The Expected Economic Impact of an Energy Downturn
Posted by Gail the Actuary on March 26, 2008 - 10:00am
I have been asked to give a short talk about the expected economic impact of an energy downturn. The talk is to be part of public health program called "Converging Environmental Crises: A Teach-in on Energy, Climate Change, Water, Agriculture and Population." I expect that the audience will be university students plus physicians and others in the public health field. The talk will be recorded, and will appear on the internet. I have added some to the talk, since my first draft. These are the PowerPoint slides I show. This is a link to the recorded version of my talk.
Good afternoon. My name is Gail Tverberg. Some of you know me as "Gail the Actuary" on TheOilDrum.com web site. The Oil Drum is a web site about energy and our future.
Today, I will be talking to you about The Expected Economic Impact of an Energy Downturn. If, after this talk, you would like to learn more about peak oil and about resource depletion issues of all types, TheOilDrum.com is a good site to go to for more information.
Let's talk a bit first about the energy downturn. As everyone is aware, the price of gasoline and diesel has been rising recently. The reason the price is rising is because the world's supply of oil cannot keep up with demand.
I have illustrated the situation we are facing in Figure 1. In this chart, I show demand increasing in the future at about the same rate that consumption has increased in the past. One reason for increasing demand is growth of economies of developing countries such as China and India.
The supply of oil has leveled off. Oil production for 2007 was about the same as it was in 2005 and 2006. Many people believe that sometime in the next few years, supply may actually begin to fall. Even if supply remains level, as it has in the past three years, there will be a growing gap between expected future demand and supply.
Why Does a Drop in Oil Production Make a Difference?
Why does a drop in the production of oil, or for that matter, any type of energy, make a difference? After all, oil doesn't cost a lot. We only pay about 4% of the US gross domestic product for it.
In many ways, oil is like food for your car, or food for the earthmover that makes our roads. Without food, we can't do anything. We would starve. Without oil, or the fuel made from oil, all of our big equipment won't work. Our electric power plants use other types of fuel, but if they don't have the fuel they need, we won't have the electric power we need either. Our houses will be dark.
We talk about substitutes, but in the real world they are still a very long way off. Think about plug-in battery-operated cars--that's the kind that use only electricity. First of all, we really don't have this kind of car perfected. Even if we did, it wouldn't solve our need for a whole lot of other kinds of vehicles, like semi-trucks and earth-moving equipment.
Suppose we did have the plug-in cars perfected. We still would have to figure out how to build the cars in quantity. Engineers are looking at the possibility of using lithium batteries, but the supply of lithium isn't necessarily sufficient for making millions of batteries for cars.
We also have to think about how people will pay for all the new cars. If there isn't a good supply of oil, the old cars suddenly are worth very little. How many people are going to be able to buy a new car, if they can't trade in their old car as a down payment on the new one?
Scientists have looked at a lot of other solutions as well, but they all seem to be a long way off. It is hard to get people to tell us the truth about the problem. Politicians don't want to admit there is a problem that they don't have a solution for. Even a publication like Scientific American won't admit there is a problem. They would like us to think that our scientists can fix any problem. No one wants to admit that the solutions they are looking at are a long way off.
Earth Is Finite
What is happening is that the earth is finite, and we are starting to reach some of its limitations. At this point, most of the "easy to extract" oil has already been removed. There is still oil in the ground, but what remains is becoming more and more difficult to remove.
When we try to find alternatives, we encounter limitations of other types. In some situations, natural gas might be a substitute, but in North America it is also in relatively short supply. Coal is in better supply, but it has serious climate change issues.
We hear a lot about ethanol from corn. Growing corn for ethanol requires huge amounts of agricultural land and fresh water. Both agricultural land and fresh water are in limited supply. About 25% of the corn we grow in the United States is now being used to produce ethanol. Even using this huge amount of corn, we don't produce very much ethanol. The energy content of the ethanol produced is equal to only about 1% of energy of the oil we use. Clearly, there is no way we can scale up this process, to cover any reasonable shortfall of oil.
Even the minerals that we might use in batteries, and the uranium we might use in nuclear reactors, are becoming increasingly difficult to extract. We have already removed most of the high quality ores of many minerals. What is left is ores of lower concentration. These ores can still be extracted, but it takes more energy resources to process this ore. The energy resources used for processing the ore are often oil and natural gas, and they themselves are in increasingly short supply.
Immediate Economic Impacts
We are all aware that the price of oil is rising. With the increase in price in oil, the price of things made from oil, such as gasoline, diesel fuel, and asphalt also rises. In some cases, it is possible to substitute one fuel for another. Because of this, prices for other fuels, like natural gas and coal, also tend to rise. Electricity is made from coal and natural gas, so its price tends to increase as well.
Food prices are also rising. This is partly because oil is used in growing crops and transporting them to market, and the cost of oil is higher. Higher food prices also reflect the fact that food production is not keeping up with demand, now that demand is so much higher because of biofuel use.
Impacts of Higher Food and Oil Prices
A major impact of higher food and oil prices is to squeeze out discretionary spending, such as eating out at restaurants and flying overseas on vacation. Some students may have to temporarily drop out of college, if their families can no longer afford to help with tuition. Families will cut back in many different ways to keep their budgets balanced.
Another impact of higher food and oil prices is more defaults on loans. We first heard about higher default rates on subprime mortgages. As prices of food and energy continue to rise, defaults can be expected to spread to other kinds of loans, such as credit card debt, auto loans, and student loans.
As families cut back on spending, financial difficulties can be expected to spread to businesses. Some types of businesses that are particularly vulnerable include restaurants, airlines, auto manufacturers, and homebuilders. Businesses with high levels of debt are especially vulnerable, since a drop in revenue is likely to make it difficult to make loan payments.
Financial institutions, such as banks, hedge funds, insurance companies, and pension funds are also likely to be affected by rising default rates. When individuals or businesses take out loans, these loans are often held by one of the various types of financial institutions. If there are defaults, it adversely affects these institutions. Banks and hedge funds often borrow money themselves, so they may find themselves squeezed in the middle if default rates rise. Insurance companies and pension funds may find themselves unable to meet their obligations, if defaults become a serious problem.
Finally, recession is an important impact of higher food and oil prices. Higher energy prices in the past have lead to recessions, including the very severe recession that took place in 1973 to 1975. It is likely that higher energy prices are one of the causes of the current recession.
Longer Term Impacts
The graph I showed earlier suggested that the gap between oil supply and demand is likely to get wider, as time goes on. If the shortfall in oil continues to get worse, and it is not possible to offset this shortfall in other ways, this recession may become permanent. The recession may get worse with time, turning into what we would think of as a long-term depression.
We are now reaching limits of many kinds. One way of representing the economy at various points in time is as disks of various sizes. Each year, society has various resources available to it, in terms of oil, natural gas, fresh water, soil productivity, minerals of various types, good climate, and people available to work with these resources. Based on the investments we have made over the years, society is able to produce a collection of goods and services using these resources. The amount of these goods and services has been growing. Let us look at this graphically.
In the recent past, the economy has been growing:
With a long-term recession, it may change to a no-growth economy:
More likely, the economy will decline as resources deplete:
(TOD readers: In the article The financial crash has a simple cause and a simple solution, Jerome a Paris discusses the fact that since 2002, the US median wage has stagnated. Thus, for a large share of the population, we have already reached the "no growth" scenario. This lack of growth in median wages is likely the reason that the financial services industry developed new forms of loans that made home-buying look more affordable than it really was. The lack of growth in median wage is also a likely reason that those same schemes are now falling apart. To the right is the graph Jerome showed.)
With a declining resource base, the median wage, adjusted for inflation, is likely to decline. This decline in median wage means that default rates on loans are likely to increase, and that discretionary spending will continue to decline.
Future Promises
It is not very obvious just looking at an array of discs, but a change from a growing economy, to a flat or declining economy, is really a major change. With a growing economy, future promises are relatively easy to fund:
The reason promises like interest payments and social security payments are relatively easy to fund in a growing economy is because these payments are generally not growing as fast as the economy as a whole. When promises such as these are made, the expectation is that the payments will be less of a burden in the future, because the economy will have grown. With this growth, there should be plenty of funds left over for other things.
With a flat or declining economy, funding for promises becomes almost impossibly difficult. Food and energy costs become a bigger share of the economy, over time, because of energy shortages. Future promises like interest, social security, and Medicare payments also become bigger, relative to the total. I have illustrated this in another graph. The combination of the two types of increases, that is the food and energy costs plus the cost of future promises, becomes a huge problem. There is not enough left over for "everything else".
Lenders Will Soon Catch on to Decline
If the economy is in long-term decline, it will not be very long before lenders start to catch on. Some creditors may actually figure out that the economy is not growing, and that it is not likely to grow in the future, because of energy shortages and other limits. Other lenders may only figure out that the default rate is very high, and, because of the way the economy is headed, it can only go higher. Regardless of their reasoning, many lenders are likely to come to the same conclusion, namely, that it no longer makes sense to offer loans.
For the United States, the balance of payments deficit is very much like debt. For years, the United States has been importing nearly twice as many goods as it exports. Once trading partners realize that the US economy is in long-term decline, they will realize that it will be almost impossible for the United States to make up for its export shortfall in the future. They are also likely to realize that buying US treasury bonds is not a good substitute for an even trade balance, since the Treasury bonds are likely to decline in value in the future, in terms of the goods they can buy. These issues could lead to a crisis in US imports of all kinds.
World Is Headed for a Credit Unwind
It seems likely that the world is now headed for a major unwind of credit. There has recently been a crisis in the financial markets. This crisis looks very much like the beginning of a major shift toward reduced credit availability. As energy supplies get tighter, economic conditions are likely to get even worse. People will be spending more for food and gasoline, so will be more likely to default on loan payments. If people are out of work, they are more likely to share living spaces. This will reduce demand for houses, and further depress prices.
I expect that the shift toward reduced credit availability will expand in the future. This may even be the "great unwind", in which debt and financial instruments of all types, including derivatives, become very much less common. The real question now is what form the unwind will take. How major will it be? Will it take place in steps, or will large sections of it occur all at once?
The impact of a credit unwind is very much like cutting up a person's credit cards. The person (or business or government) still owes as much debt as in the past, but the organization has no way of obtaining new credit. The debtor must now repay the loans out of current income, in addition to paying current expenses out of income. For many, this will not be possible. Bankruptcy seems likely for many, including a large number of businesses and some governments.
It is possible that a correction to the balance of payments situation, mentioned previously, could be part of the unwind. If this happens, imports of all kinds could drop by as much as half, very quickly.
Looking Ahead 20 or 30 Years
If we look ahead 20 or 30 years, it seems likely that the world will be very much poorer. Personal autos may be rare. Electricity may be unreliable. It is likely that we will have much less in the way of goods and services than we have today. A growing population may add to our problems. If the smaller supply of goods and services is divided among more people, living standards are likely to be much lower than they are today.
If the world becomes much poorer, I would expect social security and Medicare to be drastically scaled back or even eliminated. There will be so little goods and services in total that society cannot afford to set aside much for the disabled and elderly.
I expect that in 20 or 30 years, many business and governments will have failed. Bonds of these businesses and governments will have little value. Stocks of companies that remain in business will continue to have value, but this value may not be high compared to the cost of available goods. Inflation rates are likely to be high, reflecting the lack of goods and services for people to actually buy if they do have money.
Insurance companies and pension plans own stocks and bonds of other companies. When these other companies fail, the insurance companies and pension plans are likely to encounter financial difficulty as well. People who were counting on insurance companies and pension plans for benefits are likely to get nothing, or to receive benefits that are worth very little, because of hyperinflation. I expect most people will choose to continue to work as long as they are physically able to work, because of the poor retirement and pension benefits available.
My expectation is that over the next 20 or 30 years, globalization is likely to be scaled back. A decline in air travel will make it more difficult to manage international businesses. There will be less trust for other countries, because of all the defaults. Countries expecting to import goods are likely to need a corresponding amount of goods to export.
Nature of the Transition
The exact timing and shape of transition from our current economic system to the one that will be in place twenty or thirty years from now is not yet clear. Ideally, the transition will be a slow one, planned by governments. Even if it is slow, it will not look all that slow to people who are laid off, or to people who can no longer afford to drive a car.
It seems at least equally likely that the transition will not be smooth. Many people talk about the possibility of some type of implosion, if our current debt situation cannot be straightened out, or if rising food and gasoline prices make the debt situation worse.
We would like to think that our current financial system can handle multiple failures by banks, money markets, hedge funds, and insurance companies. It is possible, though, that failures will cascade through the system, because each institution owes money to multiple other institutions. If too many institutions fail at once, it is possible that the safety nets in place for the financial system will not work. A lot of people could lose a lot of money, overnight, from multiple failures of institutions holding our money.
There is a second way cascading failures of financial institutions could work out badly. Suppose multiple failures cascade through the financial system, and regulators actually succeed in keeping financial institutions propped up. It is possible that all of the extra cash added to the system may cause rapid inflation, or hyperinflation. If this should happen, we might all find that our money will purchase very little, almost overnight. Our bank accounts would still be full; we just wouldn't be able to buy much of anything.
Unfortunately, the current safety net in case of cascading failures is fairly limited. Treasury Secretary Henry Paulson has proposed a new regulatory structure that would be wider ranging, and presumably provide a better safety net. Getting agreement on what this new regulatory structure should be is likely to take months. In addition, once a new structure is agreed upon, it is likely to take at least another year or two to fully implement the new plan.
Meanwhile, the problem with failing financial institutions is a very current one. If recent trends continue, it is possible that several large financial institutions may fail within the next few weeks or months. If failures occur this quickly, it is doubtful any new structure will yet be in place. We can only hope that ad hoc methods, such as those used by the Federal Reserve so far, will be successful in keeping things patched together.
Health Care Services
Since this talk is part of a series of talks related to public health, I will close by making a few comments about changes I expect in the healthcare field.
I expect that over the next 20 or 30 years, health care services are likely to be drastically scaled back. In a poorer world, I expect that services of all kinds are likely to become less important relative to actual physical goods, and medical services will not be an exception. Fees paid to physicians are likely to be scaled back even more than health care services in general, because few will be able to afford the high fees physicians currently charge.
Public health may become more important, rather than less. If people are poorer, they may look to the government to provide some basic level of service. We might do well to look at how some of the poorer countries are handling healthcare now, for some ideas as to what we might do in the future.
If there is a shortage of oil, transportation is likely to be an issue, for both healthcare employees and for patients. Smaller facilities, within walking distance of patients, may become more important.
Because we are running into limits in so many ways, I expect that electrical interruptions will become more common in the next 20 or 30 years. These may even become a problem early on, for a whole host of reasons, including lack of water for cooling, lack of fuel for power generation, and poor upkeep of the electrical grid. Healthcare providers would be wise to plan for the day when elevators and electronic records may not be available.
Conclusion
I am sorry all of these predictions are very downbeat. As the world reaches it limits, it is clear that the growth paradigm that we are used to will have to end. Decline is in fact quite likely. The financial world does not deal well with economic decline, so economic problems are likely to be among the more severe ones facing the nation and the world, in the years ahead.
Thank you.
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Gail,
Sad, but most probably true.
As currencies become more debt-based (debts that were in-turn based on the promise of fossil-fuel fueled growth) they will obviously lose value. I suspect that a barter-based economy will become more prevalent.
I'm watching the budget debates going on in NJ. There are rumors that government departments might be eliminated. If true, where would the workloads go? After all, things need to be taken care of. Scary.
Things may need to be taken care of, but I suspect that they won't. If there is no Department of Education, each school will be on its, and any funding will be allocated on the basis of the simplest possible formula. If there are not enough funds for prisons, some excuse will be made to let the prisoners out early. Medicaid will go away too, if there are not funds for it.
I also heard the NJ State Department of Agriculture, as well as funding of equipment acquisitions for volunteer fire departments (as if they don't get paid little enough as is).
I live in NJ too and was a volunteer fire fighter a couple of years ago. I'm not sure that the state has ever had a significant hand in providing money for local departements to buy gear. Most of the money comes from private donations or fire distric taxes. Still, the budget situation in NJ is something to be concerned with. Gov. Corzine, as far as I'm concerned, is being realistic about the situation, and a lot of people in the state assembly simply don't want to face up to reality.
California has a 16 BILLION dollar deficit... so you can imagine the cuts going out here on the left coast.
Todd
If I were a lender, I would have serious questions about lending California anything, with that kind of deficit. California looks like a problem waiting to happen.
California is a problem in progress.
Interesting that the Bush regime has brought down three sitting Democratic governors. Gray Davis in California by recall, Don Siegelman in Alabama by dubious prosecution, and Eliot Spitzer in New York State by combing his financial records. (Spitzer is shamefully guilty, but his offenses were uncovered by opposition research. Siegelman seems to have been railroaded.)
The "no growth" situation cannot be recognized too soon.
I wasn't able to quickly find the last time that the CA budget was actually balanced, but it's been broken for a long time. At least 10 years, but my memory says much longer than that. We've been running on borrowed money forever. As in many other things, CA is a microcosm of the bigger picture, and it wouldn't suprise me a bit if, in the same way that we have led the country in pursuit of renewable energy and emissions controls, we also lead it in playing out the inevitable end of the borrowing game.
Great work on this article, Gail! It's not a pretty picture but you told it straight and simply, and you did it well.
Governments downsizing is something that I hadn't really thought much about until I read Kunstler's new book "World Made By Hand", where the State government in Albany is down to one guy working alone in the Capitol building (He has no authority, everything is really run by a warlord). As for medical care, it's just a GP in the little town (Union Grove) which is the main setting. He has to brew up his own pain-killers and other medicines. Most awfully, there aren't any antibiotics to be had. (I personally hope Kunstler is wrong about the antibiotics. )
I think your presentation is good, but I wonder if many young people will be able to fully understand its implications. A few more concrete examples might be helpful: little by little we'll have a tough time getting and affording plastic; we won't be able to fix roads, so people will have a harder time to simply VISIT a doctor, etc.
I'll see if I can add an example or two.
If I give the talk to other audiences later, when I am not constrained to 20 minutes, I can add some more.
I've discovered when you say, "There may not be medications", I get a lot of arguments that this is the highest use, so of course we would have medications, even if we had nothing else. Also, if I say there may not be plastics, someone believes that since they take such a small share of the petroleum, surely they will be spared. And so on.
If this is a part of a group of talks, it is hard to know how much foundation the other speakers will have laid.
Gail, what a great way of expressing the problems of medications or any usage - somehow they end up broken down and we're still using as much oil as ever! That's very helpful to me when I run into these same questions.
Sharon
Hey! Make with the Spoiler Alert! Some of us are still checking the mailbox for our copy of WMBH.
Thought about buying it locally, yes.
Our grandparents' generation, our parents', our own, and perhaps our childrens', have had the great good fortune to have existed during the extremely narrow window in human history when fossil fuels were cheap and antibiotics actually worked.
Gail - Thank-you for writing a realistic unsanitzed version of events. We are so conditioned to the happy ending that this may sound downbeat. The post-peak world is a different landscape. The sooner we look at that reality and make adjustments the better.
There's a number of international organizations like The International Committee of the Red Cross, The International Organization for Migration, and UN activities like WFP that receive funding from the various member nations. Lots of these programs are already operating on a fairly tight budget and I'd guess things will get tighter still as nations look for places to cut. I doubt that donations will be especially forthcoming in hard times and there's probably some minimal funding level below which they just can't operate. (The bird with one wing can't fly witticism fits here.)
I often read here where folks assert that it's not possible for there to be a massive die-off in this day and time. Perhaps not here in the US (but I'm now so sure about that-things can happen very fast with a confluence of untoward events). Folks killed directly by warfare or a climatic disaster can't be prevented, but timely aid via these international programs can prevent lots of deaths and privation that sets in once the hurricane, volcano, earth quake, tsunami or whatever subsides.
I know from observing the response to the infamous hurricane Katrina that governments can be pretty callous about such things even when it strikes on the home turf and it's probably even easier to ignore if it's some little country somewhere in Africa.
Short answer: they won't.
Entitlement programs of all sorts will be scaled back or eliminated.
Infrastructure, especially roads, will be maintained less well and eventually not at all.
The fact is that we have built an enormous edifice that couldn't be funded even with steady growth, and certainly won't be in a shrinking economy.
In the short term you'll see desperate tax grabs, along with enormous labor disruptions from public sector unions as their disproportionate wage increases stall and even more as serious layoffs begin.
Longer term you'll see a lot of very angry ex-entitlement recipients causing increasing political turmoil.
Inner city riots will be commonplace as welfare stipends disappear.
Ya know - I don't think so. I was around during the riots of LA - but something tell me the anger is not in the air - maybe because we are all screwed?
maybe because we are all screwed?
I'd say the energy peak message has not quite arrived.
When the shelves of food go blank - then you will see reaction.
As an example of government funding problems, think of what happened in California after Prop 13 passed. Lots of departments took big hits, especially education. There was a hiring freeze, which, incidentally, cost me a job and a career. Governments will try to raise taxes where they can, which will only make the problem for the consumer more difficult and hit the consumer based economy even harder.
E. Swanson
The Economist Has No Clothes
Could you double check your link?
Actuaries are involved with a field that is basically economic, but don't go through the same indoctrination as everyone else (unless actuaries choose to take additional economic courses). My MS is in mathematics.
The casualty actuarial profession (what I am) basically grew up outside of the university system. We have our list of readings, and there are short courses a person can sign up to take, taught by other actuaries. Everyone must pass the prescribed examinations. There were never enough casualty actuaries to justify our own university program. There is now a program in Canada, at the University of Waterloo.
The life actuarial field is bigger, and is somewhat more tied to universities, but still pretty separate. I don't think we lost anything by not being closely tied to the economists.
the html in his link seems to have an extra close command at the end of it..
Well...economists might have taught you about supply and demand. When the price goes up.....
I doubt, at these prices, you will see demand rise the way you project on your charts. In fact, I think we have seen the peak already.....US demand now running below year-ago levels.....
add to that fresh supplies coming on..,Shell says they can extract shale oil at $30 a barrel, and they just annnounced they likely can make gasoline from biomass....man, these guys are great....never bet against man's ingenuity....
I hate to bring good news to the party here, but the fact is we will be making plenty of energy in the years ahead, as the demand shrinks...maybe a glut coming.....
Shell can't extract shale oil for $30/barrel or they'd be doing it. Extracting oil from shale requires lots of water and natural gas, gas now being used to heat homes. As it is diverted to produce shale and natural gas supplies diminish, the price of gas will rise exponentially.
And the amount of oil produced from shale will NEVER maintain pace with the loss of easy to refine light crude from existing mature fields.
Wake up and smell the napalm.
I hate to bring good news to the party here, but the fact is we will be making plenty of energy in the years ahead, as the demand shrinks
While you just got here - perhaps you take the time to read the arguments and data posted over the years, then cite how the arguments were wrong.
I'll try to remember your name a year from now - and see how your good news is working out.
Here is the correct link for the article:
http://www.sciam.com/article.cfm?id=the-economist-has-no-clothes
This is an April 2008 article! People are actually now thinking about the issue. It is well past time.
I'm still confused.
... Was it the April 1 edition?
.....Or the April 31 edition?
Gold as an investment alternative? How would the value of gold develop under this scenario?
I would think it would have value. You probably wouldn't be able to buy milk and eggs with it, because the denomination would be way out of line. You would have to be able to show that it was really gold, and of the weight you said. I don't think ownership of a piece of a bar somewhere in someone's vault would necessarily be all that helpful, but if everything worked out well with paper currency, maybe it would be.
As simple as it sounds, if you want a cheap "lifeboat investment" go to your bank and load up on Eisenhower dollar coins and other coins.
If paper inflates, small coins will hold relative value against inflation.
Unless you can defend great wealth in a meltdown, it is best not to go flashing gold coins.
I think we can make the corner. Efficiency increases are so easy to make. The big question is will we make the effort before the fenders hit the corner.
If by 'make the corner' you mean keep the stock market growing for the rest of the century, I am extremely skeptical that we can do so. If we could create an economic system that did not require constant growth in order to be 'healthy' then it is possible that a combination of efficiency and the development of non-fossil energy sources could maintain a decent standard of living. However, creating an economy which does not 'need' growth requires altering the fundamental power relationships of our society. I am not holding my breath waiting for such an event to occur.
I think it is possible to have an economy that is not reliant on growth. The problem is it would involve government takeover of all banks, with zero interest loans for monetary creation, and an eternally balanced budget where taxes go up everytime government spending goes up.
Doable, but not politically viable until things get a lot worse.
I agree. Unfortunately the number of people who understand that public or community financing is an alternative to private financing is extremely small.
You can buy bags of silver quarters and dimes, that are a whole lot less expensive than gold coins. These would seem to me to be more practical. Check on the internet for suppliers.
I have numerous 1000oz silver bars (the big one in the pic below). Heavy as hell, but can be taken to a bank for a lot of credit. These bars are stamped with serial numbers and the exact weight (rarely exactly 1000oz), so no need to "prove" they are silver or have them assayed.
Must be fun having numerous bricks of that value. Hope you don't have to swim anywhere with 'em.
Nice that they have serial numbers and exact weight, but I think you still might have to "prove" it's really silver. Seems like you could make 'em hollow and pour in lead & aluminum to get the specific gravity just right.
One of my colleagues, metals investing guru Greg McCoach, recommends buying silver eagles in particular, because they are not only silver, but legal tender.
Euro,
Be sure to check on what the costs are if you need to sell/convert to cash. Gold traders - like any trader in other investment deals - do charge fees.
Although I agree with almost every word of this, I suspect it is a bit too harsh an introduction to peak net energy. You come to extreme conclusions (in the context of a typically unaware US audience) whilst presenting very little evidence to support it. It is a big subject to cover in one talk, but a little more introduction to how central energy is to industrial society, and some references to external information for those that wish to review the evidence may help.
In 20 minutes, it is hard to know where to go. I was originally starting from the premise that someone else would be talking about peak oil. After I looked at the list of speakers and talks, I decided that wasn't necessarily the case. Some of the others seemed to be talking about population overshoot and collapse. The speakers mostly seem to come from a medical/biological background, so the whole concept of energy is off their radar.
