Energy Tomorrow interviews David Murphy on Economic Growth

At the most recent ASPO-USA conference, I gave a presentation as part of a panel hosted by The Oil Drum. The subject matter of my post was taken from a recent paper developed by Charles Hall and me on peak oil, net energy, and economic growth. A much abridged version of the paper can be found in this post.

After the conference, Jane Van Ryan from the American Petroleum Institute (API) asked to interview me for her weekly podcast for the Energy Tomorrow blog. You can listen to the interview by clicking below, or alternatively, I have copied the transcript of the interview below the fold. The interview is 15 minutes long for those who would like to listen.

The Oil Drum recognizes that API (and hence Energy Tomorrow) is funded by the oil and gas industry. But the interview here relates to my research, which is not funded by such interests. I think the interview serves a useful purpose, because it makes my work accessible to a wider audience.

In the interview that follows, items with no name attached are made by Jane Van Ryan of API, for the Energy Tomorrow blot.

00:16 Last week, I had the pleasure of attending the Association for the Study of Peak Oil & Gas (ASPO) National Conference in Washington, D.C., where professors, geologists, economists and physicists gathered to discuss the possible repercussions of the world's reliance on oil and other fossil fuels. One of the speakers, Dave Murphy, a graduate student from the State University of New York, presented a paper about oil and its relationship with the U.S. economy. Dave is on the telephone with us today to explain his findings.

00:52 Dave, before we begin, I need to make it clear to our listeners that your views do not represent those of API's and your conclusions are those of you and Dr. Charles Hall, who coauthored the paper with you. I also want to mention that you're contributor to The Oil Drum, which is a very well respected blog that deals with the issue of peak oil. Can you provide a brief explanation of peak oil to our listeners?

01:19 Mr. Murphy: Peak oil is a concept that has been around since 1956 when M. King Hubbert published a paper on the topic. In very basic terms, it just says that for any nonrenewable resource, like oil, coal or natural gas, production is going to begin at zero and end at zero and at some point reach a maximum. It's really about flow rate. The idea of peak oil is that at some point on earth we will be producing the maximum amount of oil per day that we ever will. A lot of the time the message of peak oil gets muddled and the focus is driven on a specific date, and that's not really what the peak oil movement is about. It's just about measuring when, in general, oil production will reach a maximum, not necessarily a specific day.

02:14 I know that some people associate the reducing flow of oil to geology, but then there are others who associate it with energy return on investment (EROI). Can you tell our viewers what that means?

02:28 Mr. Murphy: EROI is similar to its economic analog, which is return on investment (ROI). The idea is that you have a cost of getting a resource and hopefully you input that cost and you get some oil out. EROI is simply the energy produced from an energy extraction process divided by the energy you put in. We add up the cost of building the rig, the diesel fuel used on a rig, and what you get is a ratio of energy out divided by energy in. That number is essentially a measure of quality. It's an efficiency calculation, but you can understand it as a measure of extraction and how difficult that extraction process is. Historically, if you look back at East Texas and see a lot of the big oil fields in the United States, the EROI was very high. Today, it's obviously a much more complicated industry. For example, deepwater platforms cost billions of dollars and the wells are much deeper. The energy input has grown a lot. In general, EROI is this measure of extraction quality and how that changes over time.

04:10 Let's turn to your paper, which asks a critically important question, whether a return to a growing economy is possible in light of concerns about peak oil and the dwindling supply of oil. One of your findings was that affordable energy is very important to the economy. Can you explain that?

04:32 Mr. Murphy: We looked at the economy over the past 40 years. Before I get into that, when I talk about a "growing economy," I'm specifically talking about growing GDP, which is the most popular measure of the economy today. I'm really talking about growing GDP 2, 3 or 4 percent per year over the long term. We looked to see the causality between energy and economic growth and we found that oil is the primary driver of economic growth. We live in the age of oil. It is the most important energy resource for the economy currently. We looked at the supply and the price of oil and our research shows that it's not just oil that is essential to our economic growth, but that oil has to be provided at a cheap cost. I'm talking about oil, but obviously coal and natural gas are important as well. Energy, in general, has to be affordable for economic growth. We looked at the last 40 years and there are a lot of figures I could go over today, but most importantly, every major recession, including 1973, 1980 and 2008, was preceded by a spike in the price of oil. Granted the first two were caused by geopolitical events, but a spike of oil nonetheless. As the price of oil increases, the cost of pretty much everything in the economy goes up because oil is so ubiquitous. It's used to make plastics, pharmaceuticals, you name it. Oil is involved in the manufacturing, industrial and transportation sectors. Oil prices go up, discretionary income goes down, people stop spending money and that inhibits economic growth. That's the big finding from our research.

07:00 I think this goes back to an earlier statement you made that many people believe the easier oil has all been found and that the remaining oil is going to cost more to produce. What does that mean for the economy based on your research?

07:14 Mr. Murphy: This is one of the conclusions we came to. I have a graph where EROI is on the x axis and price is on the y axis and essentially shows that the low EROI resources cost less money to produce. Our research shows that the places where we're finding oil most recently, for example, in 2005 more than 50 percent of the oil discovered was in ultra deepwater areas, and are the areas that cost a lot of money. The price needed to maintain production in these areas is indicative of the average price of oil during recessionary times over the last 40 years, which is around $60 per barrel. If you average the price over every expansionary period from 1970 to 2008, the price of oil is roughly $37 per barrel and that is a lot cheaper than today's prices and the cost of production in the areas where we're finding oil, which is above $60 and some of the estimates for oil sands production are around $80 per barrel. Clearly, where oil production is trending in the future is in a higher price environment.

09:20 Oil prices are hovering around $83 per barrel today. How would you describe the situation we're in right now?

09:27 Mr. Murphy: Tenuous is how I would put it.

09:30 At the ASPO conference you also said that this recession, the one that we've just been through and that some experts say we're climbing out of, is quite different than previous recessions because the EROI is low, and you're indicating that with what you're saying about prices. How is that going to affect economic growth?

09:53 Mr. Murphy: I find it very hard to believe that we're going to have economic growth like we've had over the last 40 years for the next 40 years because there's a perfect storm in this last recession of maybe reaching peak oil, but nonetheless we were in a restrained oil environment for four years. Whether or not the peak occurred, let's forget about that question. Let's just think about whether oil production was constrained, meaning that demand was outstripping supply. Then we ask whether we can produce more oil. Yeah, we're producing more oil, but it's from these high costs areas. Even if we can increase physical supply, it's going to necessitate a really high price. The outlook for growth in the future is going to be different in some way than the past 40 years.

11:14 What do you think about what the administration and Congress are considering? They've been looking at policies that would raise the cost of energy through taxes or environmental regulations. How could that impact the economy?

11:27 Mr. Murphy: There's two ways to look at the situation. First is from the objective standpoint. Higher energy prices, specifically oil, have led to recessions in the past and there's no reason to think that we can pull out of the current recession if we taxed oil so that the price is above $100 per barrel. Higher oil prices do inhibit economic growth. The other side of the coin is whether or not there are larger concerns such as climate change and if the powers that be deem those concerns to be more important than economic growth in the short-term or long-term then maybe the taxes are warranted. I'm not one to make a decision on that, but I would probably go another way and say maybe we need to start looking at a different metric of economic performance. GDP is a measure of production within the economy; it's not a measure of human well-being. If we can somehow get it through that we don't necessarily need to pursue economic growth every year, maybe we can have the best of both worlds.

12:44 That's an interesting observation. Let me ask you one final question. There are some observers that say higher costs are necessary to pave the way toward new forms of energy. Based on your research, substituting one form of energy for another does take time. Can you tell our listeners how long you think that takes?

13:03 Mr. Murphy: It takes decades. We're talking primary energy sources. There was research done by Marchetti in 1977 and he looked at substitution among different forms of primary energy, whatever the primary energy source was at the time. He found that it takes decades, 50 or 100 years, to substitute for a primary energy source. Having to substitute out the infrastructure for our oil economy will take decades. The Hirsch Report in 2005 concluded the same exact thing. In general, alternative energy sources have been higher priced than the fossil fuels. A higher fossil fuel price will allow for more easy substitution, but I don't know how that's going to happen.

14:28 And there's a human cost there, too, in terms of jobs and affordability for American consumers.

14:36 Mr. Murphy: There are costs with doing anything. It's clearly going to take a long time. There's not an overnight solution to this.

14:52 Very interesting discussion. Dave Murphy, thank you for sharing your research with us today and for joining us on Energy Tomorrow Radio.

Thanks! It is interesting that Jane Van Ryan chose to interview you for Energy Tomorrow Radio and her blog.

Jane told me that many years ago (long before she started working at API), she interviewed M. King Hubbert. So she is quite knowledgeable about some of these subjects--more than one might expect.

Thank you for posting this interview. I did have the pleasure of meeting Ms. Van Ryan at ASPO 2010.

