Change in Price = Change in demand / Elasticity
Then I used the new price to calculate Net Revenue = New Price * New Production Level.
(This is the first time I have done a calculation using elasticity, so if anyone sees an error with the above, please help!)
What I think this is showing is that we are just starting entry to Phase I for export land. It will continue until production drops to 33 Mbpd (long term -0.58 Elasticity) or 26 Mbpd(short term -0.26 Elasticity). Either way exporters are going to be rewarded for taking oil off the market for at least 10Mbpd more. This also says to me that OPEC is doing us a favor. If they were totally self interested, they could be making a lot more money.
Edit:
Thanks Mark B. for this cool article.
Discussion of Price Elasticity and Gasoline here:
http://economics.about.com/od/priceelasticityofdemand/a/gasoline_elast.htm
Buuut. I don't see the import economies lasting to the point that we are 10mbpd. I've used 4-5mbpd as the breaking point.
So we can expect economic issues before 10mbpd.
Basically its the point your down about 5% from peak.
I've been using this paper as my bible on the issue.
http://www.hubbertpeak.com/reynolds/MineralEconomy.htm
This is the ten commandments part.
Notice that the system is effectively breaking down much past 5% declines post peak. This is why I think the importing economies will begin to fail as the price spikes so the exporting countries won't see the big revenue flow your predicting and will go into Phase II a lot faster then they actually believe.
Now the only real choice they will have is to withhold even more oil to try and support the now collapsing price and also of course and this is important drop investment in oil production.
But this will just push the importing nations to collapse faster.
If you take this graph and my graph you will see that Phase I won't last that long and any attempts to move back to Phase I from Phase II once the importers start to collapse will simply hasten collapse.
So I'm proposing that the Phase I too Phase II transition is driven by economic problems in the importing countries and demand and price collapse followed by all the wrong moves on the part of exporters to get back to Phase I.
I guess I don't understand why Figure 2 predicts that the Import economies will break down at 5%? The curve you have here is what happens as you exhaust and ore body and need to mine and refine increasingly impure ore. The energy costs go exponential as the mass needing to be refined goes exponential. EROI is very similar in shape as you approach 1 to 1. I can understand how this might cut into oil production, but I don't see how this predicts anything on the Import side. In a way, the Hubbert bell shaped production curve takes this into account already.
Defining phase 1 and 2. I think we should stick to WestTexas's first definition, during phase 1 import revenue increases. It is an easy definition, and it is simple to measure if a country is in that state or not.
It would be worth searching the literature for more examples of what happened in importing countries during the last supply cuts. Did the Elasticity values take a sudden change? If they suddenly turn to mush (go above 1) that would support your position. There have been cuts of oil production by 5% before. If the impacts are going to be different in the future, some mechanism for why is needed.
I think we need a bit more Net Energy analysis.
When prices rise because demand is outrunning supply, Importers are sending goods (and thus energy) back to the Exporters in the form of the higher price. The producer is making a fortune just because they happen to be rationing between Importers. That just moves around who is wealthy. Nice work if you can get it.
When the exporter economy grows, some of that growth is locally consumed stuff, and is lost to the Import economy. But some is also exports (like refined gasoline and fertilizer) and can be imported instead of crude oil, so is not lost to the Import economy. (we need to quantify this value).
When costs of energy production rise (EROI declines) that removes energy from the world economy as a whole.
My intuition says that the Import economies can handle a larger drop than 6 or 7% because it has happened before, and those were shutin production and so totally lost to the world economy. In effect, the world felt the whole 6 or 7% loss. While if 1/3 of Exportland usage is reexported as goods or refined products, then the 6% would drop to 4%. Again, I think net energy can make what is happening clearer.
You have nailed the problem!
EXCELLENT !!!!
The problem with the churn of wealth is its the importers that print the money to pay for oil. This causes issues.
If the exporters where in control of the money supply we probably would be a lot better off. Basically by inflating their currencies they can destroy the wealth of everyone including the exporting nations except that in a inflationary scenario the groups closest to the source of money are able to concentrate their wealth its the people farther away that get their savings devalued and oil exporting countries are esp susceptible to inflation.
In fact this inflationary approach is the current path we are taking and at least for now its manage to lessen the impact of expensive oil but this won't last.
During the 1970 we had a lot of room to reduce our oil usage via conservation efforts. We don't have this cushion now.
Next the import land or consumer land was concentrated in the US under one government for the most part today its far more diffuse with a lot of governments involved. This makes any sort of unified response practically impossible. Its Jevon's paradox on steroids.