I ended us with at least a short introduction to energy shortages. I hope that a few of the others will go in this direction as well.
There are some articles on medicine, public health and peak oil, often by Bednarz and sometimes by Montague. See rachel.org. Maybe something there will help bridge to the health aspects.
cfm in Gray, ME
Bednarz is organizing the event Gail is preparing for. I will give a talk, so will my wife, an MD. I think the promo materials will be available soon and it is free and open to anyone who visits the web site.
One blogger:
Peak oil medicine, a blog by Dr Paul Roth exploring health care options for a scarce oil future.
http://peakoilmedicine.com/
Very standard, mainstream.
There is actually quite a bit of standard medicine that one can do with very little electricity. When my father learned medicine in the 1940s, he used a stethoscope even more than doctors do now. He learned to diagnose illnesses more based on symptoms, with much less reliance on medical tests.
Later, my father learned hypnotism, and used that as an anesthetic when delivering babies and when sewing up people hurt in auto accidents.
My father is no longer alive, but he would get very disgusted with the doctors he went to because they couldn't do the kind of medicine he had been trained to do years earlier. He read constantly, so knew many of the more up-to date techniques as well.
Ahem, well perhaps not everybody with such a medical/biological background (I'm a neurologist). Of course, general energy issues are not mainstream, in the sense we see it from the oil drum. However such an audience should be rather easily convinced (if they don't watch CNN too much). In medical training we deal a lot with some forms of energy, be it only in feeding. I think concepts of homeostasis and intersystem analysis are well understood by such people. When I discuss these issues with colleagues, most ot them understand well what I am talking about. Doctors working in hospitals or general practioners are probably already used to increasing poverty among patients.
The people less convinced are the executives from the large pharmaceutical companies.
I would agree that doctors are pretty good at understanding these things. I have discussed TOD topics with my brother, who is a psychiatrist, and he has a good understanding of what is going on. Other relatives, with more like engineering backgrounds, catch on quickly too.
I don't think the audience is really doctors. I think the audience may include a fair number of graduate students, and they should catch on reasonably well.
Well drafted. Please post the URL on the internet once delivered..
I agree that it would be best if someone - if not you - could outline some of the things that NEED to and COULD be done to at least soften the landing and transition.
Sorry to keep beating on the Climate Code Red horse but that is - on the one hand - a very sobering read, but on the other hand things are peesented that can be done to soften the blow of Global Climate Change however they are presented in the conext of we have one chance to get it it right and BAU, PAU, and TAU (thinking as usual) will NOT cut it. No more screwing around.
Seems to me to be similar here. These students can be left with some "hope" - NOT sunshine up the rear end hope - that there are things that can be done and it is (also) up to them to "lobby" that they be done if not to get them.
Pete
Its true that its a difficult subject to cover in such a short time span because of all the inter-related subjects but I hope if anyone is going to grasp the scale of the problem it will be some bright students.
I think it is necessary to declare at lease Peak Growth.
The economy is like a freight train. It has momentum and requires consistently increasing energy and/or efficiency gains to keep speeding it up (growth).
The energy source that got us to the party is conventional crude oil. Other forms of oil may take its place, but until proven, I would not bet my life on oil sands.
Looking at Peak Crude, disposable income and foreclosures indicates that lack of steadily increasing crude results in diminishing discretionary income and more foreclosures.
What Jpods have you folks sold? Do they work in the summer, if it gets hot outside?
Hi Gail
We have an agreement to build at the Mall of America and are working on funding. Our British friends and competitors are building at Heathrow. Backed by Korean steel company POSCO a network is opening by Vectus in Uppsala Sweden.
Based on riders per day the elevator is the most successful form of public transportation. Horizontal elevators on automated guideways was recommended by the Congressional Office of Technology Assessment as a solution to the 1973 Oil Embargo in study PB-244854. Opened in 1975, Morgantown's PRT, has delivered 110 million oil-free, injury-free passenger miles since.
Hopefully the recent EU study and New Jersey Legislature study will help.
Having the wrong idea does not mean no one will buy. Congress bought biofuels on a massive scale.
Having the right idea does not mean it is easily sold. Opening minds is sometimes a hard sell.
Once the first networks open and people experience the service of a chauffeured car with the cost of an elevator, networks will propagate.
Thanks. It is hard to get a real life model of anything new and somewhat expensive going and tested. Until this happens, no one wants to be the first one, so it is an uphill battle, especially if you don't have an interest group, like corn farmers and ethanol investors, pushing the project along.
There is a joke among people working on this, "There is an infinite number of cities that want to be first at being third."
Reading the history of the Transcontinental Railroads, there is a great comment from the Chief Engineer that no one, not even day laborers would give credit to get started. That all changed once the first miles of rail went into operation.
Innovation is brutal in a free market. It is insanely tough when you need rights of ways from regulatory monopolies.
I love the CSX ads showing they can move a ton 423 miles on a gallon of fuel. In urban transport we use a gallon of gas to move a person 18 miles. We can do better. Someday we will.
Excellent, Gail--you are a superb teacher. Clear, simple, succinct, logical. I hope they listen to you.
Yes very good Gail keep it up.
It’s great to see an enthusiastic discussion about how to improve our energy future. With the cost of gasoline predicted to reach $4.00/gallon by summer and other sources such as coal and natural gas following suit, more and more people are interested in learning about the promise of alternative energy options. Many government and industry leaders believe transitioning to a hydrogen economy will help will to reduce oil consumption and improve our environment. Later this week the NHA Annual Hydrogen Conference and Expo US, March 30 – April 3, is taking place in Sacramento, CA. Please visit hydrogenconference.org to learn more. If you live near or if you’re traveling to Sacramento, we invite you to join us and experience how hydrogen can have a positive impact on our lives. The latest hydrogen technologies from all over the world will be on display, and there will even be opportunities to drive hydrogen vehicles from several leading auto manufacturers – all this is free and open to the public on Monday, March 31 at the Sacramento Convention Center. Stay tuned for upcoming announcements from the Hydrogen Expo.
In addition, the Hydrogen Education Foundation has recently launched a website to help people better understand hydrogen as a fuel. Please visit www.h2andyou.org to improve your knowledge about hydrogen as an alternative fuel.
I am sure hydrogen will save us.
In short, hydrogen is not a source of energy, it is a means of storing and transporting energy.
Hydrogen might be the solution to a shortage of transportation fuel ( i.e. oil) but if we are short of energy itself, hydrogen is irrelevant.
Hydrogen's only advantage as a transportation fuel is that it is fairly easy to create - from natural gas or through electrolysis.
Its energy density (at least chemically) is extremely poor, and it is very hard to store and transport.
If you are really going to try to convert electricity to transport fuel, I think some sort of artificial hydrocarbon would make a lot more sense (especially if it happened to be compatible with existing gas engines).
Compressed air or batteries make more sense (and electrified rail wherever possible). It's hard to imagine a source for all that electricity that will be cheap and plentiful enough to permit single-occupant vehicles to roam at will, though, at least for the average person.
Actually, with electric bikes, it will be possible for people to continue to use single-occupant vehicles, since these can travel up to 60 miles per kilowatt hour, or 528 miles per gallon of gasoline (if generated by a generator). If used with solar panels, the mileage is much greater (though not infinite, due to the energy inputs to manufacture the solar).
Concerned about biking in bad weather? See here
Concerned about being able to carry your kids or groceries? Get a cargo bike such as this or this or this.
Concerned about safety on a bike? The short answer is here, the long answer is here.
Concerned about whether you can handle the hills? Electric bikes are available, such as here and here.
Can't sit upright on a bike/back problems? Get an electric recumbent bike, such as this.
There's really very little excuse for peak oil concerned people to not be implementing these kinds of technologies in their life NOW. Besides, in the process, it improves fitness, which is a good thing when crisis hits.
I have a vested interest in this, since I recently started a company to sell cargo bikes and electric bikes (http://cycle9.com). However, I started this company because of my concerns about peak oil (and to a lesser extent, climate change), and the lack of companies effectively promoting these kinds of tools to reduce oil usage right away.
Morgan
don't forget scooters.
http://peakoildebunked.blogspot.com/2008/03/339-cargo-scooters-and-bicyc...
Thanks for all these links.
The quickly declining conditions of oil-based asphalt roads; the uncertain supply of oil-based bike tire material; and the desperate/ criminal element [ease of bicycle-jacking] remain a concern....
I hope the links are helpful.
Actually, deteriorating roads are not much of a strike for bikes - e.g. my current cargo bicycle has 2" wide balloon tires that are equally happy on gravel, dirt, or grass, as they are on pavement. If a section of road is utterly destroyed (or a bridge is out), it is often possible to carry a bike around that obstacle. Not true with a car or scooter. I have explored many ancient jeep roads by mountain bike, and I got to places that nothing else but foot or horseback could reach, because I could carry my bike over logs, around washouts, and etc, when necessary.
As for tires, limited petroleum could be a problem, though at least the tires on bikes are far smaller, lighter, and less petro intensive than car tires. Maybe rubber trees will make a comeback?
Regarding bikejacking - well, in theory it is possible, but it is not a frequent occurrence. Among other things, a bikejacker wouldn't get very far from the police very quickly. And even though the "cage" in a car seems like protection, just consider the unfortunate events of the Virginia sniper a few years ago - all the people were in cars, and it wasn't protection against a bullet from a rifle. Actually, the nice thing about bikes, is that if you use a cheap and beat up one (like mine), it does not make you a desirable theft target. Most criminals probably think that the next Jaguar or BMW they see is far more promising way to score some riches than someone coming by on a clunky looking bike.
Morgan
The problem here is that the roads are not made for both bicycles and autos. There are way too many autos, and they do not watch out for bicycles. The roads are hilly, and don't have shoulders.
When I talked to my husband a year ago about buying a bike, he basically said there was absolutely nowhere that i could ride the bike that would be safe. After i thought about it, I decided he had a point. I would like a bike, but in this particular area, it doesn't seem to work Maybe it will work better when there are fewer cars.
I've heard this time and again. Many of my co-workers want to ride to work, as I do, but they claim their spouses deem it too dangerous. So they keep on driving -- and become one more presumed danger to existing bicyclists.
Perhaps it will be safer when there are fewer cars...but this will only happen when people decide to take alternatives or...bike!
I have noticed new people lately on the bus and train here, but no new bicyclists. I likely have maybe 3-4 fewer cars to share the road with on my hour long bike ride due to gas prices. This is just a guess -- I 'feel' the traffic is lighter. If safety is a concern, a full on depression or severe oil shock to limit the number of cars on the road would be required.
Blaming the spouse is what you do when you're embarrassed to admit you're chickenshit :)
I admit it, I'm too scared to cycle on my local roads, because drivers are crazy and feel they're entitled to their space and great speed.
I walk on the pavement, since while drivers feel they're entitled to move their car across the zebra crossing where I walk, and they're entitled to zip through lights if it's only a pedestrian they're waiting for rather than a car, and they're entitled to park on nature strips - most stay off the pavement.
And I train and bus.
But I'm too chickenshit to cycle.
Doesn't mean I'll buy and drive a murder machine, though.
If we had spent a fraction of the money on biking trails that we have spent on roads, or for that matter had even attempted to bring the concept of bike transport into our transportation planning, it would be easy. It's not the fault of would-be bikers; the infrastructure isn't set up for their safety, and they know it. Should pedestrians try to walk on the freeways? We need to make paths before they can be ridden.
Oh no doubt. The infrastructure has to be there to support it, no doubt about that.
For my part, I would have the spending be proportional to the desired range of trips. So if I want it to be (say) 33% walking/biking, 33% mass transit, and 33% driving, then that's how I'd spend the money.
But that would be logical and bold and innovative stuff we don't do that here Down Under. It's not the Strayin Way.
I'm still chickenshit, though :)
I do walk most everywhere nearby.
Also, we have a 29 year old son who is currently recovering from being hit by an auto, as a pedestrian, so the fears are not entirely unfounded.
Gail. You are doing great work, thanks. I used to ride a bike from the rat hole I inhabited in Roxbury while a grad student, visiting my to-be wife at Harvard. I rode over all those NO BIKES signs on the way thru the parks, along with all the other cyclists. The cops never bothered us, and we and the few pedestrians were relatively safe.
I won the fair lady over some serious competition because, as she told me later, I was the only one who could or would fix her bike. 'Ray for bikes.
I'm 53 and I cycle to work every day in London. There is a lot of daily friction between (1) pedestrians and cyclists -- because some pedestrians don't look for bicycles and some cyclists ignore traffic rules, and (2) cars and cyclists -- because cars dislike looking out for cyclists, and once again because some cyclists ignore traffic rules. There are some bike lanes. However, because London streets are more narrow than, say, Paris streets, the bike lanes that are there are often very poorly designed (both-way-cycle lane on one side of road suddenly begins or ends, constant disappearances and inconsistencies, cars or even bollards in the middle of them). Pedestrians and cars have less friction because pedestrians are more scared of cars -- cars brush them back all the time.
However, it is no more dangerous to walk than it is to cycle. The dangers are quite localized -- e.g., large vehicles going around not-wide-enough corners cutting across the sidewalk (="pavement" here) and killing cyclists but also pedestrians; cars and cyclists rushing to get through intersections when the light changes; turns (you can turn left from the middle lane, across the leftmost lane here, most intersections don't have 'stop ahead' cycle bays so bikes can get in front of turning cars and diesel exhaust). I try to stay out in the lane through intersections because cars can see me better. I get over once through to let the cars overtake me.
Because of congestion, the overall traffic speed is low, but tempers often flair at peak hours, which is why I avoid peak hours whenever possible. I try to stay of the biggest streets. But sometimes I can't.
The only way to increase the number of bikes out there is to get on one, period. For even an hour here and there. I think it is extremely important to develop social interaction between cars and cyclists, even if some of it is negative. It is very important to work out where to keep your bike (it's difficult to get mine into the building). Cyclists pay taxes and we own the road, too. Cars will slowly adapt to this. It also makes you think very concretely about how things should be changed. There are less women than men on bicycles, but still about 1/3 women. But nothing like in some German cities where women go out for a night on the town in high heels on bicycles.
My wife made me take off the sign on my rear bike basket that said "Cyclists will inherit what's left of the Earth" (which I got from TOD comments). It had been making me pedal faster...
Finally, this place sure is sounding more and more like the 'I mentioned the war/website once, but I think I got away with it'. If you talk the talk, then you should get on your bicycle! -- even if it's just once a week.
As a mother who takes her child to daycare on a bike 15 miles round trip, in a Southeastern city with the same characteristics you describe, I find the safety argument a bit overblown. This is a site where the "downfall of western civilization" is a frequently-raised spectre, including things like resource wars, food riots, etc. And people are worried about the safety of riding a bike? That brings to mind the people from Easter Island. Things were not going well for them, their resources were being depleted. "The gods must be angry," they said. So they built more and bigger statues to the gods, to make the gods happy. This accelerated their resource depletion, leading to a vicious cycle and then collapse. (For more detail on this, see Peter Diamond's book, "Collapse"). I see a strong analogy to this and CARS in the USA. Cars are "safe" so we must drive them. "I can't bike because it is not safe, I'll wait until the roads are safer." And so everyone waits for everyone else to make the necessary changes, such as biking, and off we rush, headlong into a collapse, when one simple solution was right in front of us all along (just like the solution of stopping the rampant building of statues was right in front of the Easter Islanders, and they ignored it).
The thing is, it is has been shown pretty clearly that if only a few percent of the populace is on the roads on their bikes, biking safety is dramatically increased, because cars learn to look for bikes (I'll post the link as soon as I find it). And, it doesn't take everyone biking every day to make a huge dent in the problem. See, for example, my piece on the gas that would be saved if 1/3 of Americans replaced only 2 car trips per week with a bicycle trip: http://cycle9.com/Blog/files/TwoCarTrips.php
Statistics clearly show that biking, if done properly, is much safer than it is perceived to be: http://www.kenkifer.com/bikepages/health/risks.htm (and, it is safer than sitting on one's rear end, leading to all sorts of negative health consequences). One of the key facts from all the biking statistics out there is that people's biggest fear, being hit from behind, comprises only a small portion of bike accidents (less than 10%). And most of the bike accidents are preventable.
But what's more, there are many things one can do to mitigate safety concerns, all it takes is a little self education. Here are examples:
1. Get a flash flag. This is a $10 fluorescent flag that sticks out to the left side of the bike, mounted on a flexible shaft. Cars give a lot more room with this, but I see almost no cyclists using it, probably because standard bike shops don't promote such items.
2. Get a mirror. Helps see approaching traffic to have a better idea of what's going on.
3. Choose the route. Most people who go from their cars onto the bicycle assume that they should take the same route that they did in their car, which is the wrong thing to do. Good car routes often don't make the best bike routes. The key is to spend some time with a map or with a tool like bikely (bikely.com) to plan out a route with quieter streets. Sometimes it is a bit more distance wise (I bike 5 extra miles every day to take the quieter route). But doing so is a time to relax, get some exercise, and slow down a bit from a hectic life.
4. Take the whole lane when appropriate. This is counterintuitive to the non-cyclist. But when the cyclist is hugging the right shoulder on a busy, narrow roadway, it only encourages cars to make dangerous, close passes.
5. Use lights - even in daytime, lights increase visibility. At nighttime, they are essential, a large portion of fatal bicycle accidents are due to people riding at night without proper lighting.
There is much more at sites like this: http://bicyclesafe.com/
All it takes is some education. In school, we all go through "driver's ed" to drive a car, but there is no similar program for biking. People mistakenly assume that what they learned riding a bike as a kid will somehow be adequate for bike commuting on the road, but that isn't true. Since there are no programs, educating oneself is the key. But with all the great websites on the subject, it is really not that hard.
So, again I ask, if people are concerned about peak oil here, and the major negative consequences to everyone's life that will bring, why aren't you thinking about biking/walking? Are we going to continue living a life dependent completely on our addiction to cars and car culture, leading us off that cliff? Or are enough of us going to lead the way into a different and better world? I know that my own bike riding in my town has inspired at least 3-4 others to start doing the same. If each TOD reader was to set a similar example, it would have a huge effect. Sadly, most will probably just sit there reading more dire scenarios and wait for "someone else" to do something about it.
Morgan
Morgan said all the things I forgot to say! Superb summary. I agree with every point.
Thanks! Those thoughts are helpful!
Firstly, I don't think Western civilisation is going to collapse, so I don't see that as a danger. I'm no doomer.
Secondly, even if it were, that's a danger tomorrow, whereas the cars and trucks vs little me on a bicycle are a danger today. I'll worry about tomorrow tomorrow, and deal with today today.
Lasty, that we choose not to cycle does not mean that we must all drive SUVs. We have still our feet and can walk, and most of the West has public transport which certainly sucks in its quality, but is useful enough to get us from A to B.
I think the collapse or revitalization of Western civilization is a choice we make with our actions.
The assumption of ever increasing cheap oil has failed. What we do to transition seems critical. What brought this point home to me was being asked "Of the 10 worst famines of the 20th Century, how many happened in Africa?" My answer was 8. The correct answer is zero.
Despite the hardships in Africa, to have a truly spectacular famine you need a complex economy and government policy. We have a very complex economy and worrisome policies. World grain supplies are at an amazing low 57 days, and we are burning them moving a ton to move a person.
I think if we stress self-reliance and communities build economic lifeboats, we will be just fine. The paradox of economic lifeboats is that if enough communities build them, we will not need them.
Lacking self-reliance, when oil supply shocks hit, we are likely to look like the Super Dome after Katrina. Massive numbers of people waiting for food to be delivered by trucks that, out of gas, will never come.
I think it would be a good idea for every community to:
We can get used to any hardship, it is the surprise shock that creates panic.
I would like to see TOD post a persistent area on the best ideas for communities to create economic lifeboats. Assuming you are safe is not safe. Assuring you are self-reliant gives you a sporting chance if you live in a community that has also prepared.
I have seen soldier fail under unexpected hardships. I have also seen them endure far worse hardships that we expected. Preparation is the mirror in which we see ourselves as strong and durable.
You have a good point. I am afraid this is the problem. We are so bound up in thinking our current way is the only right way, we won't be able to change to the simpler ways that have worked for millennia.
Yes, I think this is both a wonderful and terrible time. We are facing civilization killers in Peak Oil and Climate Change.
There is not time to save everyone, there is time for everyone to save themselves. Each economic community needs to build an economic lifeboat. Here is a wonderful quote from Ben Franklin:
We have defeated civilization killers before, we have a choice. We cannot whine about it. We need only roll up our sleeves and become self-reliant.
BTW, I like how you think. Would you like to collaborate on an efficiency assessment?
We can get used to any hardship,
No "we" (as humans) can't.
As a lower class sees an upper class NOT suffering, there will be elements of that lower class who will use violence as an attempt to 'level the playing field' or whatever rational to express dis-satification at an unfair world.
Assuring you are self-reliant gives you a sporting chance if you live in a community that has also prepared.
Ahhhh, but the rub is the others on 'the outside' who look in at what you have and they do not.
(and I'm still waiting for someone to show how this all ends well)
Bike-jacking? Hello? OK, I'm sure this has really happened, but as an on-again-off-again cyclist with a cyclist brother and many cyclist friends I have never heard of this. It can't be that common and if it's not that common is it anything we have to fear? What's next electric-scooter-jacking? Sneaker-jacking? Segway-jacking?
I for one am happy to be the biker behind the dude who got bike-jacked who sprints after the bike jackers, kicks their sorry asses into the most convenient parked car, and returns the bike to the victim. Or if I'm feeling less vigilante I'll just call 911 on my cell phone and follow the perp.
Thanks to a little middle-aged spread and my chronic annoyance with driving, I am once again part of the bicycle commuter community. With that comes some responsibility to the community. I agree with the numerous comments that here that cars are a threat to bikes, but so is isolation and ignorance among bicycle-riders.
It's not hard to get back on your bike. Start small, start with short trips. Take that beater bike in your garage to the bike shop to get it tuned up, lubed, and a new set of tires. It won't cost much--the most expensive bike repairs are no more than the cheapest car repairs. Add a little safety gear--some high output LEDs flashers in the rear very valuable.
Talk to people on bikes you meet while biking. If you can find a bike safety course take it. Don't be fooled into thinking a helmet and that blinky light make you safe--the bigger factors involve where you ride and how you ride.
Then ride some more. The more you ride that faster your perceptions of reality will change. Then you're part of the community and you can give some back.
Philip
Gail,
Missing from your intro is a definition of "energy".
Don't assume the college kids know it when they see it.
The classical definition is "ability to do useful work".
I would modify it to say: "an ability to do useful work or raise and lower temperature when and where you want to".
The "when you want to" implies storage.
The "where you want to" implies portability.
I was hoping that if the program is called "Integrating Environmental Dilemmas: A Teach-in on Energy, Climate Change, Water, Agriculture and Population", people who attend will have a little idea of what energy is.
Your comment is something to keep in mind, though. I think that if you start defining energy, then you really need to lead into a discussion of why it is important, and how it keeps everything in society running. I don't think I really have enough time to adequately cover the topic, plus the rest of what I am trying to talk about, in 20 minutes. If I give the talk again to a different group, with less time constraints, this would be a good topic to introduce.
Great comment. It would be helpful we change the Department of Energy to the Department of Power or even better Department of Work.
What gets done for the energy expended is much more important than the energy itself. We see that in the Total Liquid Fuels Reports where biofuels and the petroleum fuels used produce them both add to the total. The same is true of oil sands.
Work drives the economy. Energy is easier to report.
Uh... guys, look up "sarcasm" in the dictionary.
You mean "irony" surely? Maybe you need to study the dictionary too? ;)
I think you picked the wrong forum to push hydrogen.
"Many government and industry leaders believe transitioning to a hydrogen economy will help will to reduce oil consumption and improve our environment"
We're pretty much screwed. To BELIEVE this is not nearly enough, you see.
These morons have not been properly informed that hydrogen is a net energy looser, in other words, a waste.
Besides, if you translate a shortage of oil into affecting mobility, you miss the larger picture.
Not to mention all the other problems with this stuff, like that most of it today is produced from Natural Gas, which will also peak and decline. Storage. Infrastructure. Lack of versatility (unlike oil).
Right. Sure.
Now, the gents over at The Watt report that the people who run the Fuel Cell Forums claim Hydrogen is a non-starter.
Now....why should I believe your position VS the people who (are trying to) make fuel cells?
MAC-NHA - there are many thousands of people reading this site who are VERY aware of the limitations of proposed alternatives to fossil fuels in general, not just oil.
We already know that, at present, hydrogen is extremely unlikely to be anything other than a very small contributor to a viable, adequate, affordable alternative solution to oil as a future energy supply for transport.
We also already know that the many 'Government and industry leaders' you talk about appear, in general, completely clueless about what to do - the one thing we are really short of, other than exponentially growing sources of energy (and hydrogen isn't a source of energy on Earth), is LEADERSHIP.
You suggest a site to learn more about hydrogen as a fuel - I suggest you search TOD archives for reasons why hydrogen isn't going to solve our problems.
Economy = Energy * Efficiency
We are less than 4% efficient in highly repetitive transport.
CSX Railroad is currently running a TV ad showing how they move a ton 423 miles on a gallon of diesel.
The only thing that block similar efficiencies in urban transport is access to rights of way to bring the efficiency of rail to urban transport.
Based on riders per day, the elevator is the most successful form of public transportation. We can build a network of horizontal-elevators that provide the service of chauffeured car at the cost to operate of an elevator.
Anyone wanting to help, please send me a note.
The only thing that block similar efficiencies in urban transport is access to rights of way to bring the efficiency of rail to urban transport.
Public takings for private gain....; hows that white paper comming?
Pump it up a few degrees. Google "energy corridor". WTF is *not* an energy corridor?
Maybe I can do a white paper, perhaps along lines of gulliver's travels.
cfm in Gray, ME
Hi Eric
To summarize the following white papers:
- It costs less to move less.