Be conscious that one of the main goals of the American Petroleum Institute is to shape public opinion through fronts like Energy Tomorrow to support continued billions in annual tax breaks and subsidies to fossil fuel companies. The statement at 12:44, "That's an interesting observation," verifies Ms. Van Ryan's / API's intentions.

The policy of decades of billions in tax breaks and subsidies to the fossil fuel industry in the United States has delayed the inevitable long enough. It's time we take one for the team, pay the piper, and dive into the Post Carbon Era head first.

Diving into the post carbon era head first could very well mean a huge number of deaths. Some think this is a good idea, but others are less certain about it.

We do not have any evidence that the world could support a population of 6.8 billion people, without fossil fuels.

I would refer you to the ASPO-USA site

which is one of a number of "head first dives" into the post-carbon era that will NOT involve large numbers of deaths. In fact, one of the priorities of the plan is transporting food long distances with just a few drops of lubricating oil.

A program that I suspect API will not support.


It would take a huge amount of oil to put your plan into place, and to maintain it. Railroads require oil in order to be built. Electricity requires oil in order to be maintained (for example, workers to get to work, asphalt to maintain roads, oil for transportation of parts from China, oil to operate trucks and helicopters maintaining transmission lines). The financial system, which is required to make any of these things work, requires growth, and with declining oil supplies, it will run into huge debt default problems.

Railroads require oil in order to be built.

98% of the US track miles were built by 1910, the dawn of the Oil Age. Many of the tunnels and bridges in use today were built before 1910. So clearly not true.

It is however, easier to expand, improve and electrify railroads in the next few years, when oil is still relatively abundant. So rather than support, say, Suburban commuting, pleasure boating, power lawn mowing and vacation travel with declining available oil, using that oil to build multi-century non-carbon transportation systems seems a MUCH better priority.

But one that the API is unlikely to support.

Electricity is not as vulnerable to oil shortfalls as you imagine. But I could understand those that support solar PV along the tracks as a back-up, just in case.

It would take a huge amount of oil to put your plan into place, and to maintain it

BNSF spent slightly over $2 billion to double track and improve the Transcon line, 2,217 miles from Los Angeles to Chicago. *IF* every penny of that $2 billion was spent on crude oil, I would not call $2 billion in oil "a huge amount".

In reality, a very small amount of oil (less than used to mow lawns) was used by BNSF.

Railroads were maintained for almost a century without oil.

Transmission lines along rail ROWs can be maintained by rail.

Best Hopes for Realism,


PS; The most impressive railroad bridge in the USA, the Huey Long in New Orleans, was built in the early 1930s. As far as financing:

on November 5, 1932, the bonds of the Public Belt Railroad Commission were guaranteed by a complex agreement between the Southern Pacific Railroad, the City of New Orleans and the State of Louisiana.

This was a time of great financial crisis.

I suspect that Warren Buffet can find capital for BNSF, and Bill Gates for CN railroad.

Forth Bridge - built in 1890 . . . we can do it without oil!


AlanfromBigEasy -

While RR construction and maintenance activities do require some oil (at least as currently practiced), I think it is fairly easy to demonstrate that the amount of said oil is but a tiny fraction of the huge amount of oil displaced by switching from diesel to electric locomotives. Hence, electrification of rail transport produces a very large net saving of precious petroleum.

Furthermore, many of industries upon which railroads are dependent for materials and components, such as the iron & steel industry, cement industry, and heavy manufacturing, are actually relatively light users of oil. They may use huge amounts of fossil fuel but most of that fossil fuel is coal and natural gas, not oil.

So what we have here once again is a bit of disinformation regarding the 'essential and irreplaceable' role that oil plays in certain spheres of activity. Interestingly, this has also been repeated ad nauseam with regard to wind and solar, both of which use a miniscule amount of oil for construction and maintenance in relation to the total amount of fossil fuel displaced over their normal operating life.

I also see nothing contradictory or inconsistent in expecting that as oil becomes more expensive and less available, its usage will be more and more confined to essential functions, one of which might logically include the maintenance of wind, solar, and nuclear power generating systems. The amount so consumed is so small compared to our current total oil consumption that I don't think it beyond the realm of possibility that such oil could be gotten from a variety of biomass without putting undo strain on our agricultural system, as ethanol threatens to do.

This is not an either/or type of thing, but rather a matter of degrees. Something that uses a tiny bit of oil may still be oil-dependent in the strict sense of the term, but that is no reason to dismiss it out of hand as being 'non-sustainable'. If it displaces oil and other fossil fuels, it is a good thing and will make the transition to a less energy-intensive world more bearable.

I agree.

I have a hard time projecting when US oil production will be <1 million b/day (past 2050) and we can do a lot of critical work with 1 million b/day (current US production is >5 million b/day). Basically, I see 1 million b/day for the USA as when the sustainable crunch begins to bite hard. Perhaps ethanol (from sugar cane, distilled with solar & nuke waste heat ?) can meet that need.

Electric rail still needs a bit of lubricating oil, which comes from fossil sources today. Some would say that makes it unsustainable.

But vegetable sources (jojoba for example) are viable alternatives as are sperm whales (whose numbers should rebound by 2085).

In other words, post-Peak Oil will crunch typical consumers badly, but need not significantly affect critical uses of oil.


I agree something must be done, but trains and trams sounds like a large step backward and a huge adjustment for my fellow Joes and Janes that will ultimately prove extremely unappealing.

If one has to spend two hours getting their kid to a Saturday morning tennis comp, well...

Big step backwards.

Of course you are right if it is your family that has to take the light rail – but under the right circumstances you could use it to go to the practice field from your home. The right circumstances are that both locations are on the line.

Now if all the freight in the US were to use electric rail, thus saving a bundle of oil, your family might be a beneficiary and be able to use the family car for such trips.

Mind the fact that it all depends on where in the oil decline we are and how long it takes to get there, and how we use our resources on this path.

I prefer to think of it as a step towards our destiny, and it is not going to be going back to the days of cheap gas – they are not coming back. Lets electrify the rails and build a few nuke plants in strategic locations ( and get it done sooner than 50 years.)


double post

At the end of the day essentials are food, shelter and security, followed by healthcare (and education?).

Tennis comps are a long way down the list

Golf is even further down the list so maybe Peak Oil will have some plus points!

Like I said, a backward step (shouldn't we driving hover-cars by now?). Though, you're probably right about golf! :)

Thanks for pressing the RTS button (return to sanity) on all this, Alan.

Of course, a transition off from Oil can be made, it is just not just grand doomerific drama. And it does not take a century to get there. If you look at the path that brought us here (1900 mostly all horses to 1940 mostly all oil), a 40 year transition to electric transportation is very reasonable -- and you are very correct -- it does not have to some doomer crisis on the way either.

Electric trains can build electric tracks and electric machinery can build electric roadways. Not exactly rocket science. And there is more electricity available and coming on line than we presently know what to do with. For the recalcitrant doomers -- wash your eyes out with this >>>

It does take a lot of planning and a lot of hard work. I came to the observation a few years ago that some folks like to talk sh!t and some folks do sh!t. This is mostly a doing thing.

How do declining oil supplies equate with huge debt default problems and how does the financial system require growth?


One example is: declining/stagnating oil supplies push the prices of oil up, leading to increasing cost of living and more defaults. This happened from 2004-2008.


Someone can make a case for marginally more defaults due to rising oil prices, w/ a maximum increase in cost of ~$.3 trillion per year and an average increase of ~$.15 to ~$.2 trillion per year from 2000 to 2008, but it was dwarfed by the ~$1 trillion per year drop mortgage debt (going slightly negative during the recession) on top of the impact from the change in other types of debt.

The increase in defaults was mostly due to trillions in poor loans/mortgages and a housing bubble (Really just a big debt bubble that caused other bubbles IMO) and to a smaller extent due to rising oil (and other commodity) prices. In order to gauge the impact from high oil prices someone would also need to eliminate the increase in oil prices due to greater effective incomes in order to determine their impact on defaults due to a COL increase since the high prices were to some extent due to commodities bubble.

Economies other than the U.S. were slowing down as oil increased in price even before the housing bubble popped.

I don't believe in single causes for most things so I'd say it was a combined effort. (Plus the very nature of bubbles, in which the forces that retard further expansion eventually exceed the forces pushing for expansion.)

It was certainly a combined effort, but oil and other commodities still played a small part in that compared to other stuff like the huge drop in available credit/loans. While an extra ~$100-$200 billion per year in oil costs is significant, the ~$1000 trillion per year drop in lending probably did more to start the recession than higher oil prices did. does the financial system require growth?

Well, it would take a book to fully explain it but our financial system is based on money, mostly borrowed money. Almost all construction has a "construction loan". When money dries up, the economy dries up. When you have negative growth the money supply dries up, no one makes loans. The economy shrinks. People are laid off. The population keeps growing meaning the unemployment rate rises. And if the economy shrinks even more, then more people are laid off, less money for in circulation, fewer purchases meaning even more people get laid off... and on and on it goes.

