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The Role of Energy in Economic Growth
Posted by nate hagens on October 19, 2011 - 10:58am
Ecological economist David Stern recently wrote a paper on the importance of energy for economic growth aptly titled 'The Role of Energy in Economic Growth'. His overview paper follows a long chain of biophysical research on this topic from Schumpeter in the 50s to Georgescu-Roegen in the 70s to Herman Daly, Charles Hall, Cutler Cleveland etc. in the present day. This type of thinking - that energy is its own special input to the production function and is non-substitutable (we can't make stuff without energy), is still outside of mainstream economic discourse, who follow the classic exogenous growth model (Solow) where labor and capital are all that matter. But if energy is special, and has declining marginal returns (i.e. fossil fuel depletion), that has enormous implications for future growth prospects and the modus operandi for our institutions. Yet it is still widely assumed in economic/financial circles that energy is just the same as other commodity inputs and that a high enough price will create its own energy supply in perpetuity.
Incorporating the premise that energy is separate and unique in the production function is a necessary (but not sufficient) change we have to make to our economic theories. Professor Stern's paper, written for economists, is a step towards bridging the assumption chasm that underestimates energy's role in our human ecosystem. I invited David to write a short overview of his paper (guest post), which is below the fold.
Energy use has increased over time in close association with GDP both globally and in individual countries. This figure, based on World Bank data:
Figure 1 shows that the two variables also have similar fluctuations around the trend – the growth in energy use slows in recessions – which suggests that there is a real relationship between them. However, energy use has grown much more slowly than has GDP. This means that energy intensity – energy used per dollar of GDP – has declined steadily over time. When we look at a snapshot in a given year there is also a strong relationship between per capita energy use and income per capita across countries:
This leaves many unanswered questions:
Does energy availability and quality drive economic growth? Or is energy use merely a side effect of growth? Has the relationship between energy and growth changed over time? And what factors have reduced the energy needed to produce a dollar of GDP?
In a paper in this year’s Ecological Economics Reviews (a free working paper version is available here), I attempt to answer these questions in a review and synthesis of the literature on the role of energy in economic growth.
While physics shows that energy is necessary for economic production and, therefore, economic growth, the mainstream theory of economic growth, except for specialized resource economics models, pays no attention to the role of energy. Ecological economists, on the other hand, often ascribe the central role in economic growth to energy. I argue that criticism of mainstream economic growth models that ignore energy is legitimate, but theories that try to explain growth entirely as a function of energy supply, while ignoring the roles of information, knowledge, and institutions, are also incomplete.
As a step towards reconciling mainstream and ecological economics models of economic growth, I present a simple model that embeds the mainstream Solow economic growth model within a more general framework where energy and capital are poor substitutes. The model allows technological change to affect energy and labor productivity separately and differently so that we can distinguish between energy- and labor-augmenting technological change. In other words technological change that increases the productivity of energy and technological change that increases the productivity of labor.
The model shows that when effective energy - the product of the quantity and quality of energy and the level of energy augmenting technology - is scarce it will strongly constrain economic growth, but when effective energy becomes more abundant it is much less of a limiting factor and the conventional mainstream model explains economic growth fairly well. This explains why mainstream economic growth theory ignores energy – it is mostly designed to explain the last sixty years of economic history when energy has been abundant and cheap in developed countries.
Stern and Kander (2011) show that the growth of energy use and energy augmenting technological change were the main sources of growth in Sweden in the 19th and early 20th century. However, in the late 20th century labor augmenting technological change became the dominant driver of technological change. This explains the industrial revolution as a releasing of the constraints on economic growth due to the development of methods of using coal and the discovery of new fossil fuel resources.
This model also explains why the cost of energy as a share of the value of output fell dramatically over time as shown by this graph:
When inputs are relatively hard to substitute for one another (elasticity of substitution of less than one) a fall in the relative price of an input reduces its share of costs or income. This is what has happened to energy relative to labor and capital over two centuries in Sweden. Preliminary work by Kander and others suggests that a declining energy cost share is common to several countries.
Energy intensity has not only fallen globally over the last few decades as we showed above but has declined for at least 150 to 200 years in many countries including the United States:
The graph shows that when only modern commercial forms of energy are considered energy intensity follows an inverted U shape curve. But this is not the case when traditional biomass, muscle power etc. are considered.
The factors that have driven the decline in energy intensity can be grouped in the following categories:
–substitution between energy and other inputs
–technological change
–shifts in the composition of the energy input
–shifts in the composition of output
–structural change
The most important driver of reduced energy intensity appears to have been technological progress. More disaggregated data typically show a smaller role for technological change and a larger role for structural change. Shifts to higher quality fuels have also reduced energy intensity in some countries such as the U.S. but in others like China and India in recent decades or Germany and Britain in the 19th century, the switch towards coal has increased energy intensity, everything else constant.