- Better service will attract people from their cars.
- Repetitive Start-Stop travel is buses, trains and cars is expensive.
Please let me know what you think after you have read these white papers:
- EU
- Princeton University
- State of New Jersey
- Swedish Paper
- Canadian paper
- EU Edict Summary
- Lean Manufacturing Principles applied to Transport
- ULTRA Economic Assessment
- Cost per mile of rail study
- Congressional Office of Technology Assessment, 1975 on Automated Guideways as solution to oil embargoes
There are more if you would like to study this in greater depth. Please let me know.
- It costs less to move less.
That is why bicycles win, and have been the winner of useful links in posts in this very thread.
Odds are I'll like to them in my profile so future ppl can reference 'em.
BUT
Still waiting for the white paper on the public taking of private land (for private profit) - per the original post.
Thanks.
For comparison :
1) Efficiency of plants building biomass : 2% (that's on a modern, perfectly fertilized field, plants in a forest certainly do not get anywhere near this)
2) Efficiency of animals moving about (e.g. humans) relative to the solar energy that powers them : < 0.0003%
4% isn't all that bad. At all. If we could start using solar energy at 0.5% efficiency to move vehicles that would enable us to solve this crisis. (us as in U.S., europe would be screwed until you get to at least 2%)
The technology to do this does not exist yet though.
Yes, it does, and I use it every day. An electric bicycle powered by a small solar array that I have. It consumes only 250 watt hours for my 15 mile round trip commute (closer to 350 if charger inefficiencies are counted). The solar panels are close to 20% efficient, and charging losses reduce that by a couple percentage points. Far better than 4%.
Morgan
(for more on electric bikes and similar, see my post above)
http://alifelikewater.org/Bikes/bikes.html
Hey Bill,
I just got back from Costa Rica where we are building a community on the South Caribbean Coast. For various reasons, your observation that elevators are very efficient caught my eye. I have been looking at the practical possibility of using gravity-based wire travel on an eco-travel destination, rather than simply a tourist "jungle-flying" gimmick.
This would initially be focused on low impact tourism but it would seem to have wide application, especially as it extends to regeneration and electric cablecar backhaul. This might extend all the way to intermodal transport. It avoids lots of extra weight, friction and road engineering and was once a way of life in the Alps.
If you have ever driven over great mountain ranges, there are to be a lot of areas where such novel trasport options might start to be very competitive very soon. Like most mountainous tropical countries, CR has lots of hydropower. Lots of know-how available too and, in CR case, several large "merry-go-round" tourist projects that have gone bust to redeploy.
I'd like to put a +/-25k line across the Continental Divide. Call it the TransContinental. Anybody interested?
Fred
Hi Fred
Rail has move capacity and can turn corners. I would like to talk with you. My email is under my profile.
The general niche I understand is highly repetitive, congested travel.
Bill
How a piece like this could avoid mentioning improved efficiencies and new technology aimed at an energy constrained world beats the crap out of me. I don't think the writer has the vaguest idea how the economy functions. Adaptation to constraints is fundamental.
Still, I don't think the U.S. will be able to become as energy efficient as Japan or Western Europe without tremendous societal upheavals. And of course Western Europe and Japan will need to become much more energy-efficient than they are.
In the 90s and this decade, our major competitive disadvantage was the price of our labor, and so we began to dismantle the middle class. In the coming decade our major competitive disadvantage is going to be our inefficient use of energy. This will be cause for further hollowing out of the middle class.
That depends on how quickly the constraints come on. See for example the collapse of the communist bloc.
They suffered constraints - the collapse of their state apparatus and trading system, and the sell-off to criminal organisations of their state's assets - which essentially halved their economies in three years. Most recovered within another 12 years, some did better, some worse.
However, these countries had a rest of the world that was prosperous, willing to lend credit, invest, and buy their products. If the constraints are global - as we'd expect with peak fossil fuels - then that will no longer be true.
Now, the communist bloc collapse was relatively rapid, over a couple of years. How the world will react to resource constraints coming on over a slower period, 10-30 years, that's another matter. It may not be so bleak. After all, there's a difference between having your hours cut at work over six months and just getting the sack one day.
So rather than Gail having not the faintest idea how the economy functions, I think perhaps it's you who needs to broaden his education, to include the history of actual collapses and recessions in history.
US and Japan were just starting there recessions. I don't think there is much incentive to invest in these countries as they have no recent history with capitalism.
Improved efficiency is nice, but I seriously doubt that it is going to make a big difference. To date, it has only been getting us something like 1.6% a year. At this rate, it is quickly overwhelmed by energy declines. It often requires funds for investment, which in a declining economy we are very short of. We also have problems with limits in many other directions such as fresh water, arable land, climate issues, and lower quality ores. Efficiency won't help much in these areas.
The most one can hope for from improved efficiency is to flatten out the downtrend somewhat. I think new energy sources and better extraction methods for very heavy oil and shale gas are at least equally likely to make a significant impact on how the economy does in the future. I don't show a scale on my projections, because this very much depends on how all of these things work out.
what's the date of "to date"? energy prices are going to rise and efficiency gains will gather speed.
You have repeatedly demonstrated a serious deficiency in understanding the relative scale of the problems and solutions, john15. Believing does not make it so, and neither does constantly reminding the rest of us of your faith. Start talking quads or percentages or something concrete if you want us to take you seriously.
Hi Gail
Efficiency gains are the quick fix. CSX ads state they can move a ton 423 miles on a gallon of fuel (diesel). Similar efficiencies are possible if we deploy ultra-light rail in cities.
At the risk of being censored, JPods use 200 watt-hours to move 4 people or a 1200 pound pallet a mile. There are 36,600 watt-hours in a gallon of gas (more in diesel). So this is the equivalent of 183 miles per gallon.
That is a 10X gain over current CAFE standards. The problem we face is 2X per year (oil doubling in price every year). So we have 5 years to implement large scale networks in cities. Mulberry Harbors provides a classic example of our incredible our logistical imaginations can be. If we get started, 5 years is enough time to build survivable version of a Physical-Internet.
Efficient, better service is the only thing that will get people out of their cars, while holding the economy together. The need is to provide people the service of a chauffeured car at the cost of an elevator.
We understand elevators. Based on riders per day, they are the most successful form of public transportation. Integrating packet-switched computer networks, we can deploy horizontal-elevators.
If we can get rights of way access to build, JPods and a swarm of other innovators will employ vast numbers of construction workers building the Physical-Internet.
OK, that is a big IF. We have to get regulatory monopolies to allow free enterprise.
So we have 5 years to implement large scale networks in cities
It will take longer than that to debug a new gadgetbahn technology.
Build what we KNOW works !
So this is the equivalent of 183 miles per gallon.
Other types of Urban Rail do as well, or better.
Efficient, better service is the only thing that will get people out of their cars, while holding the economy together. The need is to provide people the service of a chauffeured car at the cost of an elevator
Last year was the first year since WW II that more people took mass transit to work than drove alone to work in Washington DC. The difference was a middling good subway system.
So obviously your statement is quite wrong.
Best Hopes for Mature Technology,
Alan
So are failure to adapt and inability to adapt.
Oh, wait, because improved efficiencies have already come so close to fixing the problem ;-P.
Seriously, I strongly recommend people read Thomas Princen's _The Logic of Sufficiency_, particularly its initial analysis of the problem of just arguing "efficiencies will fix it."
Sharon
I haven't read the book, but the argument against efficiency gains fixing problems is pretty easy to make. There is a limit to the efficiency of any particular process. Once that limit is reached, any increase in usage needs to be matched with an increase in energy available. Thus we will still run into limits on how far our economy can expand regardless of any efficiency gains. It just might expand for a little longer than if no efficiency improvements were made.
There is also the issue that we don't turn over our infrastructure very quickly. Even if we find a very efficient method for something - say powering trucks or generating electric energy from one or another fuel, it takes energy to make all of the new trucks and the new electrical generating stations.
I think our best chance at efficiency is adaptations that use infrastructure we currently have - for example, car pooling, or making certain that trucks are always full on return trips.
But the thing that is missing in all these analyses of "efficiency" is the biggest factor: sociology.
Right now, many middle class parents feel the "need" to shuttle their kids from one activity to the next (soccer, ballet, etc), usually in a gas guzzling SUV or minivan (for "safety" - BTW, I transport my daughter on a bicycle, and most parents currently think I'm loony - just wait another year or two). When nobody can afford to do this, the pressure to "keep up with the joneses" will reduce then disappear.
And this is but one small example. There is so much of our modern world where living hectic, over-stimulated and over-fed lives is conflated with "high standard of living", when in fact those two aren't so directly linked. Study after study has shown that once basic food, shelter, and safety are obtained, people are equally happy regardless of income.
So, will the world sometime (soon) wake up and collectively realize that we don't need all this crap (i.e. material stuff)? Will we realize that we can slow down, and live higher quality lives with less? That we can spend more time reading, with friends, neighbors, playing music? Some will argue this can't/won't happen because society has trouble ratcheting down standards of living. But in my opinion, a lot of people (myself included) are tired of the frantic pace and pressure of modern life, and would love to slow down. That is very hard to do when everyone around is moving rapidly.
A year ago I spent two weeks bicycling in Italy. The whole pace of life there was slower, more relaxed, more down-to-earth. People seemed much more connected to their environments. And they walked more, drove less, and had a lot of local commerce (we stayed for a few days at an "agritourismo", which raised sheep). When I came back to the USA, I promised myself I would relax a bit and enjoy life a bit more. But within a few days, all the pressures were back on to perform, succeed, excel - and I got caught up in it. We are all caught up in that.
I think if we (particularly in the US) actually do manage to collectively wake up and realize that we would be better off if we slowed down (probably spurred by sinking economy and rising energy prices), it could be a huge net "efficiency gain" (not technically an efficiency gain, just a reduction in per-capita energy consumption). There will be many doubters. Yet, here (in North Carolina), I am running into more and more people who are doing exactly these things - raising chickens, re-opening local grocery stores, starting large gardens, opening re-used bicycle shops, etc. And these kinds of things have happened in history before, when societies realize that change is due. They will happen again.
Morgan
'But within a few days, all the pressures were back on to perform, succeed, excel - and I got caught up in it. We are all caught up in that.'
Like most assertions, your's is wrong. We are 'not all caught up in it'. Some of us have the discipline to get out of the pressure and stay out of it. No one is holding a gun on you, and saying 'you must excel or die!' It is only you that applies the pressure to yourself. I am not faulting you individually, but the large majority of people that let peer pressure screw up their lives. Live your life the way that you see fit, and do not be influenced by a lemming peer group. It will mean that you have to be different and that will draw attention to yourself. Once you overcome the inital attention by peers you will be free, for they will quickly dismiss you and turn their attention to the newest bs on tv. Subdue your ego and be free.
If you persist in living the way you want, soon others will join you. Unfortunately some are just joiners. They would join if you told them you were forming an expedition to Jonestown.
LOL!
Like most characterizations, your characterization of me is false. If I wanted to follow "peer pressure," then I wouldn't be biking 15 miles roundtrip with my daughter on the back of the bike, nearly every day. A lot of people look at me plenty funny for that and think I'm insane. And I have faced other struggles in my life that have forced me to do things that are pretty much about as far from "socially accepted" as one can get (to be clear, not involving harm to others). I have survived and thrived, in part due to learning how to ignore the pressure.
But that ability is not innate for most people. It is not just some monk-like, inborn "discipline" that you boasted about, it is training and hard mental work. Most people were never trained otherwise. They grow up in a culture where everyone follows the norm, and there is great pressure to do so, and so they never think there is another way. Most don't just wake up one day and decide, "hey, I'm going to ignore what everyone thinks with my excellent disciplined mind". Rather, it is a process of step-by step realization and training to do that.
In my own case, I work on this every day - and since the time of the bike trip I mentioned, I have gotten better at this. I work in a high pressure area of academia (on the tenure track), and I can assure you, I am better at this than most of my colleagues. But that does not mean it is easy: to buck the trend takes training, attention, and focus. It is a process, not just some kind of magical "discipline".
Now, that said, I still disagree with you. The vast majority is not anytime soon going to achieve this state of whatever you want to call it (discipline, training, etc). So the question is, if Joe or Jane sixpack's neighbors and friends are slowing down their lifestyles, due to less availability of gas/money/food/etc, will Joe and Jane feel less pressure to be so busy, drive everywhere, and purchase all those unnecessary things? I think the answer is yes.
Morgan
"efficiency" in the sense of railroads vs. semitrucks is a good thing; but let's also bear in mind that what is often termed "efficiency" in commerce and complex systems is inversely related to resilience. Orlov writes well of the fact that the USSR's collapse was largely survivable due to the inefficiency, and thus resilience, of the soviet model.
I want to second Hummingbird. You are a treasure. Remember, it's not your job to convince them; it's only your job to make the truth clear. It's all part of the excruciating process of changing minds - http://letthesunwork.com/community/changingminds.htm.
Thanks!
It's a nitpick, Gail, but you might want to insert on 'often' into this statement, knowing that you are a stickler for accuracy:
I have just learnt this here:
http://europe.theoildrum.com/node/3678#comment-321082 - metalman
Fascinating stuff!
Anyway, I am sure that your lecture will go well.
It is always interesting to learn new things. If the leaching method were a lot better, I suspect it would have been used early on. I expect that what this article refers to is a pretty unusual exception, and is likely to lead to lower production. With the lower production, we are really worse off, whether or not less energy is used.
In Situ Leach (ISL) Mining of Uranium and Wiki article on in-situ. The Chinese were leaching copper in 977 AD - perhaps to use with their bamboo NG pipeline systems.
Mill tailings are by far the largest source of low level radioactive waste, so ISL is an improvement in that regard. Some of our more informed nukers will perhaps paint more of a picture, or you can hunt up the info in previous articles.
Nice to see my post quoted only one day after I put it up. And congratulations Gail on your usual super-clear and logical exposition. Any plans for a PowerPoint version? (I've already incorporated large chunks of your past introductory presentations, fully credited and appropriately praised, into some of my own...)
In situ leaching of uranium was indeed long a standard tool for low-grade ores in the USA (until that industry essentially shut down in the 1980s, concomitant with price collapse and the discovery of much-higher grade ores in Canada). Heap leaching of copper came into widespread use in the 1980s, and allowed the industry to survive long periods of extremely low copper prices. Other advantages: fewer finely ground tailings to dispose of and no acid-producing smelter involved (except to a limited extent as a source of the acid required for leaching). Also, even a long-closed mine can continue to produce copper by this method. The success of leaching technology (technically, SX-EW for solvent extraction - electrowinning) led to the shut-down of most copper smelters in the USA. The widespread adoption of this technology in part reflected environmental legislation, but also reflected what you correctly pointed out in your draft presentation - the higher grade ores mostly were already gone, except at great depth or hidden under shallow cover. You are also correct in principle that the rate of production, being spread out over a longer period, is lower - except that more ore is typically subjected to leach solutions to compensate.
Note: Current high metal prices have caused some copper mines to re-open long-closed mill circuits to feed smelters and refineries, inasmuch as this not only increases short-term copper profit, but also allows recovery of pricy by-product molybdenum (in the mill) and gold and silver (in the smelting and refining process). Rapidly increasing energy costs could reverse this trend, as suggested in my original post.
I actually do have a PowerPoint version of this. The conference co-ordinator emailed me today and asked me to consider expanding my talk from 20 to 30 minutes. I am not sure if I should post the current version, since I may end up adding to it, and it might be confusing. Check back in a day or two, and I will put up something.
Wouldn't that run into the "it's not the size of the tank" argument? Yes, we have lots of metal available, but we can only get so much out of the ore in a certain amount of time.
For as clever as human beings are, we still can't seem to wrap our heads around the idea that infinite growth is impossible. Even if we developed faster than light travel this morning, we'd still eventually run into limits to our growth. Failure to face this reality is going to cost humanity a lot of pain and suffering that might have been avoided if only we had been just a little bit wiser.
Davemart,
Leaching is already in use all over the world for deposits where it makes sense...I really doubt that there is much in the way of new leachable ore or dramatic new savings to be realized. We have been using leaching in gold, copper and uranium mining for years.
While it is true that leaching is generally a low cost option, it is generally used on low-grade bulk-mineable ores which are VERY sensitive to mining costs...raising fuel/electricity prices means that that 350 ton haulpac of .02 oz/ton Au ore must now be .027 oz/ton Au etc etc ad nuseaum.
In addition, most gold and copper ores which are amenable to leaching are oxide ores near the surface...those are pretty much gone. As the big open-pit mines in the Carlin Trend begin going underground there will be very little heap leachable production.
In situ leaching is a whole-nother-can-of-worms. Talk to me again after your project is permitted on USFS ground! You just have no idea what a nightmare permitting one of these will be!
Your comment(or metalman's) are about 35 years too late; you'ld have been M. King Hubbert in 1950.
That would be where it makes sense at the moment, with current commercial grades of ore and current energy costs.
If energy goes up, then the whole structure changes, and also it changes if as Gail argued we have to move to lower grade ores.
USFS permitting applies, well, to the US, which with respect is a very small part of the world.
The use of low grade ores and high energy costs should mean very extensive use of leaching.
USFS permitting applies, well, to the US, which with respect is a very small part of the world.
Well I guess I cop to being a "provincial colonial". I had no idea that metals were mined anywhere but the USA; I mean do people overseas even walk erect? Yes, the US is a minor player in the global metal mining business, especially compared to the UK! (sarcasm off)
Truly, I mentioned the USFS becuase they are who I deal with on a routine basis. Other countries have other regulatory bodies; some are more onerous than the USFS. Really! If you have the time and the money to be very persistent, you can permit almost anything with the USFS!
What regulators do you deal with?
If energy goes up, then the whole structure changes, and also it changes if as Gail argued we have to move to lower grade ores.
We have moved to lower grade ores as a response to two things I believe: depletion of higher grade ores and cheap energy. Large scale mining of low-grade ore is only economic if energy prices are low in comparison to commodity prices. Bulk metal mining is very energy intensive. The acceleration of commodity prices mirrors the rise in oil prices. I think this linkage assures the mining of the highest grade ores available.
Wow! You mentioned the USFS and I said it did not have universal authority!
What do you find so controversial?
You are reading too much into my comment.
Sorry Davemart, that was meant to be tongue-in-cheek sarcasm, not biting sarcasm...it seemed funny when I typed it...well, I laughed anyway. :>)
Sorry - looks like my leg came off in your hand......:-)
Sometimes difficult to tell when things are written, not said.
Bryant,
Historically, natural resource industries, including the petroleum and mining industries, have been a buyer's market (demand driven), so that the low-cost producer ruled, and everyone else had to shut down or become more efficient. Cheap energy (or cheap labor, in the recent case of China) allowed ever decreasing costs of production. The major exceptions for metals occurred during wartime supply disruptions (and increased demand), and for oil during the supply disruptions of the 1970's. During the early 1980's, owing to high energy costs and low metals demand, most mines were forced to close or become far more efficient - hence in situ and heap leaching took over where it was appropriate. At that time Business Week put a coffin on its cover with the caption "The Death of Mining".
That was then. Well, currently oil and metals are both a seller's market, as I assume you've noticed. In the case of oil, this may well be because supply will never again keep up with demand ("peak oil") and may soon begin to fall (even faster than it already seems to be). In the case of metals, it is probably because it takes many, many years to re-open or significantly enlarge an existing mine, or permit a new one, in the face of environmental objections, despite new demand (something you seem well aware of). Also, the nature of past price swings makes companies extremely reluctant to invest heavily in new production, just in time for the next recession (like right now).
Most people, including most who post here, seem to assume either that oil is like metals (if you're an economist or cornucopian - just wait for the new mines or wells to start production) or that metals are like oil (if you're a doomer - about to run short for geological reasons). Both groups are probably wrong, at least in the short to medium term, because deposits of metals and fossil fuels do not form in the same ways, nor do they deplete at the same rates or for the same reasons. The geological limits for most metals seem far more forgiving (increasing amounts of deeper or lower grade ores, once the higher grade and shallower ores are gone) than for fossil fuels (where we are facing a potential cliff in production, or at the very least, costs).
Energy is the dog, and metal mining (like everything else) is the tail - one wags the other. Sufficient energy investment should always satisfy the demand for metals we need, but the converse seems not to be true (at least if you regularly read this site). That is, you can build and utilize as many metal drill rigs or refineries as you want without necessarily finding or producing sufficient oil.
You are correct in pointing out that mining is already highly efficient, especially with regard to marginal (low grade) ores. It seems therefore to have little "wiggle-room" for energy improvement (unlike transportation or housing or workplaces or ...). However you are incorrect in assuming that deep ores or high grade sulfide ores cannot be leached, much as near-surface marginal oxide ores are currently. It's mostly a function of metal price (in turn a function of demand or need) and time. Sustained increasing metal prices should allow increased production, as long as energy and related costs don't climb much faster, causing metal demand (and metal prices) to fall off a cliff. Your statement that "raising fuel/electricity prices means that that 350 ton haulpac of .02 oz/ton Au ore must now be .027 oz/ton Au etc etc ad nuseaum" ignores that fact that gold prices are increasing in step with energy prices, and that energy costs are still a relatively small part of total mining costs.
That is, peak metals, when it occurs, will probably be caused by demand destruction in a depression, as hypothesized by Gail in her original post, not by inherent production limitations (at least in the short to medium term). Nearly everything, including objects made of metals, will become too expensive for people to afford, at least in large quantities.
Some metals will probably survive an energy crunch better than others. That is, we'll need copper for electical conduction no matter what energy sources we move to, whereas we'll need uranium (or thorium) only if reactor use is expanded (this already seems a given for the rest of the world, no matter what the USA and Europe decide). Gold mining, unless it is shut down by government decree (as happened during the Second World War), will probably expand as people lose confidence in paper. You yourself noted that leaching can be and is used for all three metals, rendering them less energy cost sensitive (at least in principle). Finally, new energy technologies might cause demand jumps, and thus new investment opportunities, for many metals other than those three.
At the opposite extreme might be, e.g., aluminum, inasmuch as energy currently accounts for most of its cost, and major uses include airplanes and superfluous beverage containers. Not a metal I follow much, though, so I could be wrong about future needs. As the most abundant metal in the Earth's crust, it's certainly in little danger of geological exhaustion.
However you are incorrect in assuming that deep ores or high grade sulfide ores cannot be leached, much as near-surface marginal oxide ores are currently. It's mostly a function of metal price (in turn a function of demand or need) and time.
I disagree. Two points.
1). Most of the sulfide gold ores I have encountered are not amenable to heap leaching...micron-sized gold particles are absolved into crystal faces within pyrite and arsenopyrite grains. Only milling or oxidation in an autoclave recovers this gold. My experience is that deeper unoxidized ores tend to require milling or autoclaving. I agree that some copper sulfide ores can be heap leached, but that leads directly to point two. (As an aside; If the time factor you mention is supposed to allow the natural or biologically-enhanced oxidation of sulfides on the heap, then show your data. Newmont's been working on that for two decades with precious little to show for it. Sure, sulfides in the heap oxidize...at geologic rates! The thousand year leach...good luck with that.)
2). What mining method do you propose to extract these deep, hypothetically leachable ores? The only thing that makes low-grade leachable ore economic is that it can be mined at truly astounding rates. I can not see any underground method...even longwall or block caving which could generate even a fraction of the tonnage needed to make this economic. Yes, yes; I am quite aware of the drastic increases in metal prices...can you say "receeding horizons"? Have you looked at actual profits for these companies? Newmont's 2007 second quarter was a huge loss. Sure some of it was on the sale of their banking unit, but a large percentage was on continuing operations. As I recall, they lost over 400 million on continuing operations when gold prices were averaging $650/oz.!
I am not an economist or a doomer. I am an exploration/mining geologist with my boots on the outcrop and I am a great deal less sanguine about this than you are.
Bryant,
I'm more into following copper than gold, and autoclave leaching of copper sulfides has recently proven itself commercially viable there (after years of hush-hush development). Heap leaching of low grade copper sulfides has long been viable. The acid seems to speed up the leaching (you can't use acid in cyanide heap leaching of gold sulfide ores, unless you want to die), although copper oxide and silicate ores admittedly leach faster. If milling and smelting costs become prohibitive, and you are willing to discard valuable by-products, I see no technical barrier to acid leaching of higher grade copper ores obtained by block caving, provided that you are willing to spread production out over several years, and can afford the acid. And most uranium oxide ores are presumably amenable to leaching at any grade from any depth.
The recent precarious profitability of some mining companies may be mainly related to everyone suddenly trying to increase production drastically. This has led to runaway prices for every needed resource, ranging from tires and trucks and mills to people. It's hard to blame on energy costs alone, although there's definitely a "receding horizon" involved. That's why I suggested that some governments might choose to shut down the gold mines, in order to divert such scarce resources to production of minerals more essential to industry or agriculture. Finally, Brian Skinner's malthusian "new iron age" argument (regarding a chemical cliff between ore and ordinary rocks) is probably more relevant to extremely rare metals such as gold and mercury than it is to more common metals like uranium and copper (especially with regard to bulk mining).
Incidentally, you and I do seem to be worried in the same way about the same industry, although I am somewhat more optimistic about the flexibility of supply of copper and uranium than you are about gold (a metal that you first brought up - I had deliberately left it out, for a variety of reasons). Presumably we both agree, with Gail, that the industry will be deleteriously affected by rapidly increasing energy costs.
Presumably we both agree, with Gail, that the industry will be deleteriously affected by rapidly increasing energy costs.
I do agree Metalman.
see no technical barrier to acid leaching of higher grade copper ores obtained by block caving, provided that you are willing to spread production out over several years, and can afford the acid. And most uranium oxide ores are presumably amenable to leaching at any grade from any depth.