Ron P.

I have been looking for models of what happens to unemployment during contraction and the best I could find (so far) is Peter Victor's work at York University for the Canadian economy. In his model he slows growth then stops it completely by 2015. The result:


One can only imagine what happens with actual economic contraction.

I used that slide in my talk at ASPO, which I believe outlines the future of our civilization (14 minutes).

Also, don't forget the effect of our debt overhang. In one of his papers in Energy Policy Hirsch calculates that the economy would shrink at roughly a 1 to 1 ratio as oil declines but he does not include the exacerbating impact of debt. I think closer to 5 to 1 is more likely at the beginning and a cascading stock market failure will temporarily bring it higher.

Of course the other problem is that under no circumstance will we see the mirror image of the oil production curve. Between the hoarding, resource wars, difficulty getting the remaining oil and the net export problem, the "perceived" oil production curve to an oil importing country is more likely to look like this:


The net exports problem is known well here but the wider world has no clue about it:

Great Oil Squeeze

All that combines to leave really only one open question: how much does the world economy contract before it reaches some sort of "stable" state?

Economy vs Renewable Energy

Well, it would take a book to fully explain it but our financial system is based on money, mostly borrowed money. Almost all construction has a "construction loan".

You don't need a book, just a source.! It sounds very unlikely to me, unless you're comparing debts that have year or decades to be paid off to GDP in just one year, but that's not a fair comparison. It's like people lumping entitlement spending in the future together and ignoring income from taxation. In the event that there isn't sufficient income from taxation then the entitlement spending will be cut proportionally, so either way it's a non-issue. Either we have enough to pay for whatever programs and we do so, or we don't and we scale them back.

When money dries up, the economy dries up. When you have negative growth the money supply dries up, no one makes loans.

The money supply can move independently of the economy. When we have negative growth we see a drop in GDP/productivity by definition and probably more unemployment, but the money supply can grow or contract during that time. It depends on the actions of whoever is controlling the money supply. As usual an increase in the money supply relative to other countries will make each unit of money worth proportionally less, and vice versa.

The economy shrinks. People are laid off. The population keeps growing meaning the unemployment rate rises. And if the economy shrinks even more, then more people are laid off, less money for in circulation, fewer purchases meaning even more people get laid off... and on and on it goes.

Well, only if you're a cornucopian, well at negative one at least. A cycle like that will eventually lead to no one being employed and stop there. It won't go on and on after that because we can't have negative employment. ;)

Realistically, the economy would stabilize at some level greater than no employment, although where that is depends on the specifics.

Roflwaffle, please read Aangel's post above and Gail's post below. They explain it very well. Aangel's post explains what happens when the economy contracts, I.E. no growth. Or, you can google 'debt based economy' and get about 7,960,000 hits. This is just one of them:

Debt based economy explained

Our money is entirely create from debt. If ALL debt was retired in our country, there would be NO money. Deflation is defined as a reduction in the credit/money supply. Everytime a loan is created it increases the money supply. Once that loan is retired, the money that was created is also retired.

This would all be different if the money was actually printed. But only a very small fraction of money created is actually ever printed. Only the money needed to carry our day to day transactions is printed. Near ALL of our money is nothing more than book entries, or today, a computer entry.

Our fiat debt based money system REQUIRES inflation. If you go and buy a house on debt, at first you may have a hard time affording it. But due to inflation your wages increase and after a few years your mortgage payment becomes less and less of a percentage of your income. Same with the government. They borrow, get in over our heads, but they know that due to inflation their revenues will increase. So this HUGE debt, in theory, becomes less and less percentage of revenue.

Really Roflwaffle, this is all very elementary and economists have been explaining it for decades. I am a little surprised that anyone would question it in these days.

Another great place where this is explained in great depth is Chris Martenson's Crash Course It is a little over three hours long but I have watched it twice. It is a real education. This is the book, or book length video that explains it very well.

Ron P.

The author of the information in the first link you posted seems to be a bit confused. They are swapping what fractional reserve banking means with what fiat currency means. A FRB system tends to inflation because the interest paid on the loan isn't destroyed when the loan is paid off, which slowly increases the money supply (inflation). Technically if no loans are made in a FRB system there would be no inflation, but that's a trivial example.

All a fiat currency does is allow all goods to move in value relative to each other, as opposed to a currency backed by a tangible asset like gold or silver, where everything is linked to however much of something there is. People can devote a substantial portion of their life looking for more of whatever is the standard in order to become wealthy, generally to the detriment of society as a whole unless society happens to really really need whatever the standard is, and even then most individuals aren't the best at planning so it's still detrimental. While countries may tend to have both fiat currencies and FRB systems because they both have advantages, they are not the same thing and they do not have the same impacts on an economy.

In terms of the last paragraph quoted, generally speaking inflation does not erode debt because for the most part lenders tend to accurately predict what the inflation rate will be, and include that in the interest they charge people. Some lenders might no be very good at doing so, but they won't be lending for very long if that's the case. Take today's interest rate on home loans of ~5%. The inflation rate is only ~1%, so a bank making that loan has a 4% margin for increased inflation over the term of the loan, and whatever is left over is profit.

Really Roflwaffle, this is all very elementary and economists have been explaining it for decades. I am a little surprised that anyone would question it in these days.

Economists may have been explaining it for decades but it appears that most of the individuals in this thread either didn't understand what the economists were saying, are just making some of this stuff up as they go, or are citing others who are doing one or both of those. I haven't looked at the second link, but I imagine it's more of the same.

Either we have enough [money $$] to pay for whatever programs and we do so,
or we don't


Scientists dug up a bank of dinosaur bones and were stunned to discover that there was no money back in those days.

Which leaves it still as an unsolved mystery: where did all the money come from?

Dinosaur bones, clearly! ;)

where did all the money come from?
Dinosaur bones, clearly!

Well that's your soup-cooked bone of contention.

My "secret" theory is ...

and shh please don't tell anyone ...

Is that we later evolved apes conjured it up out of sheer nothingness.

Bubble, bubble, toil and Ponzi scheme trouble
Happy Halloween

These are illustrations I often use:

The problem is that in a shrinking economy, there is not enough left over for "everything else", after debt plus interest is paid, so there tend to be a lot of defaults. Our financial system cannot handle such a situation. It is based on debt, so it assumes that, on average, most folks will be able to repay their loans. But as oil supplies decline, this becomes less and less the case.

We can see evidence of this happening in practice in a number of different places:

OECD (that is, the developing countries) hit a peak in the supply that they are able to purchase in 2006 (because total oil supply was flat, and China and other developing nations were increasing their supply) :

That is precisely the time all of our debt default problems started, and the drop in home prices related to the subprime loan problem started:

Now, when we look at the PIIGS in Europe (the five countries with the most problems with debt), they are precisely the five countries that get the largest percentage of the energy from oil:

Greece is in the worst financial condition, and is the country with the highest percentage of its energy consumption from oil.

And there is the academic paper called This Time is Different by Reinhart and Rogoff. It looks at countries that have defaulted on their debt over a very long period--from the 1500s on. The study was not set up to look at growth, but the authors comment:

It is notable that the non-defaulters, by and large, are all hugely successful growth stories.

It is interesting to note the position of Sweden (SE) on the oil use graph. Lowest of any EU nation that was not formerly Communist, and best economy in the EU.


Gail - Nice work as usual. But I'm almost embarrassed to ask a such a simple question compared to the complex postings on the economy re: debt and growth. The premise: the economy grows and is able to pay off the accumulating debt. Given we've had periods of booming economic growth in this country when have we ever paid off any of the debt? IOW at what point in the last 30 years, let's say, has the US debt declined? I don't follow such numbers too closely but my impression is that the US has not reduced debt in a very long time...if ever. We pay interest on the debt but otherwise we continually refinance the debt as the older paper comes due. So when I see you pie chart I wonder if you're really just focused on the interest payment and not the balance. I also understand the concept of inflation reducing the value of the monies we pay over time. But if I do understand correctly the current dynamics, in addition to borrowing for new spending, we're also borrowing to pay the interest payment on our debt. Wouldn't that go a long way towards negating any benefit from inflation? Additionally, since we're making installment payments and not repaying one big balloon note at the end, doesn't that also diminish the value of any inflation discounting?

Inquiring (and simple) minds would like to know.

Rockman, I think you are laboring under a false assumption. Gail's pie charts represent private debt and commercial debt, not the national debt. Private and commercial debt must be paid back, or at least most of it, else the economy collapses. That is what the sub-prime mortgage mess is all about. Private and commercial loans is what the economy runs on. When they dry up, or are not paid back, the economy collapses. The government can simply push their debt forward, forever, into the future. People, banks and mortgage companies cannot do that.

Ron P.

The government can simply push their debt forward, forever, into the future.