Last but not least the reason for shortages was purely political not because of geological constraints so it was obvious once the political solution was solved we solved the problem. I am arguing that politics will be a big part of making peak worse than a lot of people expect but this time around is again a lot of players with a lot of different agenda's. I've even warned that we may see a repeat of and anti-Israel embargo in addition to all our other problems.
We can certainly learn from the past but be leery of assuming that the future will be similar.
In any case I thank you for laying out the problem in a clear manner. I hope that your optimism is well founded the potential for things to go badly wrong will be high and that tends to be depressing. Our governments and people will be facing the biggest challenge faced by man in over 1000 years
so we can only hope we are up to the task.
Now with that said given the current model the issue is really a matter of how many years it will take for various conditions to unfold the end is not in doubt. We won't have a SUV driving McMansion living middle class by the end of the next decade at the latest the party is over. We are just trying to see if we can figure out how its going to end.
Again THANKS !!!!
I am not claiming to be an optimist, I just like my Titanic sinking time to be noted to at least two decimal places! :)
The rate of decline is super important for mitigation planning. I like hunches, intuition, and ideas, but data and testing are critical to finding the right path.
We have a lot of numbers from a large number of sources.
We don't have a complete numerical model and very important factors are currently left out. Even ELM is a high estimate of the real situation.
To look at another issue we have some fantastic numerical models for the ice melting in the arctic and they are wrong the melting is happening far faster than predicted. The intrinsic reason in this case and in the case of peak oil.
Its correlations and positive feedback loops that swamp the base signal.
With that said the worst case scenario I've come up with to date points to problems starting this fall and reaching the first crisis level by the end of 2008 this is about when we should reach 5% down and will see how exporting countries will respond.
Note that the EIA net export numbers are for total liquids, inclusive of refined products. From the monthly peak in 9/05, net exports by major net exporters (one mbpd or more, close to 90% of total net exports) are already down, as of 3/07, by 5% (based on data by "Mr. 5%").
So, of every 20 barrels that were exported in September, 2005, we have already lost one barrel, in an 18 month period.
And again, the model suggests that the net export decline rate will accelerate with time.
Yes, it looks like we are just starting to climb the total revenue curve.
Thanks for the tip on the total liquids. So the situation is worse.
Another useful thing these two curves show is that anything we can do to increase the elasticity (give people alternate options) will lower the price and export revenue. So everyone should get out there and push trains and buses, even if they themselves don't plan to ride them. Open up the option, so that others who can ride them do, and it keeps funds inside the Import countries. If you live in a Red State with low population, now is the time to change views and push for mass transit. (or do nothing and we can all pay, and pay, and pay).
Thats actually the crux of the problem in the US. In Europe a fair number of people have viable substitution paths. Even carpooling works since they have excellent inner city public transport.
The US however does not have viable substitution pathways to many people are stuck in their home/commute investment and will probably stick with it to the bitter end.
I'm sure people will innovate when pushed but this is in my opinion a situation that must have a crash program to build out electric rail to work.
Asebiu asked how this discussion could be held without considering the effect of ELM on the price of oil. When I went back and reread over everything, I found trying to understand the impact on price lead me into a briar patch.
When you talk about the price, are you talking about US dollars or yuan or pounds or just what? And what year are you talking about?
Recently the US dollar has been falling relative to other currencies, and some are predicting an even larger fall. So US$225/bbl oil in a couple of years might be cheaper than what we are paying today, at least in terms of its value.
IMHO we need some way to talk about the "value" of a barrel of oil and how that changes over time as supply and demand change. It would be nice to talk about value in a measure as stable as the size of a barrel, 55 gallons. I don't think the US$ is going to remain stable enough to be that measure.
Until we agree on a value measure, doing the study in terms of barrels seems appropriate.
Sam Penny
the Prudent RVer
A barrel of oil contains 42 gallons.
Bob Ebersole
Bob,
I am embarassed. I don't know where the 55 gallons came from, but that is what has stuck in my mind all these years. My time in the oil patch was back in the early 70s, so it has been some time.
Okay, now I will remember 42 gallons for evermore. :-))
Sam Penny
the Prudent RVer
Several ways to do it: constant dollar (inflation adjusted), in other currencies, in gold.
Inflation calculator (works forward and backward): http://www.minneapolisfed.org/Research/data/us/calc/index.cfm
$75 oil is about $71 in constant 2005 dollars. Matt Simmons' bet is that oil prices will be at or above $200 in 2010, in constant 2005 dollars.
Nice piece, Mark. I would like to put forward an argument for the more pessimistic of the scenarios above.