Do you mean "technical" as in theoretically possible? Or do you mean "technical" as in there are no barriers to this type of mining operation? Profit seems to be a technicality :-)
The actual mining costs vs production rates seems to be the problem to me. How do you finance these slow leaching operations? The costs are all up front and the profits just dribble in over years...lots of years. We are seeing dramatic and sustained increases in the costs of everything needed to mine: steel, tires, electricity, equipment. wages (consultants-yeah!) reclamation, cost of money etc. Your suggestion that these cost increases are due to rapid expansion may be true...or maybe you are seeing the receding horizons that are cause by hitting the peak of oil production...few industries are as energy intensive as bulk metal mining. Besides, gold production actually declined during the period 2005-2006 in Nevada...almost 8%; this is the expansion in mining that is driving up costs? No numbers for 2007 yet but I can email NBMG if you are interested. The trend is down.
Once you go underground, the opportunities to mine bulk are pretty limited. Sure, block caving is great but it is only great when compared to other underground mining methods. If you compare production rates between a typical block caving copper operation like San Manuel and a typical open pit copper operation like Sierrita, open pit rules for rate of production. Porphyry copper deposits are probably the most easily block-caved and there are more Cu deposits that can be block caved than most other elements, but still, what percentage of future production will be block caved...I still see a lot more underhand cut and fill operations than block caving. I seems to me that high-grade pays the bills underground.
I guess if we get back to the "royal mines" type of mining, then all bets are off...if the state can compel people(convicts and political dissidents) to mine, economics takes a back seat...after all, stolen goods are never sold at a loss. Looking in the fifteen to thirty year range though I think high-grade will be the target for most mining companies.
"I think high-grade will be the target for most mining companies"
Always has been, always will be. I don't disagree with anything you said. Increasingly cheap fuels (and energy in general, plus ever-larger trucks) allowed increasing tonnages of ever lower grade ores to be mined. If Nevada gold production has already peaked, owing to abrupt cost increases (including a dramatic rise in fuel prices), can Arizona copper be too far behind? Both are mature mining environments (analogous to Texas in oil). In that case the much predicted "peak oil causing peak metals" may have already occurred locally there, perhaps owing to metal prices not rising fast enough to get ahead of fuel prices. As I mentioned, though, for gold one could also make a good case for geological limits (the concentration cliff hypothesized by Brian Skinner in the 1970's) having been reached first. If gold suddenly shoots to $2000/oz, without oil doubling too, and Nevada production continues to decline, one could make a better case for that argument (with geological limits, gold would be analogous to oil, at least in Nevada).
Nevertheless, for more common metals like copper, I suspect you would agree with me that if the supply side doesn't bite you (what we were talking about above, with two possible causes), the demand side will, in a depression. Peak oil causes peak metals in either scenario.
A possibly relevant observation: "Good" (grindable) copper ore at Safford, the first new Arizona mine to open in about 30 years (and discovered and drilled at least that long ago), is running about 0.2% and "mine run" ore (straight to the leach pile without grinding) about half that. To someone as old as me, those super-low ore grades are absolutely astonishing (not to mention extremely depressing). They also emphasize the low grades made economic by leaching technology (and today's high metal prices).
Regarding your initial question, I think I was mainly referring to copper (or uranium) mining "after the peak" (or after the collapse, if you prefer), when it might be a real challenge to produce any copper (or uranium) at a profit, and anything other than leaching and electrolysis (or even cementation of copper onto scrap iron, 1960's style) might be impossible. New metal production could continue, even under those trying conditions, using leaching technology. (You'd have to tell me about gold production.)
"How do you finance these slow leaching operations? The costs are all up front and the profits just dribble in over years...lots of years."
In mining most of the costs have always been up front, way up front. Mining is the most capital-intensive industry there is (or so I was always told in my classes). All the big oil companies (Exxon, Chevron, etc.) that used their windfall profits to buy mining companies in the 1970's were apalled by this feature (not to mention falling metal prices during the 1980's). Most (except Union) dumped their purchases as soon as they reasonably could. Of course, now deep-water drilling for petroleum is probably nearly as capital intensive as mining. The payoff is much quicker than a 30 year mining plan yields, though. (Too quick for comfort, from what I read here.)
Sounds like we have been talking past each other.
I think Au production declines in Nevada are, at this point, more related to depletion than fuel costs. Not that fuel and material inflation isn't having a effect. Deposits deemed barely sub-economic at $350-400 gold in 1989-1995 still look shaky at $900 gold today...that is one manifestation of the "receding horizon" effect.
Big oil's purchase of the mining majors was an unmitigated disaster for mining. The management of the oil companies discovered that they were not as smart as they thought they were...most mining companies earn returns that look good only when compared to grocery stores and running one takes skill, knowledge and some luck. Oil companies (in the seventies) appeared to just print money...easy.
It has been good exchanging thoughts with you - thanks.
And I have enjoyed reading both.
Thanks likewise, Bryant. This has helped clarify (and hopefully not calcify) my thinking.
I was about to ask you if you thought we were about to run short of both gold and petroleum, based on recent price run-ups, but decided not to, because our present demand for gold appears to be even more insatiable than our demand for oil, despite the fact that nearly every ounce of gold ever mined (over the past several thousand years) is still sitting in someone's vault or jewelry box or electonic scrap heap waiting to be sold (provide supply). In other words, the idea of gold prices ever accurately reflecting production constraints is probably a joke, given "the Midas effect" (humanity's greed).
Nevertheless, a peak oil metaphor involving gold did occur to me, although I'm far from the first person to express the inheritance idea:
Owing to its unique properties, petroleum quickly became the gold standard of energy. Everything else was dross. We discoved it in a long-hidden vault left to us by the dinosaurs (actually, by equally long-dead algae). Thinking this vault had no bottom, we spent our inheritance as rapidly as we could, mostly on amusements, fighting, and food. It's already about half gone, with what's left getting increasingly risky to find and retrieve from the dark, freezing, flooded bottom of the vault. What should we do now?
I'm sure that Gail could phrase this better (and probably already has).
Thanks for this informative post, metalman.
How is money related to energy and why should it matter?
I have posted a blog that looks at a new way to think about money (what it really is) and an energy standard (vs. gold) that would allow us to accurately and fully measure base costs of goods and services. There are many implications in this for how we think about the economy. My proposal situates concepts like Odum's emergy in a way that allows us to speak truth about wealth creation, etc.
I agree that money is closely related to energy available for our use. The problem comes when energy available for our use goes down. As our monetary system is currently structured, it seems like we probably get rapid inflation. If not, we get some sort of collapse.
I purposely didn't spend a lot of time on money in this post. The only goods we have to allocate are those we have at a point in time. It would be nice if our money supply matched up reasonably well with those goods.
Services depend on goods too (piano lessons require a piano, a heated room to have the lessons, and transportation to the lessons; computer programs depend on a reasonably stable electricity supply, the availability of computers, and an infrastructure to sell the programs). Once the necessary goods are gone, the services are gone also. If people have a more pressing need for goods (like food) than services, the services will be squeezed out of the picture.
Right on all counts. I cover this in the blog.
Thanks.
Good job Gail.
If you can get more time for your talk, you could add more specific likely impacts for your target audience along the lines I and Dr. Barson discuss here:
http://www.theoildrum.com/node/3527#comment-292504
-André
I will be the first to agree that the health care field is a disaster area. My actuarial career was spent mostly in medical malpractice; my father was a physician (who started out doing home deliveries of babies, and such) and I have a brother who is a psychiatrist. I have had to take care of elderly parents, and discovered for myself how we spend amazing amounts during the last year of life, for virtually no benefit.
I could write a book on the subject, but I figured this was not the time to talk about how bad things are currently.
Hi, Gail.
My apologies: I should have directed you to Dr. Barson's comments that appear after mine. My comments are merely the setup for what he points out are some likely impacts of PO on the medical field. His response is immediately after mine.
-André
Thanks. I went back and found Dr, Barton's comments. There is a whole analysis on this subject that Dr. Barton was involved with, found here. One good point it makes is that at some point, one-use medical products will no longer make sense.
The one shortfall I see in this report is that it doesn't consider electrical shortages at all. I know I am in the minority, but I don't see reliable electrical power lasting much longer than readily-available oil, because of the interconnectedness of systems, and because of the use of natural gas for electricity. If electricity starts going off once a day, or is only available during certain hours of the day, this adds a whole new dimension to the problem. It seems like we have to plan for this also.
Yes, I too used to think electricity would be one of the later things to go. After reading several of your posts, I'm leaning increasingly more toward your thinking.
The security of the electricity grid in Australia is not an issue as yet, we have however embarked some years ago on a program of privatisation, which will no doubt in the future lead to problems of inadequate maintenance etc in the pursuit of profit. We make the bulk of our power from coal of which we have a lot. We use some hydro and some gas, of which we also have a lot, with renewables contributing around 1%.
It is extremely hard to get those in positions of power and influence in the health policy area to take notice of the peak oil issue. To some extent I can sympathise with their position, the system is under stress and demand is increasing at an unsustainable rate. When a man is up to his crotch in crocodiles the last thing he wants to hear shouted from the shoreline is that the swamp is getting deeper. Individualistic errors of commission are much worse for one's career prospects than than collective errors of omission. It is good to be right but if you have to be wrong it is best to wrong at the same time as everyone else. I am not sure how to get around this and get some action before it is too late. The peddlars of 'plausible deniablity' at CERA et al have a lot to answer for.
I must point out that the work we have done on this issue was very much a shared effort with Dr Paul Roth of peakoilmedicine.com putting in a lot of the work.
Dr Jim Barson
Convenor, Health Sector Working Group ASPO-Australia
Thanks for your comments. The piece you folks looked at is certainly important.
With respect to grid sustainability, I think water shortages may be another issue to keep on eye on. That is a major area where we are running into problems now. Hydropower is directly reduced; coal and nuclear fired plants have more water cooling requirements than depleted lakes and rivers can sustain. This is an article I have posted a link to elsewhere:
http://www.platts.com/Natural%20Gas/highlights/2008/ngp_iferc_021308.xml
Which is why the voluntary euthanasia concept is going to become a big part of our future. Dying with dignity, at a time of our own choosing, is both morally, ethically and financially sane. The luxury of Judeo-Christian tenets will be discarded.
The voluntary euthanasia scene from Solyent Green was one of the most beautiful approaches I've ever seen (magnificent imagery with magnificent music). Aside from how the bodies were disposed it would seem to be a good model.
Yet Another Doom Thread. As the patron of this blog site referred, TOD is a basket where cornucopians (I wonder if he was referring to Stuart Staniford, it would be a joke), and doomers get together and discuss the future of things, like if we were somehow embebbed with a crystal ball and could in fact predict what is coming. It's a good thing to do, mind you, but I am appalled at the reception of these scenarios into the people's minds, because often they are received as not scenarios but inevitable conclusions, the "proof" some doomer or cornucopian desperately "needs" (like a fix, almost) to calm his vision down.
Having put that aside, I agree with the overall "landscape" of this post. Clearly, if you spend more with A, you have less to spend with "Everything Else". It's obvious. Still,I would like to play the Devil's Advocate to this thread, not because I don't believe it to be true (I have no idea of what is really coming and anyone that says otherwise is a fool in my book) but because I don't take it too serious when the author says that:
1.
... without giving any explanation of why, not even a resumé of the thought behind it. This factoid is always given as Truth - "Economy will Shrink because of Peak Oil". What is amazing is that this factoid, which has little relation with the real world, has this "sticking" quality that makes it directly connect with our present financial crisis and a probable recession, even if it had nothing to do with Peak Oil, but with irresponsible credit management.
I disagree with this factoid altogether, not because I'm a cornucopian but because I have yet to see a comprehensive and respectable study on this connection oil-economy. To simply say that the economy will shrink 60% until 2040 is madness or brilliancy. The difference between both is the seriousness in which you make your case study, and by considering the arbitrary cartoonish style you present, you may guess my judgement.
... and your proof on this is... what? Yes, it is more "difficult", but impossible? Of course not. Funding for "promises" only makes sense if the investment is made to get more money out of each business. The consequence of this in an even shrinking economy is that the businesses that prosper more will have an explosion on the economy, while others less needed will down the toilet. Thus, for example, if you are willing to make a case that the economy will shrink because of Peak Oil and the consequences on the Energy Sector, any business that makes money out of creating Energy (read renewables and others) will prosper more than anyother, and attract more investment and fundings (even with banks foreclosing, yes), it will be the surest bet.
I mean, it is classic economics 101.
Oh yeah, I forgot, economics are the words of Satan... snore.
3)
My problem with this sentence is different from 2). This sentence comes after a chapter where you talk about the coming recession, the dangers of it and its economic consequences. They are all true. It could even cause a Depression, who knows? But you cannot simply deduct from our financial present situation that 20 years from now we will be in the gutter! It is not serious, and at least you should aware your readers/listeners that this is your personal subjective take on the situation, like an amateur urbanite trying to guess the climate by putting the wet finger on the air. You take it for granted, and that's a big red herring against your objectivism.
4)
Now look, I'm no capitalist. But please, this myth that the government is somehow capable and competent to "plan" a downfall of an economy isn't even meritory, it's hillarious.
5)
Well, in my conclusion I simply advise you not to bother much what will happen in 20 years in such a detail. It bothers me the simplistic and the naiveté of such reasoning, that by combining two or three factors you can deduce the entire century's occurrences. For my own, yes, I can reasonably fear that what you say may be true, and I advocate a saying:
Plans are rubbish but Planning is essential
Have a nice day.
Luisdias,
As for the "oil-economy" connection: oil runs our most of our economy. Our farms with the hi-tech machinery run on oil; agri-chemicals are made from oil... plastics are made from oil... food is transported using oil... planes fly on oil (kerosene)... freight ships run on oil... trains run on oil... the family car runs on oil... the factory meat farms get their feed using oil... the vegetable food processing plants get their food delivered using oil... construction crews get to work (and do work) using oil.
Well, that fails to account for the world GDP growth between 1973 and 1990 while your sweet oil not only stagnated its growth, it reached a decline of 15%. So all of your talk is factoid. We don't need oil. We need agriculture, transportation, and tools. Not oil. Get over it.
PS: Trains running on oil? In your country maybe. In my town, all trains are run on gas and hidro power, aka electricity.
Which means in our places where trains do run on oil we will be hard pressed once decline starts. Besides, it's not just oil as a fuel for electric railways, as the oil is used for plastics, wiring sheathing, and lubricants in these electric trains (as well as maintenance and construction).
But you do have trucks, that run on fuels right, so they will be hard pressed to keep up once oil goes into decline. So I'm not sure how you see there is no connection between oil and the economy.
Personally I see Gail's scenario as a best-case outcome of our future. I can see it getting much worse as she did not even address the very likelihood of escalation to worldwide resource wars.
"Well, that fails to account for the world GDP growth between 1973 and 1990 while your sweet oil not only stagnated its growth, it reached a decline of 15%."
That statement presumably refers to efficiency gains made possible by the tremendous energy waste (slack) in the system as it then stood. Our current system has since become nearly as wasteful, especially in North America, which implies that old fashioned conservation and efficiency gains could take up the slack in energy production for possibly many years, with no major effect on the overall economy. The basic problem is the permanency and increasing magnitude of the shortage - too soon you run out of slack. Also, if I recall correctly, petroleum costs declined greatly, instead of increasing, during the last half of the period you refer to.
Note also that the effect on the economy of late 1970s energy shortages became noticeable almost overnight. A possible example: highly successful auto dealers who specialized in "love nest" vans and motor homes were forced out of business within months, and some of their salesmen (especially the used car types) jumped into selling shoddy, overpriced roof-top solar hot water heater systems (that flooded your home whenever temperatures got much below freezing) instead. Ah, those good old days.
I dunno if the US could do that again.
http://www.eia.doe.gov/emeu/aer/elect.html
8.2b Electricity Net Generation: Electric Power Sector, 1949-2006
In 1978, the US generated 22% of its electricity with oil. By 1985 it was 5.5% In 2006 it was 2.1%
That was low hanging fruit that could only be picked once.
Heading out had an interesting article a couple of days ago about how one part of Massachusetts plans to solve its problems with not enough electricity when it is cold out. They currently get their electricity from natural gas, and discovered they could not ramp up natural gas when it was cold, because the homeowners were using natural gas for heating their homes, and the pipeline didn't provide enough gas for both uses.
Their novel new idea was to back-up with oil. So now, when it gets cold out, they will presumably try to find what oil is available. Since around the world, oil is used most in winter when it is cold out, that is when oil supply is shortest and prices highest. It is not a good way to cut back on oil use, either!
That's a bit snide. Gail's article is meant to be very generalized and non-specific. Freddy Hutter prognosticating that oil shale will become economical in 2185 is crystal balls.
"1. More likely, the economy will decline as resources deplete
... without giving any explanation of why..."
- you seem to be infected with the belief that "the economy" is somehow divorced from physical resources. Some of us are convinced that the economy is all about converting resources to human welfare. Less resources = less welfare. And energy is THE most crucial resource, as it is what makes extraction and processing of everything else possible.
"2. With a flat or declining economy, funding for promises becomes almost impossibly difficult.
... and your proof on this is... what? Yes, it is more "difficult", but impossible? ..."
- possible, I suppose: you only need to convince the rest of us to do without just about everything, to pay as taxed most of our soon-to-be meager incomes. Yes, it's physically possible to keep the promises to some, assuming the re-establishment of feudalism to enslave the rest. Again, your statement comes from the belief that "the economy" is divorced from physical resources, thus your claim that "in an even shrinking economy is that the businesses that prosper more will have an explosion on the economy" - i.e. you refuse to accept that the macro-economic total will shrink.
"3. If we look ahead 20 or 30 years, it seems likely that the world will be very much poorer.
... you cannot simply deduct from our financial present situation that 20 years from now we will be in the gutter! ..."
- right, but you can deduce that from the coming decline in energy, see 1.
"4. Ideally, the transition will be a slow one, planned by governments.
Now look, I'm no capitalist. But please, this myth that the government is somehow capable and competent to "plan" a downfall of an economy isn't even meritory, it's hillarious."
- I agree, and so does Gail, as she wrote "Ideally", and right after that: "It seems at least equally likely that the transition will involve one or more crashes. Such a crash could be accompanied by bank failures or by hyperinflation."
"5. Because we are running into limits in so many ways, I expect that electrical interruptions will become more common in the next 20 or 30 years."
- that is less obvious, it is not a result of energy shortage per se (as "we" could give maintanance of the electricity priority), but it is a result of typical human behavior (in large groups). The proof is the current situation in dozens of countries where the grid is already intermittent.
(I have no idea of what is really coming and anyone that says otherwise is a fool in my book)
I for one would never be so foolish to say that you have any idea of what is really coming.
It can be too depressing to think of things in this way. A far better way, from an economic standpoint, is to view the entire world as entering a different stage, one that is familiar to many manufacturers around the world.
Think of an inudstry that has matured, such that what was once a new innovation has now become a commodity; not hard to do if one thinks of IT, or the drug industry, for very long. But the premium pricing power that comes from an innovative product is soon destroyed by competition, as the price one can charge for a widget is capped by the market. All of the profit potential then comes from being the lowest cost producer. Those who can decrease costs the most profit the most.
Now, apply this to our situation. Those who can increase their energy efficiency the most will continue to profit the most. The lenders who survive will be those who lend to those who decrease energy intensity, or increase energy efficiency. Thus, loans to people who drive Hummers are more likely to go bad, while loans to people who drive Priuses and electric scooters are likely to pay out. We will have to have a different set of lending criteria, which will quickly manifest itself. Airlines and suburban cul de sac home builders, bad loans. Downtown condos and railroads, good loans. The trouble comes from the dislocation caused by the shift from energy intensive lending practices to energy efficient lending practices.
And this is where our paper money system comes in handy. We get to wipe out all of those bad loans, and then reflate the economy, through "printing" new money, to make the good loans. I expect that we will see large and controlled inflationary times ahead, if we have responsible leadership.
This is not something that the free market can do very well, but it will take active monetary and fiscal policy, working in tandem, to acheive this.
But I believe that it can be done, if only for the reason that it must be done.
You have some interesting ideas. Perhaps they will work.
I think one thing your post assumes is that our current level of electricity will continue. If it doesn't, cities are not going to do all that well, especially the high rises. It also won't be much fun to be underground in a subway when the electricity goes out for hours. Electricity also is used to keep the New York City subway system free from water and (most everywhere) to pump water and to run sewage processing.
Once we start getting frequent electrical outages, no matter how efficient the debtor seems to be, there is a possibility that whatever is being financed by debt will not be viable.
If we get electric shortages. if. if the rider fares are there and you can make a profit there will be money to finance.
Rider fares don't directly fund electricity generation - they don't even account for most of an MT system's budget AFAIK. Looking at this page on the
MTA Budget
it appears to be half and half between fares and external revenues. AlanFromNO will perhaps chime in here.
The prospect of intermittent electrical power captures my imagination. I'm retired, have over 400 DVDs, and spend hours a day on the Internet. (The Oil Drum is the only site whose comments are worth scanning daily, multitudinous though they are.) If the DVD player and the computer are dark, what will I do with my time? Gardening, presumably.
No kidding. I can't imagine the future. How to prepare for another Great Depression? My spouse is only 50; he'll have to cope with more than I will. My kids are around 40, three live in San Francisco. They'll be in the middle of what's coming.
Adding a solar panel or two might power your equipment when the sun is out, but isn't much help at night. In some countries, there are pedal computers and pedal pumps for wells.
There are solar cookers that might help with cooking while the sun is out, but probably won't help much when it is cloudy.
Now might be a good time to take up some other hobbies. You mentioned gardening. Playing a musical instrument also works. So does dancing, or visiting with neighbors. Card games can be played without electricity.
Exactly! How about a little perspective here? We've had an electrical grid for about 100 years. We managed to entertain ourselves for about 10,000 years prior to that. Indeed, if you've ever spent a few days in a cabin with no power, but wood heat and candlelight, you know that it's really not so bad. In fact it encourages (gasp!) social interaction!
The previous cabin scenario, and a complex, interconnected, fossil-fuel dependent, growing, worldwide economy that satisfies the needs of 6.7 billion people are currently incompatible. That's the problem.
Before we had the electrical grid, say before 1900, there was only 25% of the current population on the planet.
Before we had the electrical grid, say before 1900, there was only 25% of the current population on the planet.
Errr 1959
http://en.wikipedia.org/wiki/We_Will_All_Go_Together_When_We_Go
http://www.guntheranderson.com/v/data/wewillal.htm
3 bil people in the middle of 1900's.
Huh?
I did say before 1900.
Worldwide population 1850 was 1.26 billion, 1900 was 1.65 billion.
http://en.wikipedia.org/wiki/World_population
That is a key observation. My road to it were observing the commercial financing of expensive ground source heat pumps.
I believe that this idea that even in a stagnant or declining economy standard financing mechanisms will still be effective in allocating production resources is incorrect. In a stagnant or declining economy the purchasing power represented by the reserves of lending institutions cannot be increasing unless somebody else is losing purchasing power. In a steady state economy if one person's purchasing power increases, somebody else's purchasing power decreases. This is a matter of basic arithmetic. The problem is that not all investments are wealth increasing investments. If someone has been a producing an energy intensive product which becomes prohibitively expensive, then it is possible that some entrepreneur will step into the breach with an improved process which make will continued manufacture of the product possible. But such an event does not mean that the new process will produce sufficient wealth to allow rich people to become richer without doing any work. Reinforcing highway bridges and railway bridges is an important kind of infrastructure investment, but it does increase our wealth; It merely prevents our wealth from decaying away. That is why such investments are not popular in an economic climate focused on short term growth.
If a steady-state economy eventually emerges, then our primary economic preoccupation will be with preserving wealth rather than increasing it. The mechanisms of private finance capitalism as they exist today are not well suited to wealth preservation. Conceivably we could use a system of community investment, the goal of which is to produce goods and services that we need rather than to make money for private financiers. Unfortunately, at present I perceive very little receptiveness to such an idea.
I agree. Thanks!
at present I perceive very little receptiveness to such an idea.
But it is being worked on! Check out http://www.solari.com/
This will make a fascinating talk - the reality is that talks are different from formal written analyses - they have time constraints for one, but also what an audience absorbs from a speaker is different than what they absorb by reading.
There is little doubt that energy consumption around the world can no longer grow enough to meet economic expansion. And the United States, as the largest energy consumer in the world is likely to experience the earliest, and eventually the gravest effects of decreasing energy availability.
I believe, if one can identify the sum difference between US discretionary energy consumption and the "subsistence" needs of the existing and near-future US populations, one could apply the "theoretical" down slope of Hubbert's Peak Oil calculations to forecast when voluntary energy conservation will no longer meet life supporting needs of the entire population. [assumes 2008 peak]
However, "discretionary energy consumption" and Peak Oil's theoretical "downslope" are both nebulous, nearly inestimable statistics.
Still, according to my calculations, we must come to terms with the fact that in 2020, we are likely to be consuming about as much petroleum as we did in 1996. How and if a 1996 oil consumption levels support the population of the US in 2020 will be interesting indeed.
In conclusion, my hypothesis is that the US GDP will decline to near 1996 levels by 2020. (It will track petroleum declines.)
Economic activity and quality of life will be divided by whatever the difference is in population between 2020 and 1996. Therefore, a significant portion of the population will live in abject poverty,[no economic activity] or an even greater portion of the population will decline in quality of life to afford a more level allocation of a contracting wealth pool.
What do you think? Can we accurately forecast poverty?
Hi, bud4wiser.
Although it's not possible to create a forecast that will be exactly correct, it's very possible to create a forecast that brackets the impacts of Energy Descent.
That's what Robert Hirsch does in his latest paper where he looks at 2% through 5% oil decline curves and their impact on the economy:
Mitigation of Maximum World Oil Production:Shortage Scenarios, Hirsch, 2008
A (brief) summary of that report plus three others is here:
http://www.inspiringgreenleadership.com/blog/aangel/estimating-economic-...
The other reports are available online at no charge:
-André
I am afraid the US will step off a cliff when we no longer can import oil and other products, without having export goods to pay for them.
I think it is easy to get mislead by the world's oil downslope. The US downslope will depend on what we are able to trade for, or what we can get by military might. The rest of the world is not stupid. If we are using something like 25% of the world's oil for 4% of the world's population, the easiest way for the rest of the world to do better on the downslope is stop "selling" us oil and goods that require energy to produce, if we cannot really pay for them.