Ron, that's a bit strong of a statement, don't you think? You're sounding like a conventional economist ;-)

(Please notice the wink.)

These are illustrations I often use:

The problem is that in a shrinking economy, there is not enough left over for "everything else", after debt plus interest is paid, so there tend to be a lot of defaults. Our financial system cannot handle such a situation. It is based on debt, so it assumes that, on average, most folks will be able to repay their loans. But as oil supplies decline, this becomes less and less the case.

How does our financial system have trouble handling debt defaults? Creditors certainly have trouble with them, but the financial system as a whole will not fall apart if debts are not paid. We had a huge market bubble, supposedly (Well, kinda. With any market correction the point is that the assets were never really worth that much in the first place, so "losses" is something of a misnomer) in the tens, maybe hundreds of trillions of dollars worldwide, much bigger than the impact of rising oil prices, and when it popped the economy still kept on running. With any bubble there will be a correction down sooner or later, but our financial system is robust enough to tolerate it. Even if we had the banks collapse the worst we would have seen according to most accounts would have been a second great depression.

We can see evidence of this happening in practice in a number of different places:

OECD (that is, the developing countries) hit a peak in the supply that they are able to purchase in 2006 (because total oil supply was flat, and China and other developing nations were increasing their supply) :

That is precisely the time all of our debt default problems started, and the drop in home prices related to the subprime loan problem started:

Given the magnitude of different influences on the economy, I think it's much more likely that a huge debt bubble in the tens, possibly hundreds of trillions worldwide caused the recent economic slow down, and naturally the speed up prior to the bubbling popping, as opposed to spending a few trillion more on oil.

Granted, this is the oil drum, so I can see why people would want to look at anything from the perspective of oil, but we need to keep an eye on the magnitude of different influences and make reasonable statements based on the facts. In the states mortgage debt outstanding increased by ~$8.5 trillion in the eight years before the recession, which was an increase of ~$7 trillion compared to the eight year period before that (mortgage debt outstanding only increased by ~$1.5 trillion over that time period). When comparing the same time intervals, the increase in oil prices only accounted for a ~$1.5 trillion increase in costs. I think it's fairly likely that cutting an additional ~$1 trillion per year in credit from the economy had a bigger impact than increasing oil prices leading to an additional ~$.2 trillion per year in costs. They were both part of the picture, but realistically the credit bubble had a lot more influence.

Well, I guess BAU folk have a problem then, don't they?

Watching people cling to a dysfunctional and sinking system at all costs in lieu of at least trying to think outside the box is quite depressing.

Electricity requires oil in order to be maintained (for example, workers to get to work, asphalt to maintain roads, oil for transportation of parts from China, oil to operate trucks and helicopters maintaining transmission lines)

I understand where you are coming from Gail, but I can't stand by when someone claims that Electricity requires oil in order to be maintained No, it does not! And parts from China for helicopters aren't necessary either.

BAU does require oil for it to be maintained, any chance you might want to start thinking in a constructive way about what kind of world we are going to be living in? I'm betting we will still have electricity and trains and we will be building a lot of the infrastructure for it without anything from China. Perhaps we will have fewer financial services and bankers to go along with them. I don't think that would necessarily be a bad thing.


In principle I believe you and Alan have the best of the oil and railroads arguments; but your arguments are only valid in my estimation if you are looking at a fairly long time frame.

In the short to medium term, Gail wins hands down.

All or very nearly all of the existing stock of maintainence and construction machinery and equipment is oil dependent, and virtually the entire supply of skilled labor is accustomed to this and only this equipment.

My own personal wild axxed guess is that it would take a wartime type effort and an absolute minimum of ten years or longer to make a good solid start on changing over to alternative machinery and labor practices-and in the world of practical politics , there is not a snowball's chance on a hot stove of that effort being made-not until it is too late for it to succeed.

So as a practical matter, Gail probably has the best of you guys, on reality points.

But for what it is worth, I believe that the oil needed to build and maintain railroads will be available for as long as necessary, so long as we have stable govt, democratic or authoritarian.

Assuming that we are entering an era of increasingly scarce and prohibitively expensive liquid fuels,anybody reasonably well acquainted with our current culture and the lessons of history must necessarily conclude that we are at best headed for a period of extreme austerity and full bore govt interventions into the economy intended to achieve a new, stable, sustainable(in the short term at least)low energy economic model.

It seems perfectly safe to assume that such an activist govt will do whatever is necessaery to make sure the railroads are maintained and expanded, no matter the cost , if it is physically possible.If that means shutting down air travel and putting a five dollar a gallon tax plus a draconian ration limit on gasoline purchases, such policies will be enacted.

There won't be any alternative-other than collapse.


Well this is what Gail is saying:

It would take a huge amount of oil to put your plan into place, and to maintain it. Railroads require oil in order to be built. Electricity requires oil in order to be maintained...

You say Gail has us beat...

So as a practical matter, Gail probably has the best of you guys, on reality points.

But for what it is worth, I believe that the oil needed to build and maintain railroads will be available for as long as necessary, so long as we have stable govt, democratic or authoritarian.

Well, I think that you and Gail can't really have both of those cakes and eat them too!.

And what you say about the available alternative pretty much nails it for me:

There won't be any alternative-other than collapse.

Which is precisely the reason why I think that whatever the cost of transition It must be attempted now. BTW I don't consider a 10 year time frame a long time nor do I think that an all out WWII type national effort to do the job is an unrealistic expectation.

I have no idea what the future actually holds but I'd sure as hell like to give my best shot at trying to prove the naysayers wrong... if nothing else I feel I owe that effort to my son.

In any case I don't think this is the time to be investing in Xbox games for instance...
This kind of activity uses up a lot of oil too. I think its time for our society to grow up and make some choices! If we can afford this crap than we can afford to build electric railroads!

New Xbox add-on aims to be game changer

Microsoft's cutting-edge Kinect gaming controller is its riskiest, most ambitious move in years. 'Big, big deal,' says CEO

I think we have bigger fish to fry right now, let's get on with it! We can no longer afford to have a society where 30 year olds are still acting like they are in Kindergarden.



Back atcha Fred,

I meant that Gail has you beat in terms of the short to medium term time frame, but you win in terms of the longer term time frame.Since the crisis seems to be a short to medium time frame problem in terms of when it will arrive, and thus necessarily when it must be dealt with,using current stocks of equipment, and currently trained workers, I give it to Gail on points.

But IF Gail believes (I am not sure exactly what she believes in this respect)that sufficient oil will not be available to maintain essential infrastructure such as water, sewer, electrical grid, most highways, and railroads, then I disagree with HER-assuming that we are lucky enough to continue to have a stable govt.

If the govt is stable under the circumstances that will prevail, it seems perfectly obvious to me that it WILL NECESSARILY be a powerful, autocratic govt, possibly/maybe probably authoritarian in nature.

Such a govt will do whatever is physically possible to maintain itself in power-banishing commercial air travel for instance to free up enough oil to build some railroads would be a step roughly comparable to prohibiting the manufacture of automobiles for sale to the public during WWII.

Bau is finished imo, but I do not see any reason why we cannot survive peak oil as a society , at least here in the states, by going to a controlled wartime type of economic footing.

So as I see it , Gail and I aren't trying to eat cake-not the same one, at least. ;)

Unfortunately my scenario looks more like poor and scanty porn pone than cake to me. :(

As long as there is available oil, critical uses will get oil. I agree with that.

It is easier, starting from where we are today, to do tasks with oil. I agree with that.

US oil production is >5 million b/day, and over 1 million b/day is from on-shore (or very shallow off-shore/swamp) stripper wells.

1 million b/day should be enough to give something to agriculture and meet other critical needs (if the military takes a severe diet, i.e. like Swiss bicycle regiments).

If need be, rail construction and maintenance could shift to a high labor - no oil mode and still get the job done.

Workers would not drive, as Gail supposes, an ICE to work, but would bicycle, walk/hike, take electric trains & buses and a few would take horses. If you can't get to work, no job. Someone else will be waiting for the opportunity.

At 5 million b/day, oil could be used for a much wider variety of tasks. Pleasure boating, vacation travel by air or car, gas powered lawn mowing and suburban commuting alone would not be on the list.

If there is a shortage of electricity, critical uses would get what they need. Scheduled rolling blackouts of Suburbs would be the preferred alternative. In a severe heat or cold wave, perhaps something like 20 minutes on, an hour off would save quite a bit of fuel and electricity.


Scheduled rolling blackouts of Suburbs...

What a great idea -- we should start doing that right now to get people acclimatized.

Hi Alan,

Your reasoning is as usual impeccable.Fat old geezers like me who can't get to the job site on a bicycle will have to give up thier job operating a big track hoe that gouges out a cubic yard od dirt at a bite while the operator does no more than delicately manipulate two little joysticks and a couple of pedals-while seated in a very comfortable cab.