For EL countries to contain domestic demand, they will have to reduce/remove subsidies. This of course will encounter resistance from their citizenry. As others have pointed out, many of these countries have a restive populace and the leaderships often have (a) A relatively tenuous grip on power, and (b) A commitment to stay in power as long as possible so as to maximize their own welfare - the welfare of the state/populace be damned. With booming oil revenue to siphon off to their (the leaders') Swiss bank accounts, why risk an insurrection?
Furthermore, a reduction in subsidies is effectively equivalent to the introduction of a new tax. Even in the US people are suspicious of new taxes and don't generally believe they will be to their benefit. If we in the west cannot trust politicians to take money out of our pocket and use if for our benefit, how can citizens in Russia and Saudi Arabia possibly trust their governments to do such a thing? People in those countries will simply assume the "higher taxes" are flowing to Swiss bank accounts of the Powers-That-Be - and they will have a very strong inductive argument.
Finally, for an EL government to sell such price increases to its populace it will have to insist that things have changed - that PO has arrived. But once the country has accepted that PO has arrived, the logical thing to do is to constrain exports. After all, why sell something today when it will be worth much more tomorrow? So even if domestic consumption is constrained, Import Land may not see any benefit from it.
Mark,
I appreciate your putting the hard numbers into Westexas/Khebab's conceptual export land model. I certainly agree with the general direction of the model, and your graphs spell it out well. However, I've pointed out a few times to WT that the problem with the model is that it assumes that the rulers of the oil exporting countries will continue to allow their internal consumption to continue unchecked. I know you replied to a similar concern of Dave's above. I have an additional piece of information that shouldn't be too hard to add that will make the concern clear.
Most of the oil/gas exporting nations are food importers. I think it's pretty clear that an exporting nation will not allow all of their export revenue to dry up, since that would mean that portions of their population will starve. I think that the rulers of those countries might allow some people to starve, but it's hard to imagine that people in those countries would willingly choose full gas tanks of cheap gas for empty bellies. Food import information for countries of the world is available at the UN Food and Agricultural Organization.
For example, Saudia Arabia is a heavy food importer. This should be pretty obvious when you look at their available land.
This map (pdf warning) of food import dependency shows Saudi Arabia at greater than 70% dependency on imported food and less than 2700 calories per person per day. The import statistics page shows that they imported about 1.2 million metric tons of rice, 3.9 million metric tons of barley, and 1.6 million metric tons of corn in 2004 (latest year available), along with large quantities of other foods. I think the Saudis will cut back their subsidies for gasoline and diesel before they give up their food imports.
Of course, this is also an argument that SA and other exporters are powder kegs. Another way to structure the data would be to show their exports falling until they would no longer have the money to pay for imported food, and then a precipitous collapse in both oil exports and food imports, as the country implodes. I would expect the elites to move toward a smooth elimination of subsidies, but we can't rule out government overthrows and insurgencies.
Yes, if the balance approached the point where the exporter made substantially less from their exports I think there would be a problem with the model. In the cases where net exports approach zero by 2020 I state that I think the model would most likely be wildly incorrect. However, in the case where there is a 2% decline rate, net exports have declined by a maximum of ~50% by 2020. In that case I don't think there would be a revenue crisis for the exporters.
Your point about using revenue as part of the model is certainly something to think about. Gtrout goes into some detail above on this point. The issue for me is I don't really trust projections of price. Again, for the more realistic 2% decline rate case, I don't think its an issue.
ELM sort of reminds me of Olduvai gorge theory, namely a big cliff falling rapidly down the other side, instead of slow and cozy. The older PO theory was more comfortable, like US depletion without replacements and with raional players being kind to one another in best interest of the common good.
Of course add to that all the politcal uncertainty and even worst case scenarios could be feasible. But let's leave that to Hollywood and Stephen King and our current VP.
The problem are alarm with ELM is the probability of a failure mode is non zero. In fact its fairly high esp when you consider above ground/political factors. As ELM progresses the chance of failure simply increases.
The real situation seems to be problematic enough that even if we aggressively try to avert the worst effects of peak oil we may not be successful. The probability of this is decidedly non-zero. In short if we started tomorrow with a massive movement to move to electrified rail we may still face significant economic problems.
Like global warming peak oil needs aggressive action to minimize its effects and like global warming we will probably fail to see any real action until to late.
The biggest problem is actually pretty simple the longer you wait the less options you have almost all solutions require a wedge type adoption model and can take decades to implement completely. And this is with a enlightened populace and government trying to solve the problems.
Instead the approach that seems to be the norm is lets run the current economy as far as possible and when it hits a wall the market will allow us to change.
So if you take the results of ELM and take our current approach together its hard to be optimistic about the outcome over the short term i.e less than a decade.
And we do know from WWII that decisions (Israel/Africa) that look good in the short term can have lasting problems.