"The rest of the world isn't stupid" is true, but you are missing an important service that the USA provides. Let me call it PAX AMERICANA. We provide protection for an awful lot of countries expecially in the middle east. Those folks should be paying attention to the presidential candidates.
There is definitely a reason we have the largest military establishment in the world. Perhaps there is a way we can continue to play the game successfully.
http://www.amazon.com/dp/0805087281/ref=nosim/?tag=nationbooks08-20
http://www.bullnotbull.com/archive/chalmers-1.html
The key seems to be how the economy is based on feeding the war machine.
Very interesting review of the book. Some quotes:
Regarding overseas military expenses:
Sounds familiar, doesn't it. What does the end of credit do?
(Johnson's quote of an analyst)
It seems like there is some truth to this.
What boggles my mind, is that this site continues to use very old economic models that have been proven wrong. In the first graph shown, we see an ever increasing demand line, which is an impossiblity when linked to a continually decreasing supply. Yes, oil does have a relatively inelastic demand curve in the short term. Speaking from a gas or diesel perspective, cars are a large investment for a personal budget and not something people can change quickly. But, as prices soar, people begin to change to more efficient cars, public transportation or relocation.
So, within the mid-term (5-10yrs or even sooner depending on the severity of price increases) the demand curve would go down. This is already starting to happen today, and has been seen in the past "oil shocks". Now, i understand that oil is not used for strictly for vehicles, it's used for agriculture, plastics, chemicals, etc etc etc... however, how many of those things are used for "discretionary" products like plastic spoons, toys, and other products that are the result in an abundance and over-supply of energy and oil. I have a feeling that most people probably wouldn't buy a "Power wheels" toy for their child if an increasing portion of thier budget it taken up by food and transportation.
I also point out that the presentation shows an ever decreasing economy, in correlation with an ever decreasing supply in energy. You can't have unlimited demand with limited or negative growth... That point alone is a contradiction and error in the whole reasoning behind your argument.
This is the first post I've had on TOD and I'm not a cornucopian, but at the same right, I'm not a doomer as well. The problem with "education" materials such as these, is that it causes more problems for the coming energy shortfalls than it helps. Educated people (for instance people in college as is the intended audience of this presentation) will take one look at the lop-sided arguments, stats and assumptions presented in this and just write them off as an extremist view.
I know I did.
Hi, tpeterson.
It's possible to account for everything you say in an econometric model. Yes, it will break down at some point, but I think that the "doomerish" predictions are well substantiated by the reports I refer to in my response to bud4wiser above.
Best,
André
I think economists have done society a great disservice, espousing their econometric models as the truth.
Actuaries, for years, have looked at society on a quite different basis. I am sure that you are aware that when Social Security was set up, it was set up as simply using some of what was available in a given year to pay for benefits to elderly in that year. As a practical matter, that is all we can really ever do. We can have fancy models that talk about growth, and compound interest, but if they really aren't there, it doesn't do any good. We are stuck with looking at what we have when, and how we divide it.
"Demand" is a word that has been commandeered by the economists. I'm not certain that it makes a lot of difference to the whole discussion. What really matters is supply. If it isn't there, we have a problem.
Gail,
Despite the fact that the whole social security issue really doesn't have anything with the Demand comment I made... And since this is a discussion on Economics, here is the definition by the Random House Dictionary:
http://dictionary.reference.com/browse/demand (see 9.a and 9.b)
In this context, by definition you cannot have demand without the power purchase. If the cost is too high for a consumer to purchase or willing to purchase, they will no longer do so. Hence, you have demand destruction and a decreasing demand curve.
Society is on the demand side of the equation... so, to say that supply is all that matters is a narrow-viewed, eisegesis approach to the problem. Because after all, if demand isn't there, we don't have a problem.... Granted, demand will never drop as fast as supply, but I'm just trying to prove a point.
Also, I get the feeling you're trying to lump me in as an economist (in an anti-economist site), but I'm not... Just taking a fresh perspective from this.
There are two types of demand. Discretionary demand that one can cut back on if one cannot pay, and required demand. Required demand is the demand that needs to be there in order to survive. It's like food. You can eat more than you actually need and hence cut back on demand, but there comes a point where you cut back any further and you suffer health consequences and could die.
Thus there is a floor to demand destruction. Once that floor is met, then any reduction in supply below that core demand requirement and society starts to get starved. Parts will fail, and as the supply drops further more will have no choice but to fail. That’s when the dominos start to fall as all the economy is interlinked and interdependent.
The big question is not the eventual outcome, the question is how it will actually unfold.
While I can't recall the source, I remember a textbook discussion that differentiated demand from consumption. In short, demand was defined as what we want to use, and consumption as fulfilled demand. In those terms, demand may very well exceed supply, but consumption is always restricted to no more than supply. For a practical example, there may be no gas to buy, but as long as you've got a car in the garage, your demand for gas will always exist.
Thanks PedalPower!
This is actually what I was looking for. You are correct, "Consumption" is the correct term instead of demand.
But, the graph above is mis-leading in that fact, especially with the label of +1.8% increase per year. If it was a "business as usual", then it needs to be stated as such, or if it's consumption, it also needs to be stated as such.
Perhaps it could be described as desired consumption, estimated to be increasing at 1.8% a year.
I think you're misinterpreting what Gail is trying to convey in the graph. The "demand" line indicates how much oil would be required for "business as usual." This is contrasted with how much oil we are likely to produce. I realize this isn't an economist's definition of "demand" but it makes good sense in this context. She's graphically making the point that we're not going to have enough oil to avoid major problems. Period.
In my view we can dump most economist definitions to good effect. It's time to use a little common sense. Gail's presentations are always filled with that.
Remember the life cycle which the doomers like to apply to PHEVs and solar and etc.
Less toys mean less mining, less shipping from mines, less shipping to the plastics factory, less shipping to the store(or around the world) and less stores. less trips to the stores. less trips to the stores by the employees. less employees means less energy consumption and consumption by them and the whole cycle repeats over again.
... and less pay, which eventually leads to less food on the table or less heat on cold nights.
We can save money by not buying plastic eating utensils and using metal utensils instead... but then, the cost of buying dishwashing soap and the extra water usage utility bills go up.
A very good talk.
A couple of suggestions( mainly in tone),IMO.
People, businesses are LIVING on credit to just keep going (they aren't even using it to plan ahead). Imagine a world where you had to pay a lot just to get credit.
A lack of credit is far more dangerous than too much debt. Without credit, there would be an implosion of our freemarket system--the fear that is stalking Wall Street. You did mention this but you might want to enhance this aspect of your talk.
Second, people need to accept, even more so DEMAND government planning. The sooner people accept they need a coordinate government response the better.
This is counter-intuitive to everything americans learned from economists and is foreign to US culture.
Also we need to be prepared to discuss RATIONING. Again, very shocking to US audiences.
I don't see electric brownouts as big a problem, but gas shortages, definitely--we will see them again and soon!
Good luck on your talk!
Thanks for the suggestions.
The switch from an amazing amount of credit, to very little, is going to be huge problem - basically an implosion as you say. Are you suggesting I use words like implosion? I didn't want people running out screaming.
Regarding government planning, I wish I were at a point where I felt we could trust the government. We have nothing but "funny numbers" coming out of the EIA and the USGS. It is hard to trust Bush and Cheney to do anything. Just moving from disinformation to information would seem like a huge change. We clearly need someone planning, but who?
You are right about rationing being shocking to American audiences. I am afraid what we will have is rationing by outages. You go to the gas station, or turn on the light switch, and what you expect just isn't there. Some sort of a planned set of outages would be a whole lot better.
Believe it or not, I was not talking about electrical brownouts, I was talking about blackouts. Our electrical system has gone significantly downhill, in the name of deregulation. We are running with much less margin between available supply and demand. Read a little about this in my article What are our electricity vulnerabilities? The grid needs to be upgraded, but instead it has been neglected. Most of the workforce in the electrical supply industry is nearing retirement age, since it has been felt that there was no need to hire new employees.
Most of the electrical capacity that has been added since 1990 is natural gas supply. Heading Out had an article yesterday, talking about a recent incident in Massachusetts. During a cold snap, there was a big increase in electrical demand (probably because of electrical heat and space heaters). Massachusetts is a big user of natural gas for electric power. When the electric utility tried to buy more natural gas for electricity generation, they discovered that so much had been used by homeowners for home heating, that there was no natural gas available to purchase for electrical supply. We are likely to see more and more of this kind of thing.
Here's a little Question for the "Engineers," among us:
What would be the effect of running 100% of our Country's Sewage through an Anaerobic Digester?
How much Stress would this take off of our Electric Grid?
Kdolliso,
Could possibly get enough methane to heat a good sized chuck of residential buildings across the country over the Winter.
However, the problems are (overwhelmingly) cultural. Even though anarobic digesters don't smell most community planners (who have no idea what the thing is, but only hear the word "sewage") will fight you tooth and nail. Then - if you get someone to listen - some "official" will put up "regulations" which make the entire plant EROI negative. I spent 2 years trying to get the idea to take flight... got nowhere.
You might have been "Too Early," Igno. California's starting to take off, and they've even gottem drinking pee in Orange Co.
Of course, in warmer climes (such as Ca) they're running the methane through a fuel cell, or turbine/IC engine to produce electricity.
Also, there are millions of cows producing methane that's, mostly, going "uncaptured."
And, of course, eventually all big cities will convert ALL of their TRASH into electricity.
Fossil Fuels have been the CHEAP, low cost solution up until now; but, we would be silly to think that they are the ONLY solution.
Anaerobic digesters turn manure into biogas, so that's only a tiny portion of our overall waste.
The US generates 250 million tons of trash.
53% is yard scraps, wood and paper that theoretically could all be converted to cellulosic ethanol. At 100 gpt, that would yield 13.25 billion gallons of ethanol, about 10% of our annual gasoline consumption.
About 18% of waste is plastic and rubber which could be reduced to oil by thermal depolymerization to maybe 72,000,000 barrels of oil~1% of our current oil consumption.
About 12% of waste is food, which if it were somehow changed into methane might yield 180 bcf of natural gas~.8% of current US natural gas consumption.
What's left is metal(7.8%) and glass(5.3%) and other(3.3%).
IOW, our trash problem cannot be the solution to our energy problem.
http://www.epa.gov/msw/facts.htm
and how would that impact fertilizer supplies?
Very positively, I think, John.
As one who has actually pulled a manure spreader, let me tell you, Manure is a very inefficient fertilizer. The Organic residue of anaerobic digestion, however, is Great Fertilizer.
"Very positively, I think, John."
yep, and that's another reason not to worry that it takes oil to make fertilizer.
Anarobic digestion actually produces a high nitrogen-fixed slurry that's a good fertilizer.
However, I don't think the volume is there for constant electric production; a "batch" of sewage may take up to two weeks to process. If saved over the course of a year it could significantly supplement Winter-time heating for a lot of cold areas though. The gas needs to be processed to remove potential acidic by-products and leave just the methane.
How much Stress would this take off of our Electric Grid?
How do you plan on going from gas -> electric power?
Digester gas has Sulfur and Nitrogen in it. So what way are you gonna burn that gas?
How ya gonna keep the digester 'bugs' working when you have variable city sewage with things like paint, varying water amounts (runoff from roads/roofs), oil, and even antibiotics which kill your bugs?
I'm sure john15 has an answer - right John15?
Or perhaps you can divert some of what you state here answer your question: "However, I've got a sizable proportion of the highest number of scientists, and engineers that have ever lived on planet Earth (actually, about half of all the scientists that have ever lived are working, Today) on the case."
I'm afraid I am.
An implosion is what happens when you burst a bubble.
In the good ol' days, people took credit to buy a new plow or a horse, in the context of an investment. Now people live off their credit cards. If those people lose their jobs they're bankrupt.
Your audience needs to hear this.
The last time this country was bankrupt 1930s the government had to revive the economy. You have to put your mistrust of the GOVERNMENT(carefully cultivated by freemarketeers) behind you. Watch newsreels of the TVA, rural electrification, WPA, etc. What came out of the 1930's was a strong confident COMPETENT government. Don't worry about Bush Cheney, they've always believed that government can't work and now they've 'proved' it.
Our electricity system (an heirloom from FDR) has been neglected but in a powerdown situation we can unburden to an extent the system by energy conservation. The US with the world's largest coal, nuke generation will be the last to go dark. Overseas I agree with you, the situation is critical. Natural gas generation is the size of nuclear and absorbs 25% of our natural gas consumption, it could be worked around assuming COMPETENT government regulation. If people want to reduce their gas consumption let them insulate their houses to Canada's R2000 standard and put in a new smaller furnace or even an electric heat pump.
http://r2000.chba.ca/What_is_R2000/index.php
That alone would reduce residential gas consumption by 50%(saving maybe 2 Tcf).
You just have to believe that the government can be made to work as americans believed in the New Deal.
No better, let the government MANDATE it!
"The US with the world's largest coal, nuke generation will be the last to go dark. Overseas I agree with you, the situation is critical."
I have lived in four countries so far, including a few months working in the USA. Based on my experience, I'd say the USA would be the *first* to go dark, because nobody is running the electricity grid with any kind of clue. ("Most mis-managed" used to be the New Zealand grid, but they've wised up lately.)
The last place to go dark will be Switzerland. The whole train and tram transport infrastructure for the whole country runs off hydro, for crying out loud. They need to lose their snow melts before they lose electricity. That could happen, of course, but that's a whole lot of climate change, which will take much longer than (say) a 50% reduction in fossil fuel production, which would be enough to seriously trouble the USA grid.
Gail, have you thought about the possibility of rationing by price? That seems to be the path we're on now, and I see no reason why it can't continue on that way for quite a while. Things like interruptible supply contracts, dynamic pricing, real-time consumption and pricing feedback will also be thrown into the mix. There's no question we are going to have to throttle demand to match available supply, but I don't think outages are the foregone conclusion as to how it's going to happen.
There was a reason I left rationing out of the talk - it gets too complicated to discuss, in just a sentence or two.
Now, when we try to ration by price, it doesn't always work. We get spot outages at the end of the supply lines, like North Dakota, and some parts of Canada for petroleum. We have electric power stations that can't find natural gas in the winter, when all of the homeowners are also using natural gas. I expect these spot outages will get worse and worse, as we supposedly ration by price, and supply gets tighter and tighter.
If we ration only by price, I expect that we will have a lot of outcomes that no one expected. We will have parts of the transportation chain disappear, so that some of the food that is grown, doesn't get to market. We will have huge theft rates, by people who don't want to starve. Copper wire will disappear, as will pothole covers. If we still have an elected government, the 80% who are doing poorly will be very unhappy voters.
Rationing by price is also the shortest path to violence, IMO, when you're dealing with something as crucial as electricity.
Maybe we should examine South Africa as a concept made reality of this. They have rolling blackouts, an 80% dirt poor mostly unemployed population democratically electing a goverment.
Yet the only side effect is violent crime, not pretty much very much manageable if you have private resources. Home security there would make even a jaded Detroit gangster's eyes pop out. My sister-in-law's house has the full set of 5m smooth concrete walls topped by razor wire and lethal electric fence, permanent armed guard, double steel pedestrian gates, laser perimiter trip alarm, bulletproof bedroom doors and a .38 special by the bed.
The power goes out 2-3 hours at a time at seemingly random intervals, people now ask restaurants if they have a table and a generator !
However if you have money you can buy what you need; food, security and energy. Everything has a price even in the darkest times and places. See Warsaw in 1944 and Zimbabwe for proof.
Hi Gail,
much of what you postulate will be standard fare to the average TOD reader but could come like a bolt from the blue to this class. In fact it is possibly so out-of-kilt with expectations that a good chunk of the class will leave fazed, spend half an hour Googling, read the odd McKinsey report, e.g.:
-and subsequantly dismiss the outcome of your talk as unecessarily doomerish, incomplete and overly pessimistic.
You show Fig 1. "Oil Decline" and then go on to form your conclusions as though a decline in oil is a decline in Energy. While Energy is a significant fraction of overall Energy if you are going to use a decline in oil to derive your dowturn in the Economy conclusions you need to explain "WHY" early on.
'Energy' is:
Coal (lots of it)
Gas + LNG (a fair bit more)
Nuclear (Uranium: lots of it including new Thorium plants and conversion of the possibility of a conversion of 60% of current Uranium plants to Thorium cycle)
Hydro (not likely to decline)
Renewables (small but growing very fast)
"Lost" in inefficiencies that will be greatly reduced
-Why can't some or all of these expand to fill the decline in oil??
-IMO: Peak Oil is first and foremost a transport fuel issue and there are great efficiencies to be had here initially.
Q. Question from kid at the back: An increase in the efficient usage of resources is an increase in Productivity -why won't our recognition of resource depletion lead to far greater efficiencies and hence a far more productive Society?
Regards, Nick.
Many people seem to think that "efficiency" can be continually increased. What we have to deal with is thermodynamic efficiency, which says that physical efficiency can never reach 100%. Electric motors tend to be very near the maximum efficiency, while IC engines are not. The other side of the coin is that there are ways to use less energy to produce similar results, such as adding more insulation to reduce the heating and cooling energy in a house. We already know how to do things better, as seen by the fact that Germany and Japan use only half as much energy per unit of GDP as the U.S. The problem is, they don't live like Americans.
Each of the alternative energy sources you mention have their own set of limits, which have been widely discussed. And, the devices and methods which use these sources are different than the ones presently being used to provide services to society, such as transportation. Furthermore, changing things takes time, for example, the automobile fleet has a half life of about 8 years. Should there be a sudden change in the vehicles manufactured that doubled gas mileage, the fleet average would not reach a 25% improvement for 8 years. The aircraft and rail industries are already very concerned with efficiency, so there's not likely to be much change there.
Of course, you are ignoring the problem of CO2 emissions as well. CO2 emissions from CTL or Tar Sands are greater than that from producing energy from oil, a fact which I believe must not be left to future generations to solve, when there will be even less fossil fuels available.
E. Swanson
I think that the issue is far more than peak oil. When I first looked at the issue, I thought like you. Once I looked at it closer, I discovered that it isn't all that easy. You really can't ramp up coal all that quickly, and it is much smaller in current usage than oil. Hydro is actually having some serious issues, with droughts and climate change.
Productivity, at least historically, hasn't done very much, very quickly. We have allowed ourselves to think that outsourcing our manufacturing to China is an increase in productivity, since GDP per unit of energy looks great. It is not really. If we have to take the manufacturing back, we will have a huge problem, trying to rebuild factories with limited resources.
Given our rather large skilled workforce and our very large economy, its not unreasonable to imagine shifting of resources to infrastructure development very rapidly.
The problem that we see is that its potentially a quite inflationary environment for a long time, as factories that build toys are shut down as all the capital flows into steel foundries, fuel production sites, reactors, windfarms, solar farms, pumped hydro storage units, etcetera.
We're awash in "Energy." We'll just utilize different forms of it.
Arable land, "Decreasing?!?" Jeez, Looize!
Monsanto, I think it was, just introduced a line of sorghum that can grow in "Acidic" soil. Do you have any idea how many Billions of acres just became "Viable?"!
The end of oil will be a Wonderful thing for poor people all over the world. Their "Crops" will, now, have "Value."
It's going to be "Interesting" times for a few years; but, it's not going to turn out anything like you think.
By the way, it's not "Energy" that drives prosperity. It's KNOWLEDGE.
Thirty years ago I wrote a school essay to say that Africa would become an economic powerhouse and the food counter to the world because technology had finally got the malaria carrying mosquito beaten and vast swathes of savanna would be opened up to cattle ranching.
I ain't happened yet...
Tsetse flies, mosquitoes, and ticks have no "KNOWLEDGE", and yet they are quite prosperous as human disease vectors.
It is the availability of energy and resources that drives growth and "prosperity".
It's like if you're bleeding to death in an abattoir. There's no shortage of blood, you'll just utilize different forms of it!
Good luck with that, by the way.
That's a keeper. Vivid imagery and really...cuts to the bone I guess you'd say.
Thanks for increasing our store of KNOWLEDGE!
"Do you have any idea how many Billions of acres just became "Viable?"!"
Let's not forget that we also have a looming crisis with fresh water availability. On that note, I highly recommend the book, "When the Rivers Run Dry: Water - The Defining Crisis of the Twenty-First Century" by Fred Pearce.
I think most people would say it's innovation/discovery rather than knowledge that certainly is a very strong determinant of prosperity. What's happening to innovation is what I'm very unsure about. If you look at Kurzweil-type analyses, you can draw some curves that look like they're accelerating. (Let's draw a veil over the fact that curve fitting at the start of any kind of accelerating function has so much uncertainty that it's highly unreliable.) But when you look further, it appears to be taking covering highly automatable things like technology design/dna analysis/data mining/etc which do appear to have been increasing exponential (with above caveat) along with much less innovation in other areas. It's all made more difficult to tellc by the way that standards of measurement are changing over time (more scientific papers are generated nowadays from the same amount of discovery by spreading stuff out, patents are now issued for more routine ideas, etc). If humanity is genuinely increasing its rate of innovation by more than just the increase in the number of humans then I'd be virtually unconcerned by resource depletion (since I'd be confident we'll invent a way out of the problem). But it's very unclear to me that innovation is increasing significantly. In that case resource issues may strongly determine what happens.
His idea for a new kind of catalyst is based on solid nanospheres just 250 billionths of a meter in diameter that have honeycomb channels running through them. Lin said those channels can be loaded with a metallic catalyst and other species that can promote higher reactivity and product selectivity
An old idea - New Twist
Yeah, we're still innovatin
http://www.agprofessional.com/show_story.php?id=51466
We're still innovating, but I don't think we're increasing the rate of innovation per individual -- which is the hypothesis of the many "technology is going exponential" people -- except in highly mechanisable areas. (The qualifier "per individual" is that clearly the more people you've trying to innovate the greater the total innovation, but there's a limit to how many people doing science/technology/etc the world can sustain.) My PC computing power and music player storage capacity has increased exponentially, but I'm still writing about as many papers a year as ten years ago and most of the researchers I know are publishing roughly the same number of papers/collaborator. Likewise, in most areas that require (at the moment) intellectual insight for innovation there doesn't seem to be accelerating innovation but holding a roughly constant level of innovation. Ask yourself what area you know about where you see innovation actually accelerating (and then check it's not some highly mechanisable thing): are there any?
My feeling, and it is just a feeling, is that maintaining a constant level of innovation is not enough to counteract an accelerating decline in natural resources. It's that, combined with the hypothesis that we have actually got an accelerating decline in natural resources hidden behind dubious figures, etc, that has me thinking about the future.
Embryo,
If I only had the people in my small, Southern town working on the answer I would be much more worried (don't get me wrong, I DO worry) about the outcome.
However, I've got a sizable proportion of the highest number of scientists, and engineers that have ever lived on planet Earth (actually, about half of all the scientists that have ever lived are working, Today) on the case.
That's why the Malthusians, and the back-to-nature crowd are wrong. You have a much greater chance at survival when you're surrounded by educated, hard-working, well-fed associates (read: the world) than you'll ever have rooting for grubs, and trying to stay warm in a cave.
In short, it's not important that I'm more productive. The important thing is that The World is more productive.
Hundreds of thousands of years of pre-civilized, small group, cave dwelling, grub-eating, survival behavior notwithstanding.
And in the long term, the chance of individual survivability rapidly declines to zero, regardless.
In short, due to conservation of mass and thermodynamics, the important thing to realize is that more production equals more depletion of natural resources and more harm to the ecosystem.
In the recent past, however, there has been more production and we have grown, and now we are finally at 6.7 billion people. So now we can solve all the problems that confounded us when we were only 6.6 billion.
But due to unmanageable complexity we create problems with 6.7 billion people that can only be solved with 6.8.
Lather, rinse, repeat.
Kdolliso,
I would like to agree with your premise that half the scientists and engineers that have ever lived are working on these issues and will avoid Mathus.
However, as soon as you introduce politics and religion, our Smart Folk are discredited with lies, half truths, distractions (like gay marriage or abortion) so that the general public has no clue who is telling the truth and would not recognize a fact if it bit them. Furthermore, at least here in the US, the percentage of people who understand math and science and can apply their principles to discern the facts for themselves seems confined to a handful of people. The TOD community is well above average in this respect.
If you think about it, the biggest innovations came years ago. I would think electricity and private passenger automobiles were two of the biggest ones. Radios, airplanes, and antibiotics also rank very highly.
We think of our innovations as huge, but in the context of major changes to society, I am not sure they really rank way up there.
I'll toss in sewers and refrigeration. Gunpowder, too.
This is a good presentation. Short and to the point.
I have to believe that on some level it must pain you to be asked to talk to young people about these things but I admire your efforts.
IMO one of the biggest immediate effects of this turnaround will be vast numbers of unemployed.
I understand the opportunities in green energy and such are substantial but as with efficiency, the new positions can't possibly keep up with lay offs across the entire economy.
Perhaps you feel that it is too doomie for this event but I think the younger generations deserve to be informed.
Having presented maybe ten times on PO matters to college-aged audiences over the past couple of years, in my experience students are initially shocked and in denial, then respond with gratitude that we're finally tackling real issues in their future. They see the connections, they're worried, but they're mostly responding with an attitude of "let's get better informed, roll up our sleeves, and get going on solutions." I'm inspired. Contrast this with the response local business leaders have to similar presentations I've been asked to make (Lion's Club, Kiwanis) - mostly denial and incredulity. Youth is not wasted on the young.
I too have seen this, and heard this, repeatedly. The Gen-Y set has grown up hearing about problems of energy, climate change, resource overshoot, etc. their whole lives, and they're not nearly as resistant to the message that we have to change as older folks are, for whom the news is a real buzzkill to all that they have known and believed in the past. I have been very inspired, personally, by the energy and drive and creativity of some of the young people I speak to about these issues. They're a whole different breed. Whereas my college mates were mainly interested in getting jobs as investment bankers, these kids are ready and willing to go out and change the world. (For all of you older folks out there who find this stuff depressing: go talk to some college students!) We have some dauntingly serious problems, but I will never sell short humanity.