The excavator will run for many years after the personal automobile has been converted to a chicken coop.Such machines will do more work by a factor of ten in a week on the amount of biodiesel and alcohol that can be produced from an acre of land than the three or four men (max ideal circumstances) who could be fed for a year by that same acre.

But at some point-many thousands of men will be out there with picks and shovels again.politics if not necessity virtually gaurantees that.

Of course the building of such machines will probably be pretty much over after peak oil begins to really bite down hard, but there are enough of them around to last for a century easily if they are diverted from building new subdivisions and shopping centers and used primarily for really useful work such as building railroad spur lines.

There's always Trikes, too. My mom was fit up to the end, but wouldn't have wanted to bike around this busy town.. I hardly do myself. I was hoping I could find her an interesting Three-wheeler that had a groceries-basket on it, and didn't look to silly. (The final point is, of course petty, (ie, petit), but good design CAN still help the medicine go down. These ones are cheapish (ca $150), and only a bit dorky.

But even before that, people can pile up four or six to an SUV if they're still at driving distance from the company.

"Perhaps we will have fewer financial services and bankers to go along with them."

...and actuaries?

Not meaning to be impertinent or unappreciative Gail, but it has occured to me that you keep whatever personal preps you are making, if any, close to the vest, so to speak. This goes to what Joule posted below:

"Come to think of it, I don't believe I've ever heard you offer any description of what you think should be done. Or do you think it is so hopeless that nothing should be done?"

I also agree with Andre's reply:

"Well, Gail runs a blog that, among other things, includes many posts on how to prepare for declining oil production. Gail continues to point out the problems in other's thinking so that we can make proper choices. At times this role can be perceived as "only being negative" but it's a useful function nonetheless."

....but if there is no point in preparing for whatever we determine that the future holds, what's the point of discussing it, On TOD or elsewhere. Meaningful policy change? Good luck with that at this point.

Many of us have determined that mitigation on a personal level, at a local level, is the only viable option, yet you would suggest that we are doing more harm than good. Does this only apply on the level of National policy? If the former is the reality then I choose to be personally and locally responsible and globally selfish.

I'm left with the idea that this is all designed to just scare the crap out of people. If not, then I agree with Joule. What do you think folks should do? What are you doing, personally. I sense a conflict here, between the stated mission of TOD (and your role in it) and what you believe folks can do with the information they aquire here.

On my first ship (1200 psi steam plant) we had a saying: If the boiler techs and firemen start jumping off the fantail, don't ask them what the problem is. Jump! It seems a lot of TOD staff have been jumping ship lately.

A short personal note re above comments. I just got back from 2 week family clan meeting in Palo Alto. Went by train-- a huge mistake! Imagine a line of frail geezers being ping-ponged back and forth along one-person passage ways desperately seeking a working toilet- for 3 days!

There I got head-jerked by numerous wealthy relatives' accelerating-braking like madmen from one stop light to the short next one in their Kompressor mercedes' --for no reason whatsoever. These people go around the world for the same reason. Their offspring do nothing at all, from anything I saw, while outside truckloads of mexicans and half a dozen noisy IC widgets care for their littledog-litterlawns.

We talked about nothing but logistics- who drives what to what, while any and all attempts to bring up anything serious died an instant death and lay there unburied.

Talk about GDP! Hey. Talk about saving the world! Ha. Why would anyone want to??

In this kind of world, folks, it's plain silly to say anything about "costs" when what we are in fact doing is costing us our planet.

"Are you to pay for what you have with all you are? ".

But I did get to say it's a shame we don't believe in an afterlife anymore, since that would at least allow us to threaten sinners instead of letting them get away with it scott-free like they are doing.

So now I have another crusade to add to solar engines and bike transmissions- a new religion that puts retribution for sins front and center in some way that convinces.

Right- good luck on that one, too.

PS, flew back. boring and sinful, but quick. I'll never never do it again.

You should have gotten them to come up here. This is one of the sweetest looking Autumns I've seen in a while. It's a pleasure just being here. 'course, sounds like they might not appreciate it much.

I've had a job that gets me driving (yes, unfortunately.. but it's work.) up to Auburn from Portland a few times this month, and even in the grayish weather, the colors are lovely. I skip the Autobahn and take the local roads at a more efficient speed, enjoy the local shops and being on a 'normal' road.

Right, JK, same here in appalachian foothills.

Trip taught me what I should/did know:

Money not related to happiness, above a modest amount
Most people not at all happy and don't know why ( ans- too damned inactive in anything worth doing)
Slow and steady wins the race- I and my grad school buddy, who did great job doing what we had been trained to do-making stuff capable of killing lots and lots of far away people, and then went on to be ideal citizen, champ tennis and photography person, and I, who quit the infernal machine game early on and went on to do squat with solar energy, both far better off than the multi megabuck silicon valley types.
There are some really good young people out there, all confused about their future and not finding much to make them hopeful.

Too bad about that train. Made my wife toss her breakfast a couple of times. Couldn't have been better designed to destroy any support passenger trains might have had. Pity. She and I had foolishly thought it might have been not too much worse than Europe/Japan trains we enjoyed-- very, very wrong. I spent my windowless coffin nights wondering what dynamic inputs I would have to impose on such a mass to produce the range of bangs, whangs, shudders, shakes lumps shrieks bumps that thing delivered all the way from Chicago to SF.

It sounds like you rode through the shockwaves of the war that 'Big, Proud America' has waged against any decent, sober infrastructure that has the fringe benefit of 'bringing people together'. (a phrase with a couple meanings, I notice..)

The statement at 12:44, "That's an interesting observation," verifies Ms. Van Ryan's / API's intentions.

I think you are reaching a bit there PE. I found nothing in that statement that even remotely suggested that it was some kind of underhanded support of the API. Higher oil prices do inhibit economic growth. What did you expect her to say?

I will never enter the post carbon era but I hope my children and grandchildren have that opportunity. It will be touch and go for them however because by the time we arrive at that point the population of the earth will be well under one billion humans.

Ron P.

Perpetual Energy - I wonder if the good citizens of Imperial Rome griped in the same manner;

" It's time Caesar stopped doing what ever he can to bring all of the goods and resources of the world here to Rome for us to enjoy at ridiculously cheap prices compared to what the true cost of production is....Damniteth!"

Every time I hear the mantra that the oil industry is receiving tax breaks and subsidies, I have to nip it in the bud. Yes, the oil industry gets tax DEDUCTIONS for perfectly valid business reasons, just as you get a tax deduction for your mortgage payment. They are NOT subsidies. Your renewables industry on the other hand receives MASSIVE subsidies. Here's the difference, they make a profit because the laws of physics favor them. You on the other hand do not, and for the same reason.

The oil industry receives a protection subsidy from the US military on the order of 100's of billions of dollars. All else aside (and all else is far from a pittance) this tips the scales of relative subsidy by an order (or two?) of magnitude. Oil, the other fossil fuels, and nuclear, receive subsidies in the billions, whereas renewables receive subsidies in the millions. We have our heads on backwards. The military-industrial-corporatocracy has completely hoodwinked us. As this monster is fed, so shall he eat us. Some suggested authors - Chellis Glendinning, Jerry Mander, Derrick Jensen, Alexis Ziegler, Daniel Quinn.

The question is--what precisely are these wars for? Clearly, the wars are not actually getting much oil. In Afghanistan, they are not getting any oil.

Perhaps the purpose of the wars is primarily to show who is "in charge", and allow the US to float more debt, and continue importing far more than we export, when otherwise we could not. This would allow us to buy foreign solar PV panels and wind turbines, in addition to foreign oil. So it is not clear to me that it is fair to compare the war's cost to oil purchases. It perhaps should be compared to all imports, including so-called renewables.

There are at least two other aspects to the US military presence in the ME. One is strategic, as (I'm guessing) the US military commanders would probably not confirm or deny. Any Asian or other power trying to move an occupying army into the ME would have to go through areas where we have troops on the ground, garrisoned or out chasing around looking for "terrorists and insurgents", kinda sorta. It also gives us an excuse to patrol the air and waters there, 24-7-365, again looking for "terrorists and insurgents".

Then, one has to ask the question "whose country is it, anyway?" Is it yours and mine, or does it really belong to the military-industrial complex (the one Ike was warning us all about) and perhaps the financial-govenment "collaboration" in some grand alliance? Maybe we could do some acid tests to find out, like the French.

I will spare you the mystery and drama...the MIC owns the country and has for quite some time.

Yair...I have asked before (several times) but no one seems to want to tell have "our" (I'm Australian) adventures in Iraq and elsewhere helped U.S. oil supply.

As I see it if Saddam was still in power Iraqi oil would be on the world market...and now he is not in power the U.S. is pulling out and the oil fields are being largely developed by Chinese and Russian oilco's... "we" going to go in there and kick them out if oil supply gets tight?

Things did not go as GWB & Cheney planned.