One little editing comment: Check the second sentence under Longer Term Impacts.
Laughter is the convulsive release of tension. You need to create the right amount of tension to get people to laugh at a joke; if you don't create enough the joke falls flat; if you create too much, there is the danger that the listener will be horrified instead of amused as in the case of telling a very raunchy joke to a group of prim and proper old ladies.
So too with the topic of peak oil and the economic implications, a very mild portrayal may not have enough impact, while the portrayal of a horrific future may be too much for a listener to accept resulting in psychological defenses blocking the reality of the message. Since I expect a far worse future than you portray, I have difficulty judging if you have hit the sweet spot. I suspect, however, that you have done a good job in reaching your target audience.
On the issue of difficulties in the financial and banking system, I think the root cause has much more to do with the abandonment of gold and silver as money in favor of debt based money that can be created out of thin air, not only debasing the monetary unit, but also creating huge amounts of debt destined to collapse. I see the energy issue as perhaps just a trigger mechanism rather than a cause of the impending financial collapse.
All in all, I think your presentation is excellent, as is the case with all your communications here.
Henry,
I fixed the second sentence. It might have added a little levity to the presentation.
I agree that all of this debt is causing the problem to be much worse that it ever needed to be. I personally have been one who has stayed pretty much away from debt. I didn't buy my first car until I had funds saved to buy it. Earning a good income, and being by nature frugal, I didn't have much need for debt.
It seems like once the economists convinced everyone that growth was permanent, the "natural" next step was to apply leverage, so that the investor could have even more growth. By the time society discovers that what the economists were saying was really wrong (perhaps true for one time period, but not in general), we will have created huge dislocations that need never have happened.
Gail- no talk of plug-in hybrids, hybrids or electric cars as alternatives? this is the solution that is already being implemented now.
Go stand on a bridge over a six lane highway and count how many vehicles pass underneath you that do not get some or all of their energy from Fossil Fuel - you will find that your alternatives are currently a HOPELESSLY inadequate solution except for the VERY VERY rich and I doubt that will be Gail's audience - if they were a viable solution every African would be driving one.
Sure we're buying HEVs in the US - ca. 325,000 last year. Out of ca. 17 million vehicles total. There are 135 million commuters. Even with strict mandates that automakers immediately retool their entire fleet over to PHEVs you'd still take around 8 years for them to penetrate the market thoroughly - not taking into account the increased grid demands from recharging requiring increased efficiency/supply/conservation elsewhere.
We're building hybrid SUVs too, which put me in mind of the oversize antlers on the Irish Elk.
no they arent. you repeat that line every few weeks.
here is a better thing to do. stand on a bridge over a six lane highway and count how many drivers will swtich to more fuel efficient cars as gas prices spiral out of control.
here is a better thing to do. stand on a bridge over a six lane highway and count how many drivers will swtich to more fuel efficient cars as gas prices spiral out of control.
Bout as useful as any of your other suggestions.
Not a solution. Just a niche. The auto industry will not survive a prolonged economic downturn combined with very high fuel prices...which is what Peak Oil will mean whenever it happens.
Imagine new cars costing eight times what they do now and fuel costing 10 times today's price. And real wages at half today's value or less. Would you buy a new car - whatever technology it ran on? Or would you make do with one of the millions of old petrol and diesel vehicles - just running it when you really needed to?
In fact, people probably won't own cars once they've adjusted to a lifestyle that eliminates the need to travel long distances just to get to a place of work or the shops. They can borrow/hire/exchange one when needed.
In a low-energy, low-to-no-growth world, complex technologies will struggle to gain traction unless they're hugely beneficial to society and pretty cheap to build and run. What remains of auto manufacturing post-peak will focus on goods vehicles, buses, tractors, etc. They'll be simple, rugged and feature relatively high miles-per-gallon petrol and diesel engines.
Electric passenger road vehicles will be seen in cities (the only places with decent paved roads) but I reckon it will be four or five decades after the peak before most societies have unwound enough from oil age dynamics to rebuild to the stage where there is spare productive capacity to get back to private transportation other than for the extremely rich .
In terms of oil prices, new cars have never been this cheap.
Can you say more about what you mean?
we are a few years past peak and yet we're still developing new cars like hybrids and PHEVs. why is that? how is that possible?
you guys have to just face it that oil is not magical thing you've made it out to be. it is but one source of energy and it's decline does not portend disaster.
...and you have to face the fact that the solutions are TINY and SLOW compared to the problems we face! Again, you seem to have an inability to understand the scale and pace of things; either that, or you simply refuse to think about it. I believe in renewables as much as you do--probably more--but I try to be realistic about them. They're a drop in the ocean, buddy. Look at the freakin' math, will ya? Just because you can go out and buy a hybrid now (if you can afford one, which not that many people now driving clunkers can) doesn't mean that you'll be able to get one at all when half the country is trying to do the same thing (and the Big Three are tits up thanks to their institutional lethargy). It takes DECADES to replace the rolling stock. And we just don't have that kind of time.
The auto industry will not survive a prolonged economic downturn combined with very high fuel prices.
The energy embedded/costs in keeping roads up and passible are another reason the private car is dead.
Right John15?
In a poorer world, we don't have the resources to build an adequate number for everyone, even if we could figure out the technology. I don't see these helping more than a handful of the rich.
Maybe the 10 year auto loans will help the less fortunate of us? (pardon the scarcasm).
The world was significantly poorer 100 years ago. Infrastructure change happens and the economy continues to grow.
The underlying cause of the change/growth has been very cheap fossil fuel - sometime that WILL end.
There are more than 6,000,000,000 people in the world without a car - if you have one you are one of the very lucky few, use it wisely.
If you have a car it is much more likely you will have to learn to live without one than the people with no car at present getting one.
Or the underlying cause could be technological improvement, leading to the ability to exploit more energy resources - and we could perhaps learn to exploit different ones now, which would give a very different result.
Not an easy transition though, even if possible, I would agree.
Guess what, this website showed that global supply is still rising!
US Demand has actually been flat for around 6 years (approx) at 20 mbpd.
Global demand will have to follow, because most countries will not be able to afford oil at $200 per barrel. Btu we will.
And that would only translate into about $5.25 per gallon gas. Not enough to destroy the US economy, or even cause it to decline. (well that comment was purely emotional).
When we open up ANWR, that will bump up supply in the USA for another 5 years. (Taken from this web site) Saudi oil is not supposed to peak until 2012 to 2015.
Do you know there is billions of barrels of oil in the offshore waters of the United States? But we are not allowed to drill off the East and West coasts and Florida. (The only offshore operatins going on there is legacy wells)
I would like to see a serious discussion on when the peak will occur. Because I dont think the Malthusian predictions going on here really have any possibility of happening. (emotional again)
The Peak may be 5 to 10 years away. 1 gigawatt of new energy is coming from solar panels every year. (Nanosolar has developed a panel that can be printed on aluminum, using metalic ink)
Wind farms are going up all over the world. Cars are becoming more efficient. I guess that we waste 1 million barrels of oil per day in traffic jams. Imagine if we just fixed the traffic lights.
New Biodiesel plants and Ethanol plants will remove some demand for oil, and it would be better for teh USA if they would remove the tarrifs on Brazillian sugar and Ethanol. Because sugar cane is a much better source for ethanol than corn, which is highly energy intensive to grow.
Places like Iceland are seeing new plants going up for energy intensive industry like Aluminum smelting. Because they have the energy, and its cheap.
I work in the Oil & Gas business, and I see that we have lots of Natural Gas. the biggest constraint on Natural Gas is there are not enough pipelines to support the supply. So the supply is constrained. And I believe I saw somewhere that Natural Gas will not peak until the end of this century. And by then we may know how to tap the trillions of cubic feet of Natural gas locked up in frozen Hydrates at the bottom of the oceans.
One sad truth, Millions of people in developing countries will starve, because they wont be able to buy the oil. Which right now, they need to grow crops.
I would suggest you go back and read my Peak Oil Overview, March 2008. It shows some of the latest numbers on oil. I think you will find quite a lot of what you say is wrong.
One graph I show is with respect to ANWR. I didn't make the graph. Dr Sam Shelton from Ga Tech did, but everyone who looks at it comes up with a similar analysis. This is the expected oil production for the US, including ANWR:
I don't think anyone says that natural gas will not peak until the end of this century. I think the big issue with natural gas is whether we can economically extract the huge amount of shale gas and tight gas that seems to be around. New technology could make a difference in this regard. "Conventional' natural gas peaked years ago in the US. It is the rise of unconventional that has kept US natural gas production level. It may even increase a bit, but it is hard to see it doing much to offset the oil decline.
On Natural Gas:
David Hughes of the Geological Survey Canada did an interview on Global Public Media where he states that Canada is down to the last 30% of EROI positive natural gas. This matches up with Leharrere's predictions for North America. We can expect production to be down 30% by 2020 and down 60% by 2030. I need to finish my update on EROI for natural gas, but after review by outside experts, it appears I was optimistic.
Gail, this looks like it will be a useful talk. Thanks for posting it.
One of these days, I think it would be useful if we had a discussion on how to manage one's money in light of peak oil. I think the normal advice given by investment advisers (invest mostly in stocks for the long term, etc.) is probably wrong, but what to do instead seems debatable.
Do we have a second to this suggestion?
Yes we do...
Great suggestion!
Pete
Alice Friedemann gave a talk on just that topic. Download the file behind the link "Peak Oil Financial Planning."
http://www.sfbayoil.org/ebpo/ebpomedia.html
My only comment is that we can expect eventually shortages to start cropping up. Food gas etc. The economic impact of shortage conditions is in my opinion larger than the smooth trends suggest.
I agree. The organizer of the conference just e-mailed me about expanding my talk. I will keep this in mind.
Do you really believe that baby boomers, being the nation's largest voting bloc, will allow their Social Security and Medicare benefits to not be adequately funded. Their current perceived, with emphasis on perceived, future shortfalls are a natural outgrowth of declining real wages. Other ways of financing these programs will be found if only to pay back all the money the fund has loaned to the federal government. Since most of the defense budget does little to keep us safe from foreign attack that is likely to be where deep cuts could be made.
Our current economic situation is no indicator future performance. From the perspective of the 1930s depression one would think WW II would have looked like an economic impossibility. No country could afford a military build up yet the Axis powers did just that during the 1930s followed by an even larger build by the Allies. The response to our future energy challenges can be met with a WW II scale public works project. Unlike a build up for a destructive war the conversion to greater energy efficiency, renewables, and nukes and away from fossil fuels will be an investment in goods and services (Is electricity a good or a service?) that would be sold to the public. Future sales would pay off the bonds. Material shortages could be overcome by banning the production of other products. New materials made from renewable resources, like acetylated wood, could substitute for scarce metals.
"Do you really believe that baby boomers, being the nation's largest voting bloc, will allow their Social Security and Medicare benefits to not be adequately funded."
Try getting blood from a turnip.
"Since most of the defense budget does little to keep us safe from foreign attack that is likely to be where deep cuts could be made."
Cutting unnecessary spending on defense (esp. Iraq, "Star Wars", high-tech pork, etc.) and for that matter, our costly disastrous War on Drugs, would seem to be the intelligent, logical choice. Problem is, the majority American voters are neither well informed nor logical. They are scared witless by the prospect of another 9-11 (or worse) and will always vote for the politician that seems "strong" on defense and "law & order" issues. Any U.S. politican that suggests cutting back on military spending of any kind, or letting a few non-violent drug users got to rehab vs. prison are immediately labelled as Commie Lib-uh-rals, cowards, traitors, and/or troop-haters. Throw in support for a Gay Marriage/domestic partnership bill and kiss any chance to win the next election goodbye.
Also, the spending on "defense" is really a forced transfer of wealth to a significant sector of the US public (those who own the military industries, and a bit of "trickle-down" to those who they employ), a transfer from the rest of us. Stopping that spending, while a good idea if spent on infrastructure etc instead, will nevertheless not only cause a huge political backlash, it would also result in the loss of the trickle-down from that pampered class.
I know this has been pointed out many times before, but it bears repeating:
There is no "imbalance" of supply and demand that a rising market price cannot correct. There might be an "imbalance" at $4/gallon, but not at $10 or $20/gallon. Just like bubble housing prices, sharply rising gas prices can do wonders for demand destruction, while at the same time making alternative energy sources far more attractive.
Not saying our current way of life is 100% sustainable, just that a long-term market supply/demand imbalance is not likely to occur without large-scale government subsidies, price-fixing or other forms of intervention.
The issue is not whether the market would be "balanced", the issue is how will Americans survive with less oil. The lack of public transport, and the dependence of much employment on the "easy motoring", will make that inevitable "balancing" deadly. "Demand destruction" is more than just a phrase in economic theory.
The lack of public transport, and the dependence of much employment on the "easy motoring", will make that inevitable "balancing" deadly. "Demand destruction" is more than just a phrase in economic theory.
I don't doubt there will be some broadly distributed pain in our future, though I'm a bit more sanguine about our prospects. Last time I checked, the world had a reasonably plentiful supply of uranium & thorium, and new reactor designs (motlen salt, etc.) could exponentially reduce the quantity of radioctive waste (by "burning" it as fuel) and also reduce the half-life of the remainder to a couple hundred years. The U.S. is behind Europe & Japan in R&D, but could catch up quickly if --IF-- the political will to do so existed.
However, other questions remain: Can we ramp up nuclear production to meet current demand within the time we have left? Can we collectively throttle back future demand by gaining widespread support for population control (before population growth outstrips all future energy sources)?
I agree with this article's projections into the next 20-30 years, albeit a sobering summary of things to come. One item that may seem tertiary at this point in time, asphalt, may become a major problem. If the ongoing rise in the price of oil continues to increase the cost of asphalt and deeper recessions predicted here continue to erode our financial base, then money for road repair will be too far down the list to get what's needed to maintain road surfaces and they will denegrate into stretches of crumbled asphalt mixed with road base rock. We will probably go through a period where everyone is getting beefier tires and driving slower to navigate pot hole strewn paved roads, and then at some point it will be uneconomical to transport goods over long distances. That will mark the transition point to local communities that grow their own food and barter for basic necessesities.
The spiralling cost of road repair is already an issue.
In the English county which I live in the estimated costs of road surface repair have significantly exceeded the available budget for at least a decade.
So road surface quality suffers and only the worst gets dealt with.
I'd imagine that's common throughout the U.K.
Here in Atlanta, the Department of Transportation tried to add a concrete lane to the edge of an asphalt interstate highway. They discovered that this just didn't work. A hole in the asphalt developed next to the concrete, quite quickly. Now we have more lanes closed, as they attempt to replace the asphalt with concrete. I imagine other cities are looking at similar problems.
My prediction is we will loose our road network long before we loose our cars.
Given that we probably will see many of our state and local governments bankrupt as housing contracts no one will have any money to build or repair roads for this reason.
Next the cost of building roads is spiraling. Tar is now being cracked for gasoline and is no longer a dirt cheap waste product.
In both very hot climates and ones with cold winters roads degrade quickly and most need complete resurfacing every 15 years.
So I think we will see our road network degrade rapidly over the next 10 years. Also of course as people begin to abandon driving private cars you will get a lot of pushback on subsidizing road construction.
For people that are peak oil aware and trying to ELP by moving well out into the country.
If you still are commuting to work you may find that over the next ten years or so your living 20 miles down a gravel road instead of a paved road and that your property values have dropped considerably. If you have to remain employed and take out a loan on a home then you may be making a big mistake.
Historically the countryside existed and was populated by local farm workers and the country estates of the well off. If you don't fit in these two categories then you probably don't want to live in the country.
I'll probably get blasted by people that have bought small < 40 acre properties that think they are doing the right thing but in my opinion your making a big mistake unless your rich. And if your rich you should buy enough land to have a working farm so the estate is not a money drain.
Milwaukee is looking at over 250 years to replace their roads at current funding/cost levels.
Roads are good for 60 years BTW.
All economic bets are off when the US hits Iran.
Saudi Arabia's main newspaper is prepping citizens for nuclear war. Hoorah.
It seems man's laws are running into Mother Nature and she is pissed off. Wall Street & the Fed hath no response to nature's scorn.
Bravo! Would be nice to see this as a Wall Street Journal article or a segment on CNBC.
Gail,
It's a good presentation, as far as it goes.
Personally I believe the economic and political ramifications of Peak Oil will hit society far sooner than the affects of actually 'running out' of oil will. This makes 'planning' for the future very difficult indeed as there are so many variables to consider, understand and react to.
I'm not saying that it's a hopeless task, though I may be implying it! In my opinion there is already a great deal that's 'hidden behind a veil' in our society and there are very good reasons for this, one of them is knowledge is a form of power, and therefore the powerful don't really want too much of it spread around. Education is great and beneficial for society, so long as it isn't too good, then it can get out of hand and can be percieved as a threat to the exsisting soicial order. I think this is why public education has been starved of funding and teachers status and salaries have been allowed to decline so severely.
I think if I were giving the presentation I would start by going directly for the political jugular, crazy as this may seem. Rather than scaring the pants off them by pushing a 'negative' and 'challenging' version of the future. I think the challenges we face, not 'just' Peak Oil, but the rest, don't have, crudely put, technological fixes. On a profound level the 'solutions' are fundamentally political in nature. This isn't so much a ideological conclusion, rather a purely pragmatic one. By political I mean how we choose to organize the political economy of society. We are basically talking about the distribution of wealth and power in society. We need far more democracy than we've got now. Democracy is too often equated with 'freedom', but this often means the freedom to exploit and become filthy rich at the exspense of others. Democracy means more than the freedom to make loads of money. Democracy has also been perceived as having a profound relationship equality and justice. A democracy that downplays the importance of equality and justice isn't really a democracy at all, at least not as the term has been understood throughout most of history, and this is the reason democracy was so feared by the rich and powerful elite, and why they developed and sold the non-rich and non-powerful majority a santized, tightly controlled and non-threatening variant of 'democracy'.
I think one should try to sell the idea that instead of defining themselves as consumers one should re-define oneself as a citizen once more. It's time and essential to dump the notion of the consumer society and re-introduce the concept of citzenship instead. That life isn't about accumulating things, but accumulating knowledge, wisdom and sharing power over society. The accumulation of wealth in a materialistic society should be way down on our list of priorities. We should aim to re-invigorate the concept of citizenship in a reborn, participatory, direct and active democracy.
I know a whole lot of countries subsidize food prices. If a government of a poor country wants to have reasonably happy people, they have to figure out a way that almost everyone can have at least a reasonable allowance of food and water, and subsidized food prices seems to be something that works. I think that something along those lines may need to happen here too.
Thanks! I can try to find someone who might publish something like this. We can try to educate WSJ and CNBC folks, but it would be hard to see one of them publishing something like this soon.
"We can try to educate WSJ and CNBC folks, but it would be hard to see one of them publishing something like this soon."
It looks like there are starting to be some slight cracks in the cornucopiansim of the WSJ and some even larger ones for CNBC. Since financial news is skewed to the right politically, I think the fact that T. Boone Pickens, Matthew Simmons, and Richard Rainwater are all well connected in right-wing politics (Pickens was a financier of "Swift Boaters for Truth" I believe and Rainwater backed Bush in Texas and Simmons was part of Cheney's secret energy meetings) helps their credibility tremendously in the financial community. Even though they are saying exactly the opposite of what CNBC wants to hear they still give Pickens and Simmons regular air time. And the price of oil is helping to add credibility to Simmons/Pickens and take credibility away from their cornucopians. However, being wrong on the oil situation doesn't get you off of CNBC. I think Peter Buetel still gets on and in 2006 he shared this sentiment with CNBC: "Beutel says that over the next five years or so increased drilling activity worldwide could send oil prices crashing — and pump prices as low as $1 a gallon in some parts of the country."
http://www.msnbc.msn.com/id/14717550/page/2/
I hope I am still alive in 20 to 30 years ...
I would like to find out how it turned out
In a few more decades, we shall know better
about issues like Peak Oil & Climate Change.
Since Earth IS finite, hence
infinite growth is madness.
A fundamental idea that I beat on
as my drum, here at the Oil Drum:
Any limits to growth are forms of death control.
That is the most taboo topic in our civilization.
Saying "yes" is always nicer than saying "no."
Growing more is always better than stopping.
True birth controls are saying "yes"
to developing some potential, but,
real death control is saying "no"
to some more of a potential life.
(Most of what we call "birth control"
is really some form of death control,
that we hide under a false language.)
Anyway, the bottom line is death control.
Those death controls built debt controls.
The future evolution of human & industrial ecologies,
(which have to save and integrate natural ecologies)
more than anything else depends on death controls.
A central feature of the kinds of transformations
that will be possible and necessary to cope with a
fundamental fact that infinite growth is impossible
shall be the evolution of those death control limits.
In the context of health care systems I feel it is vital
to recognize we have a "profit from disease" system.
"Health care" may become more careful death control.
That is already the way it is, at present,
since "profiting" from disease happens.
("Profiting" from war is the phenomenon
on an astronomically larger social scale.)
Coping with real facts that we can not keep on
developing & consuming more & more energy,
faster and faster, forever and forever ...
means we have to start saying "no" more often.
The world is already being controlled
by the effects of its past death control.
However, those who were best at doing death control
were necessarily also the best at being dishonest,
and the discussion of these social facts became
the bullies' bullshit social stories, such as
the theories of economics, and so on, etc..
Civilization already IS an organized system of robbery.
Human beings fundamentally exist as robbers in reality.
Reaching some real limits to growth
means more manifest death control.
What we should be doing is making a greater use of information,
as a higher consciousness, and more encompassing compassion,
about the realities of the death controls that we have evolved ...
The death controls made the debt controls
over access to the resources to be able
to survive and reproduce more ...
Reaching some limits to real growth
will force paradigm shift to happen.
The most important of paradigm shifts
is to perceive the truth of death control,
so that we could debate that rationally.
Everything that matters most in the future
is going to be due to the lynch pins and
keystone issues of death controls done
to evolve our integrated ecologies.
Every kind of tragedy of overshoot,
resulting in collapsing to chaos,
will be dealt with by de facto
death control developments.
Every better solution, from creative alternatives
being systematically implemented, will become
integrated systems only within death controls.
Any economic downturn becomes an upturn in death control.
The essential issues are going to become facing
the facts about death controls, and making
them work more effectively, and more
efficiently, than they are now.
However, the ultimate paradox will continue to be that
the best death controls have always depended the most
on the best dishonesty to hide what they truly are doing.
The greater use of information
and higher consciousness that
we need the most is regarding
the death control systems we
already are living inside now.
Post-modernizing science and technology were
first and foremost employed to make weapons.
Therefore, our weapons are billions
and trillions of times more effective
means of death control than before.
We ARE going to solve real problems
with real death controls, and if we are
not able to do that any better, then we
will do it with worse genocides instead.
However, even if there were genocides,
people shall then even more be forced
to think deeply about death controls.
"Downbeat" conclusions are never
going to be worse than that, and
learning better death controls is
what we are going to have to do.
Energy IS life.
A limited energy requires some real death controls ...
It seems impossible for us to generate infinite energy.
Therefore, we are going to have to evolve some ecology.
The death controls are going to be central to ecologies.
And so, when one attempts to give a talk to students ...
the double whammy taboo topics of limits and death are
issues that can not be avoided when we reach the limits to
generating and consuming more and more and more energy.
An interesting facet is that you are even invited to
give this kind of talk to students in a public place.
That is a significant first step to get them thinking
about what their real world may become,
when they are as old as you are now.
Eventually, the kinds of talk about death controls
that I present here will have to become accepted
as public debates presented to more students.
However, for now we can only take
one more little baby step at a time.
It's worth taking a peek at the lecture
"The Coming Collapse of the Middle Class"
by Elizabeth Warren, Leo Gottlieb Professor of Law, Harvard University
http://www.youtube.com/watch?v=akVL7QY0S8A
It's just under an hour long, but worth the watch.
Things have been going downhill for quite some time whilst our politicians have been busy proclaiming the opposite.
Gail,
Perhaps you should touch on the structural impedements to movement to a non-growth economy caused by our current banking system. The banking system, centered around the Federal Reserve, creates money as debt via fractional reserve lending. This system presupposes growth so future economic expansion is essentially the collateral on loans generated,i.e. money created, today. In a non-growth economy, with virtually every dollar attached to a debt obligation to be paid in the future plus interest, the current financial system cannot be sustained and is itself a problem in migrating to a new socio-economic order.
We'll have to migrate to a different model, perhaps one where money is created by a government-owned central bank and introduced by deficit spending on worthy investments in public enterprise, i.e. new alternative energy infrastructure projects. This money would never have to be repaid by anyone as it is not created by means of a loan: the government spends it and the cash stays in the economy. Money supply would be reduced by taxation, and increased by deficit spending. Such deficit spending would have no interest burden as it was issued by the government central bank. This is in stark contrast to the current system in which interest on public debt comes out of the public purse and into the pockets of the private banking system that 'created' this money.
I thought about talking about this, but I am afraid it gets too complicated to discuss. If people are not tuned in to this problem, it takes quite a few words to try to explain. I am afraid it is over most people's heads.
You could briefly mention that there is also a connected problem with our money system, but discussing it is beyond the scope of your presentation. Then point them to the Money As Debt video on Google, and the website for the video.
http://video.google.com/videoplay?docid=-9050474362583451279
http://www.moneyasdebt.net/
I also think your presentation is excellent work as usual, Gail. Thanks again.
Steve: for an alternative model that might actually work, check out Charles Hall's latest book on biophysical economics, Making World Development Work: Scientific Alternatives to Neoclassical Economic Theory
Gail
This probably right if you start with the US as your baseline and are looking down, But there are huge gains to be made in the US infrastructure, Europeans live a high quality life with half the energy usage, so why can't you? There are so many issues in the US with your culture of greed and consumption that this crunch could end up being a reality check, you cannot continue to live on the back of the rest of the world
Neven MacEwan (Happy in NZ)
I think that part of our problem is that everything is so spread out. If people have to travel twice as far to do anything, it is pretty likely they will have to use twice as much gasoline.