Iran is the clear winner of our invasion of Iraq.



What is this "planning" thinga ma bob thou speakest of?

Does it require usin' them hard hard maths?


I have to take issue with the issue of a tax on oil/energy being a drag on the economy. Government revenue must be raised in some manner, so an increase in tax in one area should lead to a decrease in another. So the issue should be what should be taxed, rather than whether we can tax. Obviously API wants effective taxes on oil minimized -let some other sector of the economy pay not mine. A tax (or for that matter a change in the market price os something) does not subtract wealth from the economy, it redistributes it. Whereas increasing production costs -lots more labour and materials to produce a barrel of oil, does take something real out of the economy. And we know we are going to be getting a lot more of the later. A tax, to the extent it slowed our consumption would reduce the second real form of reduced wealth.

The previous comment speculating on post-carbon population touches on a subject which seems a bit politically incorrect, at least during the last 5 or so years. In the doomer/die off vs. gentle decline debate the doomers seem to have been at least temporarily bested. But Mr. Murphy suggests that whatever replaces fossil fuels won't adequately do so for 50 to 100 years once the change gets underway. That's a long time to live on memories of past abundance.

Simple Cartesian graphs displaying energy use over time, with population growth over time superimposed, produce curves so similar as to be almost a single line. Granted there is a lot of wasted energy now and granted a person can live, if sub-Saharan Africa is an example, on not much energy, there is still a minimum amount required to keep one alive. Where will that energy come from during the decades long interregnum between carbon energy and whatever follows?

Dave Bacon

Economic growth, population growth and energy consumption are indeed perfectly choreographed.

America, like ancient Rome, sees itself as indestructable and a beacon for the world. Other nations are less sentimental and are taking for themselves the one resource America cannot exist without. Just as Rome lost its source of wealth, the land, to more robust invaders, so is the US losing its cheap energy.

Rome went very quickly, in the west at least, and America may well be gone as the great world power within a very few decades too, and for simialr reasons: no more wealth to buy off predators, and complacency incorporating myopic insuar civil wars between selfish interest groups.

Rome went very quickly, in the west at least, and America may well be gone as the great world power within a very few decades too, and for simialr reasons:

We should be so lucky as to go as "quickly" as Rome went. But I fully expect we will not be nearly that lucky. It took Rome 320 years to collapse. I expect it will take about one tenth that amount of time for all the world's economies to collapse.

Decline of the Roman Empire

This slow decline occurred over an estimated period of 320 years which many historians believe finally culminated on September 4, 476 when Romulus Augustus, the last Emperor of the Western Roman Empire was deposed by Odoacer, a Germanic chieftain.

Ron P.

I disagree that Rome took so long. Third century troubles might have been addresses diferently, but complacency saw to it that they weren't. For most Romans the enduring permanence of their state was a given even after the sack of 410. Within a very few decades of this self-inflicted debacle the state was inded gone. The Romans lost their land, and therefore tax revenues, to invaders, and they could no longer afford their by now mercenary barbarian armies.

America and the west are slowly beginning to lose their resource and manufacturing bases, and consequently sources of power. I believe the outcome is inevitable.

Well I a not going to argue with you on how long it took the Roman Empire to collapse, I will just go with what Gibbon and the other historians say.

But America will not fall because it loses its manufacturing base. It lost that a long time ago and still retained its sources of power. America will collapse at the same time the whole damn world collapses. Well, it will not likely happen all at once, but over a period of a very few years. Japan, South Korea and all nations that have virtually no fossil fuel will go first.

The more a nation depends on globalization and foreign resources the quicker it will collapse. Eventually they will all collapse.

Ron P.

We see Americans living in tents under bridges and existing on food stamps. Is this normal, is it acceptable, is it characteristic of a first world economy that sees itself as the beacon of the world? America is turning to insane religious cults as never before, and it consumes itself with internal polital rivalries and battles which do nothing but harm to the body politic and therefore government.

Certainly, the whole world is in this together, but the fall of America wil be very significant, and what arises from the ruins we cannot yet tell. If anyhting arises that is, in a seriously depleted world.


No, this is not normal or acceptable... to see Americans living in tents under bridges on food-stamps.

THAT'S why we must:

--------1. Eliminate food-stamps.
--------2. Ban the sales of tents.
--------3. Protect the borders and margins of our bridges.

Remocrats vs Depublicans in La La Land!

Constantine moved the capital of the Roman Empire to Constantinople around 330. The Roman Empire persisted until 1453, although the use of Greek instead of Latin became official during the reign of Heraclius in 620. The Arab conquests in the mid-600s removed Syria, Palestine and Egypt from the Roman Empire.

For most Romans the enduring permanence of their state was a given even after the sack of 410.

The idea of Rome as Caput Mundi et Urbs Aeterna (Head of the World and Eternal City) goes back to an inscription in the Forum of the Emperor Maxentius who was defeated by Constantine in 312 AD so the idea of eternal Rome was not very old.

The actual capital of the western part of the Roman Empire was moved to Milan in 293 AD by Diocletian and later to Ravenna between 402 and 476 AD when the Western Empire was discontinued.

Instead the Sibylene Prophecies predicted that Rome would be destroyed 11 centuries after its founding in 753 BC.
These demoralizing prophecies were publically burnt in 405 AD by the Master of Infantry and Horse, Flavius Stilicho.
Officially, Rome had become Christian in 395 AD but probably a majority of Romans still believed in these frightening pagan writings(during the 410 AD siege some in the Senate wanted to use pagan magic to defeat Alaric though it was treason to use magic).

Peak Oil is another kind of prophecy.

If men define situations as real, they are real in their consequences.

Peak Oil is another kind of prophecy.

Absolute nonsense. Oil is finite. If we keep using oil then it is an absolute certainty that oil production will peak. It is a fact of geology, not a prophecy. It would be pagan magic if oil never peaked.

during the 410 AD siege some in the Senate wanted to use pagan magic to defeat Alaric though it was treason to use magic).

Kinda like Middle East oil reserves. They keep pumping oil out of the ground but their reserves keep going up. That is because they use pagan magic, every barrel pumped out generates two new barrels in the ground. But that is what would be required if peak oil is a prophecy instead of a geological fact. Pagan magic puts more oil in the ground when every barrel is pumped out therefore oil never peaks.

Ron P.

Or perhaps those "pagans" of the Middle East are investing in technologies that improve oil recovery. For instance, when Hubbert made his predictions there was no such thing as CO2 injection, SAGD injection or other techniques. Oil wells were "spontaneous" - flowing because of the natural gas also trapped in the wells. Once the gas ran out, the oil didn't come up by itself and the well was abandoned. As the price of oil has increased from the (literally) pennies of yesteryear, some of these notions have been abandoned. I'm not saying oil is infinite, but the hyperbole about it certainly is. Remember as the ability to produce can't keep pace with demand, the price goes up until eventually alternatives are adopted, or there is another kind of demand destruction.

For instance, when Hubbert made his predictions there was no such thing as CO2 injection, SAGD injection or other techniques. Oil wells were "spontaneous" - flowing because of the natural gas also trapped in the wells. Once the gas ran out, the oil didn't come up by itself and the well was abandoned.

Great post Widelyred, but that is not exactly correct. I don't know when donkey head pumps were first used but I know it was well before the mid 50s. When the pressure dropped to zero they just sat a pump over the well and kept right on pumping. These days, in the time of horizontal wells, they use down hole electric pumps in cases where pumps are required.

Ron P.

Interesting ...

I read Gibbon when I was a child and it made a real impression. So did Toynbee (this is the Wiki snip):

Arnold J. Toynbee and James Burke

In contrast with the declining empire theories, historians such as Arnold J. Toynbee and James Burke argue that the Roman Empire itself was a rotten system from its inception, and that the entire Imperial era was one of steady decay of institutions founded in Republican times. In their view, the Empire could never have lasted longer than it did without radical reforms that no Emperor could implement. The Romans had no budgetary system and thus wasted whatever resources they had available. The economy of the Empire was a Raubwirtschaft or plunder economy based on looting existing resources rather than producing anything new. The Empire relied on booty from conquered territories (this source of revenue ending, of course, with the end of Roman territorial expansion) or on a pattern of tax collection that drove small-scale farmers into destitution (and onto a dole that required even more exaction upon those who could not escape taxation), or into dependency upon a landed élite exempt from taxation. With the cessation of tribute from conquered territories, the full cost of their military machine had to be borne by the citizenry.

Sounds familiar, eh? Well, everybody (thing) has their ups and downs ...

I'll add another: Rome fell not because of what they did but because of what they failed to do.

They needed to push north and east into what is now Eastern Europe and settled there. A defensible border would have been the Dneiper rather than the Danube/Rhine which was hardly a barrier.

The issue with the US and the car- centric 'American Way' is more a matter of fashion. 'Style' requires a nice Hummer or E- class Mercedes, nothing else.

The arguments over the reasons for the fall of Rome will last as long as man. Yes, it required conquest and tribute to maintain its infrastructure, and yes, republican small scale property ownership morphed into the enormous senatorial latifundia of the late empire, where most citizens had been reduced to a level of servile poverty which made conquest and rule by aliens little worse, if at all, than exploitation by an absentee aristocracy. There are acute parallels here with the west today, particularly in the transfer of wealth to the rich, the increasing poverty of the once comfortable and included masses, and the inability of the economic machine to maintain the state adequately.

The eastern empire became a fiction, maintained until the moment the Ottoman troops broke doen the doors of Hagia Sophia.

I fear that our complacency about the enduring centrality of European culture may soon be tested once more when our aristocracies realise, too late, that enormous short term profits made at the cost of allowing 'foederati' status to aliens will ultimately ruin the west.

Darwinian, You can improve the output of an oilfield considerably by using EOR (Enhanced Oil Recovery) techniques. The "horsehead" was one of the cheapest and easiest pump methods but didn't really improve "production" of the field, it merely 'waited' for the oil to accumulate and then brought it to the surface more cheaply than electric sump-type pumping would. That's why you could drive or walk by the same field daily and sometimes see the "donkey nodding" and sometimes not. Much of our 5 million bbls per day production in this country comes from stripper wells that average out to less than 15 bbls per day.

My understanding is that EROEI is the difference between energy returned and energy invested, not the ratio.

If you invested 1 barrel and got 2 barrels back, your EROEI would be only 1, not 2.


What you describe is the net energy gain. EROI (or EROEI) is a ratio.

So if you invest 1 barrel and you get two out, the EROI is 2:1 but the net energy gain is 1.


you describe the net energy gain [not] EROI

I suppose we can create a new measure:

Normalized net energy= (Eout - Ein)/Ein =EROI-1

Thank you for the clarification on EROEI.

My error came about because of the way I had seen it expressed as energy returned ON energy invested.

IMO it would be better expressed as energy returned OVER energy invested.

The only reason that David Murphy's interview with API's Jane Van Ryan appeared on the Energy Tomorrow podcast is that the conclusions of his study conform quite nicely with the party line of the oil industry, to wit:

- Increased taxes and regulation of the oil industry will harm the economy and destroy jobs,

- We should not embrace alternatives to oil too quick lest we will harm the economy and destroy jobs,

- Changing our source(s) of primary energy will cost zillions and take decades, so let's not rush into it.

- We have a problem, but trust us to do the right thing.

Basically, the oil industry would like Americans to be highly dependent upon oil as long as they have oil available to sell to them at a profit. That's quite understandable ..... as what business ever wants you to use less of their product? So, what we have here is an inherent conflict of interest - the conflict being between the need to wean ourselves away from oil and the need of the oil industry to sell more oil. For this reason, I view the oil industry as being part of the problem rather than part of the solution.

This Energy Tomorrow entity is a perfect example of how subtle the powerful corporate and financial interests are at 'colonizing' and co-opting an issue. This is done not be putting forth outright lies and erroneous information, but rather in selectively choosing to publicize reports and studies whose conclusions are favorable to their interests. They are so good at this that you can hardly see it happening.

Overall, I think Mr. Murphy gave a pretty decent overview of the situation. However, regarding Mr. Murphy's specific findings, I think one could take issue with this notion that history has proven that switching from one form of energy to another will necessarily take decades, and in some cases a century. Yes, it took quite a while to switch from wood to coal for home heating and for running steam engines. While certain areas of certain countries were running out of readily available wood, in general the switch from wood to coal had less to do with wood shortages (particularly in the US) and more to do with certain advantages of coal (higher heat content per unit weight, greater ease of handling, and better combustion characteristics).

The case of oil was somewhat different. While kerosene gradually displaced tallow and whale oil for lighting, the really major expansion of oil as a primary energy source came with the discovery of major oil fields and the need for liquid fuels for the internal combustion engine, which in turn was a direct result of the automobile. None of the expansion of oil usage had anything to do with a shortage of coal, and coal is still quite abundant.

Our current situation is much different because the needs are far more pressing: we are rapidly running out of oil available in the quantity and price we've been accustomed to. If we trust API and adopt the posture that there is no crisis, that business as usual is OK for at least the near future, and that we shouldn't rush into alternatives, then we will find ourselves in a worsening situation of too little too late. Switching to alternatives is going to involve quite a bit of pain, but it is only going to be far more painful if we continue to dawdle. Ultimately, at some point alternative energy will no longer be an 'alternative' at all, but rather the only game in town.

I generally agree, but I would argue that some policy options (such as moving most inter-city freight to electrified railroads) will result in much LESS pain than BAU or API policy preferences.


Don't you think that two different groups could come to fairly similar conclusions, but traveling different paths?

Mario Giampietro (Chair of last week's energy conference in Barcelona) talks about agro-biofuel being a Granfalloon in The Biofuel Delusion. According to Giampietro:

The term 'granfalloon' was first introduced by Kurt Vonnegut (1963) to indicate 'a proud and meaningless association of human beings'. Wikipedia provides the following definition (among others): 'a group of people who believe that they have a special connection and who believe that they are helping bring about a greater plan, but are actually not'.

Huge numbers of people believe that they are doing good by encouraging switching to alternatives, but unless we have much more efficient ways of creating biofuels than we have today, it is seriously doubtful that this is helpful. (Wind in some cases may be helpful for adding to electricity supply, but it certainly won't replace oil.)

People honestly feel like they are being helpful, but if the net effect of the alternatives is simply to push society down faster, they don't offer a real benefit, except perhaps in very isolated situations (biofuel extenders for fuel for a very small number of aircraft, for example).

Gail -

Sure, two different groups can come to similar conclusions by traveling different paths ..... particularly if those two groups have the same vested interests. And in this case that vested interest seems to be to do nothing that will rock the boat so that the oil industry can continue to happily chug along until it no longer can.

Regardless of the merits (or lack thereof) of various alternative energy schemes, at some point we are not going have general access to oil as a fuel for personal automotive transportation. So what then? I fully expect we will gradually enter a downward spiral or hierarchical oil usage: at a certain point only the wealthy will be able to afford to drive cars; then as things get tighter, oil usage will be largely reserved for government officials, police, and the military. And the ever-present well-connected private citizens. After that, who knows?

No one has to 'push society down faster' as it is already going down pretty fast already. Of the many things that are causing the US to hemorrhage wealth, cohesion, and well-being, I have a hard time seeing how embarking on an orderly build-out of solar, wind, and even latest-generation nuclear, will make things worse rather than better (or perhaps more accurately, a little less worse that it would be without such). And I don't buy the notion that we don't have the money to do it, as the US is currently spending several hundred billion dollars per year on two (and possibly soon, three) pointless, seemingly perpetual military adventures. It's all a matter of wisely choosing priorities.

Come to think of it, I don't believe I've ever heard you offer any description of what you think should be done. Or do you think it is so hopeless that nothing should be done?

Come to think of it, I don't believe I've ever heard you offer any description of what you think should be done.

Well, Gail runs a blog that, among other things, includes many posts on how to prepare for declining oil production. Gail continues to point out the problems in other's thinking so that we can make proper choices. At times this role can be perceived as "only being negative" but it's a useful function nonetheless.

I know this role because my family had/has that perception of me. The problem is that until they "get" what's really going on most of the suggested responses do nothing good or even make the situation worse.

This is despite the fact that I have repeatedly said publicly that we are not helpless and that my company offers courses for people on how to prepare!


I generally agree with what you say, but I do acknowledge (maybe not in the interview) that the next transition may be faster than previous - but faster meaning 10 - 20 years instead of 50. Hirsch (2005) supports this claim as well.


An interesting primer. It's chilling to imagine society, as it's currently configured, without economic growth. 'Capitalism', or whatever you want to call our socio/economic system, surfs on a giant, historic wave of surging, economic growth, closely alligned with cheap, easy, and plentiful energy. Without cheap energy does economic growth, as measured by GDP really fall away, and if so what happens to 'capitalism'?

As we need around 2% 3% growth just to stop unemployment rising, what happens to employment in a very low growth economy? With such a low growth, high unemployment society, what happens to real wages? If wages are stagnant, what happens to demand? If demand slows what happens to the wider economy? Then what happens to the tax base and government expenditure in a low demand, low growth economy?

In a highly complex modern capitalist economy, with collosal rates of material consumption, demand is of crucial significance to keep the wheels of the economy turning.

The current 'recession', which I believe is only the first stage of a full-blown Depression, may not end, and 'recovery' isn't going to materialize anytime soon. Factor in the problems outlined in the interview, and we may well have entered a new economic era, the post-consumer society. An era of semi-permanent 'recession.'