If things were a lot more compact, we could do things differently. Now is not the time to start building a lot of new infrastructure, though. If we moved together into half of the houses, and abandoned the rest, we might come out ahead. This wouldn't make the mortgage lenders happy, though.
That would be a way to continue business as close to usual as possible for a short time. But we do it by squeezing a little more efficiency from a broken system, at the cost of resilient options and increased dependence on a broken system.
As long as we keep growing and increasing our consumption, which I can't see we can help from doing, more efficiency backs us further into a corner, just so we can put off paying the myriad pipers a little while longer.
Given the corner we are already in, each attempt at efficiency is like a ponzi scheme, where we borrow from new pipers to pay interest to the old pipers. Which gives us additional time, but which we use to find even newer pipers to pay the larger piper pool.
Each successive efficiency is harder to reach than the last, and provides declining benefit for a shorter time.
In other words, we have passed Peak Pipers.
Gail,
a book called "The Great Wave" Price Revolutions and the Rhythm of History by David Hackett Fischer
takes a historical perspective of the same issues.
We have actually gone through all this before. In fact several times over the past 850 years.
He went back to the middle ages and found that there have been several periods of relative stability, during which population grew. At a certain point, increases in the cost of energy and food relative to the average income levels have multiple ramifications and lead to instability in society, increase in crime, births out of wedlock, disease, wars, and a break down in social structure.
Then as population declines to a level that can be supported, stability returns.
This is all based on an analysis of historical records in Europe.
He reviews the various models historians have used - Mathusian, Marxist, neoclassical, agrarian, environmental and historicist - to explain these repeating great waves (he is clear that it is not cycles)
I highly recommend the book.
We need to put our situation in context, and see what may happen, based on historical fact.
I think we have a lot of "futurists" but not enough historians :-)
That's interesting. Thanks!
I told someone up-thread that if we allocate by price alone, we would get a lot of crime and other unexpected impacts, sounding like what you are talking about. Allocation by price only works if people can afford the basics.
Gail
When you listed alternatives to oil you said coal is doubtful for climate change reasons. True, but if the alternative is the scenario you have painted do you think people will bother about that. With societoral collapse in progress the attitude will be let warming take care of its self, after all it will seem the lesser of the two evils.
They probably won't worry about climate change.
There are other reasons coal isn't a good solution also - not being liquid is a big one.
There's no shortage of coal in the U.S.. We have 30% of the world's coal. As oil peaks,the U.S. will migrate from gas to electric and/or hybrids. We also have two trillion barrels of oil locked up in oil shale. The U.S. has 80% of the worlds oil shale. There are alternatives to oil....even if they aren't as cheap or clean. The world won't come to an end.
I don't see oil shale as an alternative. We don't have any way of getting it out. The ways that might work use more water than we have.
Electric cars have another set of problems. If nothing else, most people aren't going to be able to afford them. Also, maintaining roads will be a huge problem.
The economics for a modest commuter electric car don't seem too bad, actually - just don't expect to be able to drive it across the continent:
http://www.gizmag.com/ukp14000-thnk-city-electric-car-ready-for-showroom...
$28,000 ain't cheap for such a limited motor, but it would do the job.
The Green River Basin in Colorodo has more than twice as much oil as the entire Middle East. Yes,it will be more costly to produce. Yes,it will damage the environment. And yes,it is enough oil to supply all our needs for the next 50 years. It's on government land,just waiting for Congress to get off its ass.
You are talking about oil shale, not oil. Oil shale contains an organic precursor to oil called kerogen. Kerogen has to be cooked a high temperature in order to convert into oil. The problem with exploiting this resource is not getting congress of its ass. It's finding an economical process of extracting kerogen and converting it into oil. It is not the total size of an energy reservoir that matters but the amount of economic effort required to produce a unit of useful fuel from that reservoir.
The other problem is water. The methods currently being investigated use more water than is available in the western part of the country, where the oil shale is located.
"Oil shale: Energy of the future...and always will be."
There are many reasons the arguments this post makes are highly unlikely:
1) Historical precident--These are the same arguments that people were making in the 70s and 80s. The argument just didn't turn out to be true.
2) Many people have been saying that efficency has it's limits, which is true, however, we have many more opertunities for improvement than in the 70s and 80s, which was the first time we did enough efficency measures to litterally cripple the oil market for about 2 decades. Back then, the only real opertunities to increase vehicle fuel efficency was to do more aerodynamics, downsize vehicles, and reduce engine power. Today we have those (pickup/SUV sales plumeting, small car sales soaring), as well as:
*--Lighweigting through advanced materials, such as aluminum (widely used/available), mangnesium (has played niche roles), carbon fiber (has declined enough for high-end vehicles, rapidly falling price), composites (conquering aerospace market, trickling down into automotive tech), etc.
*--Advanced drivetrains, including HCCI engines (still in lab, but most easily adapted to HEV/PHEV), low-emission diesel (more than half of european market), hybrid (>2% market share, growing in excess of 30% per year, Li batteries promise to make them even better), plug in hybrid (Chevy volt in same position as Prius 10 years ago), fuel cells (hydrogen or otherwise)(wouldn't hold my breath), etc.
3) Efficency growing in non light vehicle market:
--Boeing 787 ~20% more efficent than previous models (and is the fastest selling plane ever)
--GE Evolution series 5% more efficent than previous locomotives, developing a hybrid locomotive (meaning with breaking energy capture) 10% more efficent than that.
--Hybrid busses gaining massive market share.
4) Growth of sugar ethanol worldwide, demostration cellulosic ethanol plants comming online. Algae biodiesel demostrations are in the works as well.
All these things are being done as a replacement for oil, not mentioning develpments for electricity generation. This, along with slow but steady changes in individual behavior have allready reduced US oil consumption 2% from last year (even though the economic slowdown certainly has something to do with it as well, but even with 0 GDP growth that's 2% annual reduction in GDP oil intensity, and plus our population is growing just under 2%, so that's a 4% reduction in oil consumption per capita.
This post also ignores the fact we'd sacrifice a lot of things to keep our economy afloat, and I'm not talking about conserving. We're allready seeing Canada develop oil sands, which is an environmental travesty by any measure. I might be wrong, but I believe I've read there are ~35 billion bbls of oil offshore that are off limits to production in the US, about 10 billion barrels in ANWR, at $150 per barrel oil we'd probably see coal liqufication with or without government support, and after that we still have oil shale. Yes, it would probably cause irreperable damage to the environment, but I could almost guarentee you that we'd see that before we saw the US a third world country because of oil shortages.
Hi, Daxtatter.
Regarding the extra oil you say is offshore as well as in ANWR, it always is good to keep in mind the scale of the problem we are facing and to perform some math for an occasional reality check.
For instance, each billion barrels of oil pushes the peak off by only six days or so.
1 000 000 000 barrels / 75 000 000 barrels / day (I'm using the lower conventional crude rate rather than the total liquids rate of production)
= 13.3 days
13.3 / 2 = ~6 days
Using your numbers, that means ANWR, at 10 billion bbls, is good for about 60 days.
The offshore oil number you cite (35 billion bbls) is good for 233 days.
Turning coal to liquid is very expensive. From the FAQ available on the futurecoalfuels.org website:
Using the larger numbers (the so-called world-scale facility), at today's prices to replace just one million barrels per day of oil it would take:
1 000 000 barrels / 80,000 barrels/plant= 12.5 plants
12.5 plants x $6.5 billion / plant = $81.25 billion
The U.S. currently uses 22 million barrels per day. To replace 10 million barrels would take close to a trillion dollars.
Of course this much coal could not be mined and transported to these giant facilities since, as Gail notes elsewhere in this thread, it's not easy to expand coal production. The rail system is already apparently at capacity (Alan please step in if this is incorrect).
Further, if we pursued the last course of action, we would then make sure that our descendants truly lived in a different world with all the CO2 we left for them.
I encourage you to keep using math to make your points and I'm quite certain you'll see the inescapable nature of the problem we face — even after adding up all the efficiencies and extra production you mention. And once we fall off the current oil production plateau in 0 to eight years, I assert that we will largely have only the infrastructure in place at that time to work with. The economy will be contracting and shedding enormous numbers of workers; people will be busy trying to keep our society together.
For some thinking on the rate the world economy will contract as oil declines, see: Estimating the Economic Impacts of Peak Oil
-André
www.InspiringGreenLeadership.com
Here is something I've been thinking recently. I hope it'll work with all the images... we shall see.
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The energy intensity of the GDP and declining energy
For you to fully understand where I’m coming from first of all I’m about to show you five graphs I’m sure you’re quite familiar with. However, any thorough analysis needs its details worked out first, so here you go.
1) A logistic curve for oil, taken from Jeffrey Brown aka westexas, showing the increase, the peak and the inevitable decline of oil production.
2) A logistic curve for fossil fuels taken from Luis, showing the increase, the peak and the inevitable decline of per capita fossil energy consumption (as used in revisiting the Olduvai theory)
3) The nearly 100% correlation between oil usage and the GDP, in other words: transportation energy and the GDP are bound to each other 100%
4) The nearly 100% correlation between energy and the GDP taken from Paul Chefurka’s paper regarding Africa’s future chances. The graph (correctly) shows that as the amount of available energy declines the GDP follows the same path.
5) Perhaps most important of all: the energy intensity of the GDP taken also from Glider’s paper. It shows us that as time goes on, the energy intensity of the GDP goes down – or in other words, the energy efficiency of the GDP goes up.
OK. Having seen all this, let’s see what it really means. Let’s start with our last graph. What does the data imply? It says the following: As time goes on, the GDP becomes less energy intensive. In other words: 20 years ago 1 barrel of oil (or 6,000 BTUs of energy) let us create a GDP of, say, USD 10, as opposed to today when the same amount of energy lets us create a GDP of, say, USD 15. (Note: the exact numbers are arbitrary but the direction is set by the graph above.)
So the GDP became more energy efficient – or less energy intensive. Today we can create more GDP with a barrel of oil than we were able to 20 years ago. Note also that the GDP is a per capita quantity.
Now is the time to take another look at the logistic curves of oil and that of per capita fossil energy.
The growing energy efficiency (or: declining energy intensity) of the GDP is a great thing – as long as we are moving upwards on the per capita energy curve. It helps us create more and more energy with the same amount of energy yoy. However, once we are on the downward slope this very same effect is about to bite us hard. Remember: the correlation between energy and GDP is 100%, so once energy declines, so does the GDP. The question is: By how much? The answer: the more energy efficient (or the less energy intensive) the GDP, the more the loss of a single barrel of oil will count in diminishing the GDP. Remember: we are more efficient now than we were 20 years ago. So we create more GDP by using a barrel of oil. But as of now, we have less barrels – not more. So when we are subtracting the GDP, its energy intensity (or energy efficiency) taken into account, we are about to lose more GDP then we would have lost 20 years ago if the decline in available energy started then.
All in all: the more energy efficient (the less energy intensive) the GDP becomes, the more we will lose in GDP terms once we are on the downward slope of the energy curve.
This effectively means that in case we are about to increase the energy efficiency (decrease the energy intensity) of the GDP, we are doing a disservice to society. This will not help us one bit. Energy efficiency should be measured in ‘real’ terms or in output terms if we are to help the survival of people. GDP cannot be eaten; it rises all the time while median wages (and gross output) does not change at all.
We should not focus on GDP at all – what we really need to focus on is energy efficiency in its physical meaning. (See my other letter for details.)
“Energy efficiency is a question of physics (thermodynamics) and as is, should be calculated using real terms. Either as E(out) / E(in), or if you intend to generalize a bit more: Comparing Output(1):Energy(in[1]) to Output(2):Energy(in[2]). You can do this if you count the number of the same pairs of shoes in two different years or if you measure the energy used to make fertilizer. However, if you mix it with money (a virtual entity) then you will also compare price – something that’s dependent on the ever-changing market. By using GDP in your measurements you will get lost on real output. And in the end, you cannot eat or heat your home with money (GDP). It is totally worthless if decoupled from real output. (Real output is a generalizing term also, you can also apply it to the teaching hours of a teacher using a laptop instead of a computer.)”
In case we are focusing on the energy efficiency (energy intensity) of the GDP, we are working against our final goals. I think this is the most detailed way I could go for making my point understood. I hope it is clear now. What are your thoughts?
If I understand your argument correctly, you are saying that as GDP has risen as a percentage of GDP increase, it will fall proportionately more as GDP decreases.
So if, say, for every increase in energy increase of 1 unit GDP increases 1.1 units, as GDP falls for every 1 unit of fall of energy use GDP will fall 1.1 units.
If I have understood you correctly it is apparent that they do not have to be mirror images, and a 1 unit fall in energy use could mean a 1.2 fall in GPD, or no fall at all.
If this is correct, then perhaps you could provide more linkage to your interesting argument.
Thanks.
Exactly.
Think of it this way: Until now, we have basically been climbing upwards the energy curve. We measure the strength of the economy using GDP terms. (For better or worse... but we do it anyway.) In the past, the energy intensity of the GDP went down - or the energy efficiency of the GDP went up. This effectively means that, say, 20 years ago we were able to create a wealth of USD500 out of a barrel of oil. As of now, we create USD600. As long as the # of barrels goes up, it's great. The more oil we use plius the less energy intensive the GDP is - the more GDP we are going to create.
However, what if we now lose a barrel? In the past (10 years ago) a loss of a barrel would have resulted in a decline of USD 500. But now we are less energy intensive and a barrel means USD600, which is going to result in a loss of USD600 in case we lose a barrel of oil.
So going down the Hubbert curve, while decreasing the energy intensity (or increasing the energy efficiency) of the GDP will always mean a greater loss in GDP terms per barrel of oil.
The direction of total energy used and GDP generated is 100% correlated. The less the energy the less the GDP. But as the GDP becomes more energy efficient, the same 1 barrel loss will result in more GDP loss in comparison with the same effect 10 years ago.
The more energy efficient the GDP becomes while going up the curve, the more it will hurt us in GDP terms going down the curve.
Now I am sure that I have the right idea as t your argument, I would like to put it to you that you need to provide much stronger substantiation for the idea that the increase and decrease is symmetric - suppose we allocate the increase in GDP per unit of energy to technological improvement, say for instance that you improve the efficiency of a wind turbine by 1% more, in an environment where you can also build more wind turbines (increase the GDP), it is not clear that you would not be able to make a similar improvement if GDP did not increase, ie you could buy no more wind turbines.
In Japan, for instance, in recent years when GDP was fairly static, energy efficiency still increased, I understand.
In fact, perhaps energy efficiency is linked to the cost of energy, which although related to GDP growth is not determined one for one by it.
You have not established the linkage - I suspect that there is a correlation, but it is a weak one, so say, if GDP increased from 1 to 1.1, and energy efficiency went from 1 to 1.2, then a fall of GDP from 1 to 0.95 might lead to a static energy efficiency, or if the cause of the GDP fall was basically due to increased energy costs then efficiency might even go up more than if the economy had grown and there was no increase in energy costs.
In short, I would have thought that energy efficiency correlates to energy costs, not GDP growth, at least to any great extent.
Now you are talking about *real* efficiency gains here:
Any improvement in energy efficiency calculated as: output/input is welcome. In fact it is not only great but also our only hope. However, it is a totally different issue than increasing the energy efficiency of the GDP.
Suppose I'm simply going to charge more for electricity instead of improving efficiency. The GDP will grow (in monetary units) but my output will fall
Well, you have to sets of data. (1) the GDP is on the rise historically nad (2) the energy intensity of the GDP declining, historically. By combinig the two you can conclude that while the GDP grew it also became less energy intensive (or more energy efficient).
It helps us in GDP terms going upward but hurts us on the downside of the curve. Any real improvement should arrive via energy efficiency using *real* vs. monetary terms.
A correlation does not prove causation.
(I am being severe as I find your idea interesting, and worth examining)
Well, I think there is NO DIRECT causation. It is two trends going forward simultaneously.
But we don't need causation here. The correlation may even stop today. It still will not help. Here is why.
China creates roughly USD415 using a barrel of oil. The US creates USD660. Hungary (the country I happen to live in) cca. USD850 per barrel. Now, imagine the following. All these countries can buy one less barrel of oil. Who is hurt most? Hungary. Our GDP takes an USD850 hit with each barrel. China's economy takes only a USD 415 hit.
Now you may think of the increase in the energy efficiency of the GDP as China vs. the US. Once it was USD 415 in the US but now it is up to USD660. So the same amount of loss (say: 1 barrel) will hurt the US more today than it would have hurt you 20 years ago.
The whole problem of all this is our desire to increase the energy efficiency of the GDP instead of increasing energy efficiency in *real* (i.e.: output) terms. The more we work on the energy efficiency of the GDP the worse off we will be in GDP terms once total amount of energy is on the decline (in 10 years).
Dave, I find it easier to conceptualize as an inverted pyramid. The small part on the bottom is our energy use, the successively larger parts are different parts of the economy depending on this energy use. Putting it simply, more of the economy is dependent on less oil than a couple of decades ago. Therefore it is simple to extrapolate that more economy will suffer with each unit decline in energy.
This 'energy intensity' of the GDP is something brought up by pundits frequently. Trouble is, they have it backwards. They have the impression that energy is less 'needed' than it used to be. This is like saying, since I've gained 10 lbs. my heart is supporting more body mass and is therefore needed less than it use to be.
Yes, that's a nice way of putting it.
And what we are doing is, in effect, like we were putting up more and more weight each day just to prove how we need our hearts less and less.
And increasing the energy efficiency of the GDP means we are more succesful than ever at putting up dead weight. Energy intensity of the GDP is going to really hurt when we are going down the energy curve and still want to increase our GDP.
Talk about running faster just to stand still.
I believe that in Japan efficiency has gone the wrong way. It used to be that everyone took the train; now more are taking cars, like the rest of the world. I have a Robert Ayers / Benjamin Warr paper with that finding, but it is too late now to find the exact reference.
Wow - looks like a very lucid idea.
JIT inventory systems add to the dysfunction.
This can be a lead story - we need to tear apart the logic but its compelling upon the first scan
Here is another way of explaining this. (Note: I had a nice conversation going on with Nate Hagens of TOD about this issue, but as of late he unfortunately hasn't had the time to respond. So please forgive me Nate for posting this here, but I think it is important enough for everyone here, so I decided to copy and paste the letter I've sent you a few weeks ago.)
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On the other hand, there are several issues regarding the measurement and energy intensity (or: efficiency) of the GDP vs. production and consumption in so-called real terms I’d like to point out.
1) GDP is usually calculated as ‘per capita’. The buying power of the ‘real wage’ or ‘normalized wage’ is also calculated as per capita. So if you see a sharper rise in GDP as opposed to the buying power of wages (which is exactly what you’ll find) you can conclude that consumption calculated in GDP terms gives you a much brighter picture than consumption in buying power terms.
2) People don’t buy anything in the stores via GDP. They spend what they earn – their wages. This is especially true in countries that have a low level of savings and investments going on.
3) GDP is calculated and miscalculated on monetary terms. First off, you can cheat when calculating if you don’t account for (the exact effect of ‘real’) inflation. Then there is the currency thing… In case your currency drops vs. a basket of currencies the resulting GDP is miscalculated. Using GDP instead of real buying power effectively annihilates several things affecting the average citizen.
4) GDP is measured by the flow of money. If you paint your house and I paint mine, there is no GDP allocated to our respective work. We can buy the paint for USD10 but that’s it. On the other hand, if I paint YOUR house for USD 1 million and you paint MINE for USD 1 million we generated a GDP of USD 2 million. It cost us the same energy, but energy intensity of the GDP naturally went down. We made GDP of 2 million without putting in any more energy (or money for that matter).
5) If we want to save energy, we have to become more energy efficient. Energy efficiency is a question of physics (thermodynamics) and as is, should be calculated using real terms. Either as E(out) / E(in), or if you intend to generalize a bit more: Comparing Output(1):Energy(in[1]) to Output(2):Energy(in[2]). You can do this if you count the number of the same pairs of shoes in two different years or if you measure the energy used to make fertilizer. However, if you mix it with money (a virtual entity) then you will also compare price – something that’s dependent on the ever-changing market. By using GDP in your measurements you will get lost on real output. And in the end, you cannot eat or heat your home with money (GDP). It is totally worthless if decoupled from real output. (Real output is a generalizing term also, you can also apply it to the teaching hours of a teacher using a laptop instead of a computer.)
6) Consider the following. You can make two observations simultaneously. (1) The energy intensity of the GDP going down (energy efficiency of the GDP going up), and (2) in case the total amount of energy goes up GDP goes up, in case the total energy usage goes down GDP goes down. The correlation is almost 100%, in fact you will not find extended periods where energy went down and GDP went up. This I call the energy bound of GDP.
Here comes energy intensity of the GDP to factor in. By the GDP becoming less energy intensive you’ll find that a 1% rise in energy results in, say, a 3% rise in GDP as opposed to 5 years ago when a 1% rise in energy resulted only in a 2% rise in GDP. That is the diminishing energy intensity of the GDP.
However, by taking a look at this trend backwards, you can also conclude that with each passing year more and more GDP is dependent on the same amount of (surplus) energy. So what happens when you subtract 1% of energy this time instead of adding it to the mix? Well, this year your GDP will go down 3% as opposed to only 2% 5 years ago.
Now imagine the downside of the Hubbert-curve. Less and less energy each year with a very low energy intensity of the GDP will result in more and more GDP losses each year. Much bigger losses today than 5 years ago.
7) Now we finally arrive at the problem with Luis’ way of calculating things. He not only misses his target by using GDP instead of real purchasing power, but on the downside of the Olduvai slope he wishes to close the energy gap via increased energy efficiency of the GDP (or decreased energy intensity of the GDP which means the same thing). The reader arrives at the (false) conclusion that in case the energy intensity of the GDP goes down the gap becomes easier to overcome. However, relying only on the energy intensity of the GDP, the opposite is true.
8) The thing I really wanted to show to you is that if you intend to overcome the energy gap, you will have to use either physical terms of energy (E[out]/E[in]) or physical output as explained above. You will have a hard time converting virtual body of work (i.e.: coding) to output, but if you don’t follow this path you will arrive at the wrong conclusion. The energy gap can only be overcome via real efficiency gains and not virtual ones (based on the rather virtual concept of money and – therefore – GDP).
All in all I’m not sure how successful I was in explaining all this to you, but I’m almost sure I’m right. If you don’t understand something that’s likely to be my fault so don’t hesitate to ask questions of any kind.
I think a model can be built for real efficiency gains and it can serve as a basis for understanding the tasks we as a society face once we are on the downside of the Hubbert-slope.
What do you think this time?
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I'm pretty confident I can build such a model and we have the personnel here at TOD to make a real scientific issue out of this.
Once again; You're confusing "Energy," with "Oil." Oil is Energy; but, Energy is Much More than "Oil."
btw. To be accurate you really need to cite Real, "Disposable," (after tax) Income. That changes your graph quite a bit. Taxes are significantly lower than six years, ago.
No, I!m not confusing the two. I was working with oil for the sake of simplicity, but you will arrive at the very same conclusion using "energy" instead of oil.
And income (i.e.: real wage) is the least of the issues here. The main one is: The declining energy intensity of the GDP will hurt the GDP once we are on the downside of the energy curve.
Nice work putting this together, eastender. I'd like to see you do a guest keypost on this. I think it's an important angle.
Thanks, I guess. :-) My original idea was the same you propose: Let's put together a model (and a guest post) measuring and explaining all this. However, before doing so I simply wanted some feedback so that we know if it is worth putting it together in the first place. This is not an easy thing to do if you want to do it properly.
At the moment I'm wondering if I could use westexas' ELM in a way. Imagine a country that does nothing else but buys oil and food via the money obtained by using that oil to manufacture a few things it sells on the market. It would be a GDP ILM model - or something along those lines.
But I have to think some valuable input from the readers of TOD as to how I should make such a guest post work would be great. The good (or bad) thing is that I'm almost 100% sure I'm right, the bad part is it is just damn hard to show using real numbers. You feel you're right... but it's not always easy to show.
I hear ya. I struggle with the numbers myself. Maybe Euan or Khebab or Stuart or Ace or one of those other math-type guys would help.
I'm not awful with numbers, though I'm certainly not the type of magician Khebab, WebHubbleTelescope, ace or Stuart are.
However, doing 100% proper calculations is not that important in the short run. What we need to do is building a model and understanding with 100% accuracy that increasing the energy efficiency of the GDP is a good thing only when we are moving up the energy curve. Once we are moving down it is going to be a pain.
How much a pain sure needs to be calculated... but first things first: We have to establish the direction we are going before taking any further steps.
And yes: Any help from the likes of westexas, Khebab, ace, Mr. Staniford et al. would be greatly appreciated. In fact, after outlining the boundaries of the model I really can pass it to them. I'm not that fond of the spotlight. I've been reading this site for over 15 months now, and have mainly remained silent dispite working in this field 24/7 lately.
I think the critical issue is what happens when all of the debt collapses. It seems to be that you have a huge number of bankruptcies of individuals, businesses, and governments. I would expect that GDP suddenly drops. Some governments may go on as before, even after bankruptcy, but probably with fewer employees.
I don't think I know how to model this. GDP is what we get when we pay our neighbor to paint our garage, and we paint his. That will go away. Real underlying good (and to a lesser extent services) hopefully will hold up to some extent, but this could depend on people's willingness to continue working, lacking financial institutions to use as intermediaries. The situation is so far divorced from what we know today, that even to conceptualize it is difficult.
1) consumption calculated in GDP terms gives you a much brighter picture than consumption in buying power terms.
Yes , I can buy that - in a real world example if I have to keep buying goods that do not have any durability in the long term I have increased gdp but not the service length I usually receive from the good - good for gdp but with smaller sizes and cheaper goods it sucks for me
2) People don’t buy anything in the stores via GDP. They spend what they earn – their wages.
Agree - people also take loans off of there homes to buy stuff - but ya a baseline of what they consume can be made by wages
3) Using GDP instead of real buying power effectively annihilates several things affecting the average citizen.