What will happen writerman, is what is happening. Without an expanding economy essentially finite wealth will gradually gravitate from those unable to maintain their share to those who are able, usually through the legal and economic structures they administer, to grab whatever wealth they can split off from the poorer sectors of society.
The rich will indeed become super-rich, and the poor will become, in many cases, destitute. The rich will move to safe and comfortable locations where they will lead sybaritic lives, and their assets will be managed and protected by hired men. The rich will also own and farm, through overseers, the majority of the productive land. They will also hold the reins of the police and military, which will be staffed by mercenaries, not citizens.

And don't worry, the super-rich will have all the energy they need.

On economic growth in the developed nations: For this reply, I will lay aside the energy picture as given by Mr. Murphy (much of which could be argued with despite some very strong points) and speak to economics:

The end of economic growth as it had been known in the developed world was a done deal with our without peak oil. The driving force of our age is demographic: i.e., the aging of the world post war baby boom.

When the babies born from 1945 to 1955 hit 55 to 65 (2000 to 2010) the developed world economy began to slow...and in every developed nation, (Europe, Japan, U.S.) regardless of their energy particulars...what a coincidence, huh?


The Baby Boomers are an entire glut of kids that were born at the peak of cheap energy.

Ironic, eh?

They will gobble an disproportionate share of energy, retirement, and cheap money in the process -- when compared to later gens.

"They will gobble an disproportionate share of energy, retirement, and cheap money in the process -- when compared to later gens."

Yeah, well, forgive them, for they know not what they do. If they did, they would atone for their sins. They would change their ways, try to identify, quantify the damage they have done. They would build web sites and blogs, do interviews on conservative radio and try to offer some way forward, options for "later gens". That's what they would do, if they knew.

I forgive the ones that are trying. The rest that engage in a political Glen-Beckian rampage I do not forgive yet. LOL

Thanks David for identifying the API as a special interest:

The Oil Drum recognizes that API (and hence Energy Tomorrow) is funded by the oil and gas industry. But the interview here relates to my research, which is not funded by such interests.

From a journalistic standpoint, this transparency is the right way to go. It enables readers to put their coverage into perspective.

And in the comments, it is important to allow critical voices, such as that of joule.

Problems arise when a newspaper or website is not transparent, and does not allow legitimate criticism.

Energy Bulletin

I had the good fortune of listening to R.A. Mashelkar: Breakthrough designs for ultra-low-cost products
right before the the above talk by Mr Murphy.

It gave me an opportunity to compare differences in attitude.

I am a Doomer.
I do not wish to minimise our predicament. My predictions are as dark as they come.

However we must not blind ourselves to ameliorating solutions.
There are some people who are going to become very successful precisely because where there are problems there are opportunities.

To benefit from this crisis it will be necessary to abandon assumptions about what is achievable, and so I recommend Mr. Mashelkar to you.

We in the West suffer badly from the pathologies of Wealth and Status. Wealth causes waste, and Status deafens and blinds one to solutions. The treatment of these diseases is profound withdrawal.

We in the West are about to have our mettle tested.
Good luck all.

"We in the West suffer badly from the pathologies of Wealth and Status. Wealth causes waste, and Status deafens and blinds one to solutions. The treatment of these diseases is profound withdrawal."

Well said, Arthur.

I began my withdrawl years ago. Hopefully, dealing with the withdrawl of those around me won't be too traumatic.

Here's to frugality, redefining wealth, and the clarity effect of status rejection.

Well said, Arthur.

Don't you dare give me Status.

My bad.

My bad.
My humour.

Don't you love those low status scientists who keep on working away in their labs despite the threat to their Status?

This is from The Defense Intelligence Agency

Scientists worldwide have been quietly investigating low-energy Nuclear Reactions LENR for the past 20 years. . . .DIA asses with high confidence that if LENR can produce nuclear energy at room temperature this disruptive technology could revolutionize energy production and storage since Nuclear reactions release millions of times more energy per unit mass than any known chemical fuel.

My bold.

Lots of hedging and protection of status in this paragraph.

Arthur, you threaten your doomer status posting such hopeful material. This stuff sounds like Cold Fusion by another name, which has been relegated to Pathological Science. Success in this field should be measured by cases of radiation sickness, as neutrons are produced, but so far no one has died or even had their hair fall out. And, even if fusion (hot or cold) could be sustained, it would only produce electricity, not liquid fuels that we have become reliant upon. And then there is the time needed to scale up any alternative energy infrastructure to save us all, even if it worked, which it apparently doesn't, and we only have a few years of BAU left. Sorry.

We live in an extraordinary time.
All our certainties are void.
All power structures will fall.
You are in a monkey trap.
Open your fist. Let go the peanut.

On another thread, I wax sophomoric:

A short while back, Gail asked, essentially, "What should we do with what's left?".
Most answers addressed a scenario of immediate collapse and ran to "get your teeth fixed" and "horde PVC pipe couplings".
An earlier suggestion was "put up 12 passive sets of reflectors in orbit to replace the Global Positioning System, while we can still launch".
If the **** hits the fan tomorrow, yes, run and get your teeth fixed, etc.
If there is more TIME, and RATIONAL THOUGHT, then a broader field of action is available.
Is it too late to mine the solar system? Jupiter is a star that never lit. Asteroids of ores. Moons of methane. Streams of mining cargo robots?
Is it too late to perfect artificial photosynthesis?:
C6H12O6 is glucose, a carbohydrate, made from sun, water, and the carbon dioxide in the air.
CH3-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-C-O is a fatty acid. It's similar to part of a bi-lipid cellular membrane.
CH3-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH2-CH3 is a hydrocarbon: diesel fuel oil, C16H34
We've already set global homeostasis into positive-feedback/thermal-runaway and fed the children's future to our corporations...
Is it too late to build nuclear like crazy to get 50 more years? Charge the consequences off to the kids? All 9,000,000,000 of them?
Today, to me, it looks like there is TIME: The oscillating peak plateau is presenting as being long and drawn-out.

Rudolf Diesel's original intent was to make an engine that ran on coal dust or vegetable oil. See the LEGACY section of:
Coal-fired power stations are the cheapest to build and run. When is peak coal?

I've seen the concept of artificial photosynthesis laughed at. What's so funny?

Wind is the same cost to build and run as coal, but three times as much has to be built to provide the same availability... Plus distribution.
Volume 18 Number 5 "Can Nuclear Power Compete?" page 31
But it doesn't burn anything. Distribution is also central to the electric car/rail problem... which also adds a huge extra generation/capacity requirement.

So, researching and then developing and deploying the means of producing a liquid fuel using artificial photosynthesis (without soil depletion or expensive feedstock/nutrients) might provide a path to interim survival without chaos.

Unless we ARE out of time for economic reasons... the extreme sensitivity to transportation costs in this global economy:

Could it be done if the R+D were of a wartime level, like the Manhattan project?
Gee, even our wars aren't on a wartime footing... they are held low-key so-as not to spook the herd.
And the wars are fought for resources and control...

I've seen the concept of artificial photosynthesis laughed at. What's so funny?

It is the Ha Ha Ha reflex of an Ape. Chimps do it. It is our signal that the danger is past. It is a reflex.

Us apes emit it whenever we see something unusual (possible threat), and then decide it is harmless. It is part of the relaxation reflex.
It goes really deep.

I get it if I expose cold fusion.
Not much point getting cross. It is what us apes do.

Yeah... Yep... Yepers...

Arthur, I almost added:

"And that brings us back to global warming: the trump card:
"Re-sourcing our energy use with renewable generation is technically possible — we know how to do things like solar and wind power. But it's politically difficult because of the vast power of the fossil-fuel industry. Their business model depends on using the atmosphere as an open sewer to dump their waste into for free (which helps explain why they're the most profitable business on earth). And their wealth affords them enormous political power, which they've deployed to delay action.
Overcoming that power will require building a movement. It's what we've been trying to do at for three years now, with some success. We take our name from the limit that scientists have set on safe levels of carbon dioxide in the atmosphere, since above 350 parts per million — in the words of a NASA team — we can't have a planet "similar to the one on which civilization developed and to which life is adapted."
Pretty straightforward, that statement — and pretty scary when you know that everywhere around the world the atmosphere is currently 390 parts per million. We're already way too high — that's why the Arctic is melting and Russia is catching on fire and Pakistan is drowning."

It's that pesky RATIONAL THOUGHT requirement...

We're done...


But I thought it was way too depressing, and, besides, I can't find my vein-opener... 'round here somewhere... in the cushions?...

Our current economic system is totally dependent on rapid, exponential growth, which requires cheap energy in ever greater amounts. There isn't enough energy in the entire Earth to sustain this for more than a few hundred years. There probably isn't enough in the entire Universe to sustain it for more than few thousand.

Our existing energy sources are all finite. Any potential new energy sources, even fantastic ones such as fusion, are ultimately finite. But our economic system is based around the assumption of infinite cheap energy. Something has to give.

Hunger and climate change often go hand-in-hand... here's how resolving the one problem can resolve the other problem..