Agreed
4) We made GDP of 2 million without putting in any more energy
Yes - but there are destructive functions and constructive ones, but I wont get into that one
5). Energy efficiency is a question of physics (thermodynamics) and as is, should be calculated using real terms.... By using GDP in your measurements you will get lost on real output.
Yes, but it does have connections with the real world - if I have a bunch of money from derivative investments I can if I have timed the market correctly create a low energy home, so the connection is tenuous but real. I hear you.
6). The correlation is almost 100%, in fact you will not find extended periods where energy went down and GDP went up. This I call the energy bound of GDP.
Much bigger losses today than 5 years ago.
This is a key point “ in fact you will not find extended periods where energy went down and GDP went up”
That is something that can be rigorously analyzed - but you may have created a new crack of light in the economics of decline
We may have an example of the US moving to a manufacturing economy to an information based one - we would have used a lot more energy if we tried to hold onto the manufacturing capabilities. A bad example but I get the gist.
7) He not only misses his target by using GDP instead of real purchasing power, but on the downside of the Olduvai slope he wishes to close the energy gap via increased energy efficiency of the GDP (or decreased energy intensity of the GDP which means the same thing).
I agree wholeheartedly
8) if you intend to overcome the energy gap, you will have to use either physical terms of energy (E[out]/E[in]) or physical output as explained above.
It needs a lot of work - but this may be a counterpoint to Jevons paradox.
If one has less energy far less measurable economic activity can be accomplished
Well done! Again - a lot more work needs to be done but collapse now has a measurable input/output
Yes, I totally agree. This needs a lot more work. first of all I wanted to check if the original idea made sense to you guys. As a next step, I'd be glad to work on this with somebody else. It is a very tall order to make this model work, however, I have to say it is a crucial issue. As long as we are working on the GDP part, we make ourselves miserable on the downward energy slope - provided we will insist on GDP gains in the future as well as we have in the past (which I have to think is a given until TEOTWAWKI).
Any volunteers who think this concept is worth working on?
What was Texas - not the entire USA but just Texas GDP (esp West Texas) in the years 1971 to 1981?
Well, check out this site:
http://texaspolitics.laits.utexas.edu/html/pec/features/0300_02/gsp.html
Thanks for putting all of these graphs together. I had kind of forgotten about some of them.
I think that your point about reduced energy having a bigger impact on GDP now is a good one. Too often I see the comment that oil (or whatever) is only 3% if GDP, so if the price goes up by whatever percentage, it is insignificant in the whole scheme of things. I have tried to respond that the problem is that the oil isn't there. We have had to reduce usage, and pay a higher price for what is there. It is really the lack of oil that is the problem.
For the most-part, I was trying to stay out of the GDP business. There is too much magical thinking about GDP divorced from resources. If we don't have resources, we don't have GDP. Even services take resources, just not as much resources as heavy industry.
I do think that energy efficiency has a place. For example, if we have an electrical power plant or even a manufacturing facility, we can capture the heat that now escapes and use it to heat nearby homes. We can arrange for carpooling. These are ways of making scarce resources go farther, but I don't think they will solve our energy problems, especially if we step off an energy cliff because of, say, balance of payment problems.
Hi Gail,
thanks for answering.
Yeah, I'm afraid I'm right. It is a VERY serious issue though and it gets more serious by the day. The more energy efficient the GDP is the worse off we are in GDP terms. And what do nations want to secure under this economic paradigm? The GDP. How do they achieve that? By reducing its energy intensity. What does it effectively do? It creates more GDP out of each barrel of oil - literally by the day. What happens when you now have to subtract all that oil from instead of adding it to the mix? Yeah, good guess. :(
I agree... but our economists don't. So they will address the GDP issue all the time, thus hurting us in the long run. Instead of focusing on real issues, like energy efficiency using real terms, they focus on something that will be a pain in the buttocks. (And I got trained to be an economist... just after having studied some [lot's of]science.)
The sooner we STOP increasing the energy intensity of the GDP and start focusing on real energy efficiency, the better off we are.
We can easily build a model and show this to the scientific world.
So do I. Absolutely. Energy efficiency (along with conservation) is in fact the ONLY thing that will work. But we should not mix it up with the (energy efficiency of the)GDP because we will be confused. By using the (energy efficiency of the) GDP you never know which effect caused it to increase: real efficiency or monetary tricks, inflation, etc.
Wow.
Now I'm as convinced about peak oil as anyone, and as an economist I see some REALLY serious problems out there going forward.
But posts like this one are one reason so many people don't take the peak oil message seriously.
This post should be entitled "One person's view of a possible future" instead of "The Expected Economic Impact..." because the economics in this post is basically garbage.
As probably most of you know, modern economics is premised on the concept of incentives, and even if you have your doubts about which incentives will work and have valid reasoning to support your arguments (and I agree there are many), to post about the "economic impact" and not even mention how economies respond is argument as bad as (and flawed in the same way as) the "there's plenty of oil out there" arguments.
Any first semester Econ student could tell you that as prices rise due to rising demand and falling supply, other sources of energy will become economic and come online (solar, nuclear, wind) and behavior will shift (conservation, increased telecommuting and teleconferencing, less travel).
Now, as an at least partial Malthusian, unlike some I'm certainly not arguing these sorts of economic responses will be a sort of genie to come out of the bottle to solve all woes, not by a long shot. But they are real, they will happen, they will help, and not to mention them in an "economic" post about Peak Oil is just "Pythonesque" to an economist. I very much want for the Peak Oil discussion to be taken seriously by the world's lesser-informed cynics, and posts like this are just fodder for the naysayers.
I appreciate Gail's thoughtful opinions and long time hard work and contribution to the Oil Drum, but in the interest of the cause, don't let her anywhere near the word "economics".
imho.
I appreciate Gail's thoughtful opinions and long time hard work and contribution to the Oil Drum, but in the interest of the cause, don't let her anywhere near the word "economics".
I agree that Gail should dis-associate herself from economics -- her reputation can only suffer and that of economics would an undeserved boost.
Any first semester Econ student could tell you that as prices rise due to rising demand and falling supply, other sources of energy will become economic and come online (solar, nuclear, wind) and behavior will shift (conservation, increased telecommuting and teleconferencing, less travel).
That this is still taught in Econ 101 is precisely the problem: infinite faith in the god of technology and the god of plenty. But science in the twentieth century has been as much about limits as it has been about endless possibilities. At this point no one knows an energy source that can fully replace hydrocarbons. No one knows of s substitute for water. No one knows of a substitute for metals. No one knows of a substitute for soil. There are limits. We are approaching many of them. We have to face them.
After we face them, then and only then can we figure out what the possible solutions are, other than letting nature take its course: war, famine and general misery. We have to start cooperating globally to consciously reduce our footprint on the plant, population and resource consumption. We have to aim at leveling off at a level that allows to live sustainably, from the above-ground and renewable biosphere, and gradually reduce our dependence on non-renewable underground resources to almost zero. There's no choice. What kind of hell we go thru before we muster the will to do this, know one knows. This isn't doomerism. It's just a matter of addressing reality.
There has been much discussion of the disparity in analysis between geologists and economists on the topic of peak oil and the likely future.
Of the two approaches, I would be much more highly suspect of the economists approach, given the track record of failure in economic theory and analysis. To say that that falling supply of oil will cause other sources of energy to come online presupposes that other sources are adequate substitutes and exist in the physical world in adequate quantities, and not just in the minds of trained economists.
Of course each expert in his field of knowledge sees the world through his own bias eyes as if his kingdom is supreme. And of course, any alternative view is a threat, the more logical the alternative view, the greater the threat, and the perceived insult to the expert.
Gail has described a future based on realistic constraints in available energy. If you think that all that is needed to bring forth new energy is higher prices, then it seems to me you are relying on different laws of physics than are familiar to the rest of us.
Have you calculated the price elasticity of oil lately? The elasticity is so low that 99% of why people use oil over the last 3 years can be attributed to something other than price.
http://www.theoildrum.com/node/3531
Have you proven that the drop in oil demand is due to efficiency gains and not economic destruction? Because the whole concern about Peak Oil is not that demand will drop, we all know that demand cannot exceed supply, but that demand will drop by destroying the economy and rendering everyone "freezing in the dark".
What is truly "Pythonesque" is the number of economists that have posted saying that oil is elastic and will respond smoothly to increases in price when exactly the opposite is happening.
hbj: How about pitching in with eastender upthread?
solar, nuke, ... etc. ?
You forgot to mention Lemming Power ... the most vital one of all.
As any 1st year Lemmonomics student can tell you, when our Lemming colony runs low on energy we resort to conversion of Lemm mass into energy.
We rely on Albert Lemmstein's famous eqaution: E= Lemm * V^2.
Each time a brave Lemming makes the ultimate sacrifice for God and colony by going over the edge, his velocity increases exponentially and his body mass makes the quantum leap from here and into the energy domain and beyond. His spirit lives on and his contribution to the energy needs of our commonwealth is remembered for always. This is the true Lemming way.
Now if only you humans learned to operate under the true laws of Lemmonomics instead of your Medieval "Economics", you wouldn't have so many energy crisis problems.
____________________
Remember to invest in Ledge Funds, the best vehicle for your retirement!
#1 Sarcanol post 2008
Bravo!
Thanks Gail!
The latest IEA Oil Market Report dated 11 March 2008 has just been released to the public.
http://omrpublic.iea.org/archiveresults.asp?formsection=full+issue&formd...
Pages 23 and 24 of this report describe some interesting information about non-OPEC decline rates which provide more evidence that the world's oil supply is on peak plateau now.
IMHO, the above statements about decline rates is part of the IEA's early warning public relations campaign about oil production being on a peak plateau, which will not be able to satisfy the oil demand. Later this year, the IEA will release a revised oil production forecast, at least to 2030, which will likely confirm the peak plateau. On page 24, the IEA says this in a very important footnote
Wonder if the IEA will be able to get decline rates from OPEC fields which can be included in their WEO?
Hi ace,
I'd be interested in hearing your take regarding my idea a little bit upthread. I think this shoud be tested.
On a sidenote: I'm using your forecasts (And Bakhtiari's) in my country as I'm working on an energy security company to be established these days. I made an excel sheet for supply and net exports (incorporating westexas and Khebab's work) and also added some elasticity numbers to have a handle on future prices.
I made the excel 6 months ago and it is working just great. It gives the prices at the pump in the US and here and it also gives WTI prices. It is as accurate as it can get. Thanks for all your efforts.
Hi Ace,
Thanks for the update! The decline rate quoted so far definitely are higher than CERA's 4.5%. I think CERA was assuming low decline rates for OPEC., though.
Hmmm.
I was reading the whole thing and I've just found THIS at page 17.
What's up with this? Here they say 4-5% on average with mature fields having 7.7%. Any ideas?
The decline rate is a lot lower if one averages in both increasing and decreasing fields, rather than looking at only "mature" fields. The 4.5% rate CERA used, and the 4% to 5% IEA rate, would seem both to be on the average of increasing and decreasing fields basis. I think this approach is correct, for what they are doing. If we want to compare 2008 production on a set of fields to 2007 production on the same fields, it really is necessary to include increasing fields to the mix to compute the overall decline rate.
ace: I started in on a study (which I had to put aside for the moment) of the March EIA and IEA outlooks and zeroed in on their non-OPEC projections just as you did...and came to similar conclusions. As you said, it looks like they're setting up a "modified limited hangout" so they can slowly back into the truth. Interestingly, the text and the numbers seem to have a real disconnect. I hope to revisit that study some time soon. I'd love your input on that if you're up for it.
Hello ChrisN,
Your Quote: "...modified limited hangout" so they can slowly back into the truth.
LOL! Great concept [I agree too], but can you imagine the inside turf wars in these orgs that allowed the cornucopian groupthink to shift?
We TODers, for the most part, are non-emotional and anonymous to each other. Imagine the face-to-face discussions and the divisive, but impassioned meetings that went on behind closed doors in these orgs. I sure would have liked to owned the antacid concession--sold by the ton! Picture the lunchroom cafeteria scene-->Peakers on one side, optimists on the other!
Hi Ace,
Thanks for the update! The decline rate quoted so far definitely are higher than CERA's 4.5%. I think CERA was assuming low decline rates for OPEC., though.
Hello Ace,
Thxs for this important info--if perhaps the IEA, EIA, and USGS are now finally moving towards more realistic assessments of what is truly happening geologically--IMO, this can only help increase the pressure on OPEC and other NOCs to reveal more facts of their geology.
November '08 release date? Before or after the Presidential Election?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Hi Bob,
The US Presidential Election is on November 4.
http://en.wikipedia.org/wiki/United_States_presidential_election,_2008
The release date for the IEA WEO 2008 is after on November 12.
http://www.worldenergyoutlook.org/
Prior to the acceptance of the overly optimistic USGS report in 2000,
http://www.hubbertpeak.com/US/usgs/USGS2000.htm
the IEA had forecast in its WEO 1998 that crude oil would peak at about 80 mbd in 2013.
http://www.iea.org/Textbase/publications/free_new_Desc.asp?PUBS_ID=1244
The IEA is now doing a detailed analysis of all available data on 250 of the world's largest oil and gas fields as in Matt Simmon's Pentagon presentation Feb 19, 2008.
http://www.simmonsco-intl.com/research.aspx?Type=msspeeches
Slide 26 of the presentation says "By year-end, bottoms up supply will lead to much lower long-term supply estimates" in the IEA WEO 2008.
I don't think that the WEO 2008 will show the same chart as above in the WEO 1998 with crude peaking at 80 mbd in 2013. However, I think that there is a high likelihood that the WEO 2008 oil supply forecast will show a peak, of less than 100 mbd, prior to 2015.
For more discussion of the IEA refer to this subthread
http://www.theoildrum.com/node/3726/316233
It seems hard to imagine they will make such a big change. Of course, by then there is a possibility that oil production will already be headed down.
Right after the election would seem like a good time for such a report. I wonder how peak oil aware Obama is. Hillary Clinton is clearly aware, since Bill is.
Paulson Urges Broader Fed Oversight of Wall Street
By John Brinsley and Jesse Westbrook
March 26 (Bloomberg) -- Treasury Secretary Henry Paulson said the Federal Reserve should broaden its oversight to include Wall Street investment firms in a shakeup of the supervisory system set up during the Great Depression.
In a speech to the U.S. Chamber of Commerce, Paulson praised the Fed's decision last week to lend to securities dealers and said the policy should be reserved for times of market stress. ``Certainly, any regular access to the discount window should involve the same type of regulation and supervision,'' he said in the remarks today in Washington.
Paulson, who spent three decades on Wall Street, is finishing his yearlong review of how the American financial system is regulated. He said the Fed-orchestrated purchase of Bear Stearns Cos. by JPMorgan Chase & Co. underscores that ``the world has changed,'' and the roles of investment banks and commercial banks require regulators to ``think more broadly about the regulatory and supervisory framework.''
The Fed's role in helping to finance the rescue of Bear Stearns and the expansion of the central bank's role as lender of last resort suggest it may gain power at the expense of the Securities and Exchange Commission.
``The Bear Stearns action was a sea change,'' said Gilbert Schwartz, a former associate general counsel at the Fed, and now a partner at Schwartz & Ballen in Washington. ``The Fed should be the umbrella agency for all these institutions. The SEC is not set up to handle this.''
Congressional Review
As Paulson's speech came to a close, top lawmakers on the Senate Finance Committee announced plans to review JPMorgan Chase & Co's purchase of Bear Stearns, including the Fed's investment in illiquid mortgage securities.
Committee Chairman Max Baucus, a Montana Democrat, and Iowa Senator Charles Grassley, the panel's top Republican, wrote to the firms' chief executives, as well as Paulson, Fed Chairman Ben S. Bernanke, and New York Fed President Timothy Geithner seeking details on how the buyout was negotiated. Senate Banking Committee Chairman Christopher Dodd said he will hold a hearing next week to probe ``serious public-policy questions'' raised by regulators' role in the sale of Bear Stearns.
The Fed set up a lending facility March 17 for the 20 primary dealers of U.S. government debt to borrow money at the discount rate -- currently 2.5 percent -- that traditional banks are charged for overnight loans. In the past, the Fed has been responsible for the safety and soundness of banks, while the SEC has overseen the Wall Street firms.
`Follow the Money'
``In regulation, just like everything else, you need to follow the money,'' said David Becker, a former SEC general counsel. ``The fact that the Fed has now put up a great deal of money in dealing with an investment bank means they are going to want, and may well get, a more active regulatory role. Some of that could be at the expense of the SEC.''
The Fed lent $28.8 billion as of March 19 to the dealers, including Morgan Stanley and Goldman Sachs Group Inc. The Fed said on March 16 that the facility will be available for at least the next six months.
The SEC was created to restore confidence in U.S. capital markets in the wake of the 1929 stock market crash and the Great Depression that followed. The agency's mandate is to make sure investors are treated fairly, and it enforces rules for both companies that sell stock to the public and people who sell and trade securities.
Created By FDR
Congress gave the agency broad authority to make rules for securities firms and stock exchanges. President Franklin D. Roosevelt appointed Joseph Kennedy, father of the future President John F. Kennedy, as the first SEC chairman in 1934.
Paulson noted that the SEC invited the Fed to participate in the agency's supervision of investment banks, SEC spokesman John Nester said.
``While each of the agencies has different roles and responsibilities, together we bring our collective authorities to bear on behalf of investors and capital markets,'' Nester said.
The central bank's ``creativity in the face of new challenges deserves praise, but the circumstances that led the Fed to modify its lending facilities raises significant policy considerations that need to be addressed,'' Paulson said. ``These changes require us all to think more broadly about the regulatory and supervisory framework that is consistent with the promotion and maintenance of financial stability.''
Staring at Bankruptcy
Paulson said it would be premature to assume that the Fed will make its new lending facility permanent, calling recent market conditions ``an exception to the norm.'' Bear Stearns ``found itself facing bankruptcy,'' he said.
``At this time, the Federal Reserve's recent action should be viewed as a precedent only for unusual periods of turmoil,'' he said.
In his speech, Paulson said Treasury's review of U.S. financial regulators, will come out ``soon,'' as part of his push to streamline the regulatory system to improve American competitiveness.
Bush administration officials are working to avert a recession brought on by plunging housing prices and the worst credit crunch in over two decades. The Treasury chief said the U.S. was in a period of ``turbulence'' that will take time to resolve. He didn't repeat earlier comments that the U.S. will avoid falling into recession.
``Our economy and our capital markets are flexible and resilient and I have great confidence in them,'' he said. ``I am certain we will work through this situation and go on to new heights as we always do.''
Paulson again downplayed proposals by congressional Democrats to use government funds to ease the housing recession. Some lawmakers want the Bush administration to take more aggressive action beyond the Treasury-backed group of mortgage lenders working with homeowners to redo loan terms on a voluntary basis.
``I know members of Congress have outlined other ideas, but most are not yet ready for the starting gate,'' he said.
As long as they are going to be freaked out,
3 more points:
*Regarding comments on personal/individual bankruptcy. Didn't they recently do away with that option?
*College students might also be interested in what may become of institutions of higher learning in the scenario described.
*Including the phrase "When the trucking industry can no longer afford to pull up to the local supermarkets, local populations would discover the limitations of whatever-remained-of-local agriculture ..." would wake them up quick, IMO.
That said, it may be irresponsible to dump on them without letting them know how they can prepare themselves. Mention the Powerdown book by Heinberg regarding government level policy; and also mention relocalization movements on municipal level; and on individual level, homesteading skills as a possible solutions. For the latter, provide useful references like www.transitionculture.org and www.gardengirltv.com.
Best wishes on your Q&A following your presentation.
Thanks for your ideas.
I have discovered in the 24 hours that the target audience is really policy makers, public health officials, and medical schools, including graduate students. I have been asked to expand my talk from 20 to 30 minutes, so I will add more examples and more issues with how this is going to work out in practice - also more on the connection between energy and the functioning of the economy. I was told that the audience needs a wake-up call, so it is OK to inject some realism.
The format for this is a teleconference. The audience will be scattered around the country. I don't think it will really be set up for questions and answers, so I am off the hook, unless I give a similar talk in person somewhere.
University students, especially graduate students, have little awareness or care for energy issues. I would know because they are my peers. I strongly believe this will not change until things becomes dire.
Interesting discussion on BBC Radio 4 on Wednesday 26th March 2008 :
http://www.bbc.co.uk/radio/aod/radio4_aod.shtml?radio4/moralmaze
Panel of interested parties and expert witnesses discuss the limits to growth with special attention to food prices and the market response to such.
Gail,
Good luck with the presentation. I have a 20-year-old daughter at university and I'd like to think she could attend this kind of forum. We've talked about peak oil but it's hard for me to seem to be trying to take away her vision of the future - however unsustainable it might be - and replace it with an impending giant sucking noise when a world economy predicated on endless growth meets the reality of steadily dwindling energy availability.
On that point, I share the concern of some earlier posters about your first chart. Clearly, demand for oil cannot keep increasing as supply falls after the peak, although it will undoubtedly exceed availability. Maybe the label on the demand line should read "expectation" or "projected need".
One other point I've always found powerful is the value of oil expressed in terms of its calorific equivalent as human work. When people see what a $5 worth of gas can do compared with what a human in the UK or US will do for $5, it really brings home both the scale of our reliance on ludicrously cheap energy and how high prices are likely to go when we reach the peak.
Hi Gail,
The actuaries I know don't play Economics. They spend their time computing statistics for Causes and Effects
You are only preaching to the converted. The others never believe, no matter what.
Unfortunately, having said that, not one of us has changed our lifestyle one iota. We all make token concessions by turning off an outside light or cutting a block off our commuter route to save energy.
We have so cleverly crafted our present system that it is totally "failsafe" (Meaning change will not be allowed to happen, no matter what)
I ask you with tears in my eyes, How can a guy change anything. Give up his new 150 HP Super Efficient Hybrid energy guzzler for a bicycle when he is paying a fortune for it. How will he get the kids to school or collect the groceries, to say nothing of looking good to his boss and his neighbours. How can a guy change his family from a four bedroom house, 40 miles out, when both he and his wife pay half their salaries for it and it was a bargain at half a million. The three kids have to stay somewhere while they go through school.
How does he/she change his/her high-testosterone job, when he/she is running faster and faster just to stay in the same place. If he/she stops for an instant the crocodiles will catch him/her.
Now it just so happens that I have lived long enough to remember the "Good old Days". I was not rich by any measure, yet, I bought my fist brand new car for cash, they gave me 6 months to pay, (I paid in three). I bought my first house for the equivalent of 9 months salary.
My tragedy is that as I ran faster and faster, I actually fell further and further behind my destiny.
We are all in this together but sadly, nobody actually wants to change anything. We are all hoping against hope that the Predictors are wrong. Remember, when JC arrived to change things they hung him out to dry.
Starting at the Presidency and working all the way down to Mayors and Coucillors and ending up at all Corporate Officers, they are not going to allow anything to change and especially not before they have had their complete share. Mugabe being the quintessential example of this principle.
Individually and collectively we would sell our mothers to make sure our shares continued to go up (Bubble after bubble, recession after recession).
Each one of us, when we join a Company's structure desperately want to progress to a point where WE can get the options. We will lie, cheat, and steal (Enron, Nortel, Bear Stearns and a hundred others) to keep our investment growing.
I do not believe any of our generation has the capacity to intellectualize what is being predicted. We nod and agree and carry on as usual. we know that God and technology will combine and save us.
Population growth absolutely guarantees that the Prophesy will come true, and that there can be no solution on our Finite Planet.
Why do we keep pretending that "Their" pre-defined parameters are a solution.
Graham
I think probably everything comes as a crash, and you don't have a choice but to change.
My favorite writer about collapse is Dmitry Orlov, who lived in the Soviet Union at the time of its collapse. This is a link to a recent article called The Five Stages of Collapse. Of his five stages, financial collapse comes first.
This is a link to a presentation he gave some time ago called Closing the Collapse Gap: The USSR was better prepared for collapse than the US. I heard Dmitry give this presentation in person. The audience was practically rolling in the aisles laughing. He has really good insights as well.
He is now writing a book as well Reinventing Collapse.
Gail, your presentation overlooks both the potential for improved efficiency in the economy (no discussion of GDP relationship please), and of technology. In a very few years we can run our transportation economy on less than 1/2 of the energy used today, and making the conversion will create jobs and benefit the economy, to say nothing of the benefit of spending dollars domestically for "negawats" or negajoules rather than externally for megajoules. See
http://video.energypolicytv.com/displaypage.php?vkey=2632813f9e35f4ba53d... .
A switch to renewables would give more than another factor 2 gain in primary energy needed to operate our present economy if we switched say 80%. Instead of 100 quads we could maintain our present living standard on <25 quads.
A lot of people discount Amory Lovins, but he has spent more time in creative study of energy/economy/technology than anyone else alive. He is an infernal optimist. He once believed that compelling logic would make changes happen, and because that belief was wrong, the changes he espoused and expected are a decade or so late. However price and scarcity will compel what logic couldn't and the technology has only improved in the meantime.
I have worked with an RMI team implementing energy efficiencies in industry, and their ideas work and give the expected paybacks.
We can conserve, and will in response to crisis. From 1977 to 1985 the economy grew 27% while oil use declined 17%. We have a valid precedent. Conservation buys time for efficiency, and efficiency buys time for alternatives.
From your responses it seems that you have written off such possibilities, without examining the possibilities and without experience of what can be done. The result is that you present a boiled frog scenario. We are not going to continue to get a slow ratchet. Soon it will be real crisis, and that frog is going to jump out of the pot. The technology, knowhow and policy options are all well defined and available. Most of them are being applied at some scale, and the scale is increasing. We can and will respond very quickly.
You need to take these other factors into account rather than just waving them away. Murray
You guys are morons. If you consider GDP in terms of oil, GDP=(oil intensity)x(oil consumption). Tell me how reducing oil intensity reduces GDP. It would reduce more per unit, but it starts at a higher place.