It is commonly thought that the increasing share of the service sector in economic activity over time would reduce energy intensity but the gains from this are less than widely believed as the service sector still requires significant energy inputs to support the infrastructure of office buildings, shopping malls etc. Evidence also shows that trade does not result in reductions in energy use and pollution in developed countries through the off-shoring of pollution intensive industries.
The paper implies that future constraints on energy use would limit economic growth but reductions in energy use would not reduce living standards back to those of previous centuries due to much improved technology. The ultimate limit to economic growth in an environmentally or resource constrained world is how much we can continue to improve energy productivity. Though thermodynamics prescribes precise answers for simple processes, the ultimate limit at the macro-economic level is not clear.
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Thanks, Nate, for getting this summary!
The conclusions at the end aren't really part of the original paper (which is really a survey of recent literature), and I find them on the "iffy" side.
It would seem to me that much more than improved technology would be required to make such a statement. It seems like one would need to be able to postulate that our financial systems can hold together with much less energy, or that we can get along without debtors being able to repay their debt with interest. See my post, The United States' 65 Year Debt Bubble.
This is one limit, but is it the only limit? Does't our current system have to hang together, as well?
Yea, David Korowicz' stuff addresses the other limits & sneaky dangers of popping key pieces out of a complex system:
See http://www.feasta.org/documents/risk_resilience/Tipping_Point.pdf
...as well as http://www.energybulletin.net/stories/2011-10-10/cusp-collapse-complexit...
Also http://www.youtube.com/watch?v=pmC1juUCygo
Gail - yes the whole system is interesting and obviously relevant. but not everyone can grasp the interplay of all the salient aspects (can anyone?). it will be a big step towards designing a more holistic system if economists understand/agree that the macroeconomic production function is dependent on energy. Period. To do that doesnt require bringing in finance and the other shaky aspects of our economic society.
I.e we need to see the whole picture but we also need people working on the parts...this post is either new or anathema for most practicing economists.
Nate, isn't the following a key point?
"it is still widely assumed in economic/financial circles that energy is just the same as other commodity inputs and that a high enough price will create its own energy supply in perpetuity. "
If renewables and nuclear can indeed provide adequate energy, then isn't the conventional assumption still valid??
Nate,
I'm continuously disturbed by our casting and framing of the question of economic well-being in terms of economic babble talk.
Then we inevitably fall into the trap of arguing about what "GDP" is or is not as occurs down thread.
Rather than talking in terms of dollars, perhaps we should talk in terms of the basket of unfettered promises that we expect a dollar ($1 US) to fulfill.
For example, maybe one of our underlying expectations is that a dollar will always buy us 7 miles of car-mediated transport.
(That implies that $4 will buy 28 miles of transport --assuming $4/gallon and 28 MPG).
Then again, we may have many other unstated but implied expectations about the unfettered promises that $1 US makes to each of us:
--how much of a loaf of bread that $1 promises to get us
--how much medical care/well being that $1 promises to get us
--how much entertainment or other pleasures that $1 promises to get us
--how much data processing (computer) power that $1 promises to get us
--how much of fresh or dirty air and water that $1 promises to get us
--etc.
You go, StepBack. At this point, the USD can be equated with $200+T in untenable promises to future US entitlements and some large part of the global derivative cache of $1.5?Quadrillion stuck in the off balance sheets of TBTF banks and other essential parts of our financial system. This compares to the world GDP of $65T. Money has no meaning at this point compared to the real underlying wealth of natural resources and production, especially since much of production is going to have to be reworked and relocalized. We're going to have to invent a lot of new terms, and a lot of economic terms are going to become passe.
"energy intensity – energy used per dollar of GDP"
And the reason energy used per dollar of GDP has waned is not that the underlying resources of the system have changed, but that "GDP," which is a measure of churn, has expanded as we expand the amount of debt, casino chips, bets, and useless paper swaps in the system over the past half century in this country. Our measurement system has gone wonky as too many people profited from gaming the system. Kurt Cobb's diagram of our distribution of production in the US below suggests why "GDP" is a very poor metric for an economy headed for permanent economic contraction due to declining nonrenewable inputs. Large portions of FIRE, government, business services, education, healthcare, retail, etc. are going to mostly disappear in what evolves out of collapse. That means that arguing according to metrics of either dollars or GDP is useless. Succumbing to the language and measures of the economists just gives them residual power over our dying system. And "Technological Progress" just means that we've spun up energy use (MPP). Technology is just a way to use more energy.
The use of economic terms, theories, and thinking creates upside-down thinking about how the world works. Ecological economists appear to spend too much time with economists, speak their language, and cannot be separated from them ideologically? Bobby Kennedy had it right a long time ago.
"Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product ... if we should judge America by that - counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for those who break them. It counts the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm and the cost of a nuclear warhead, and armored cars for police who fight riots in our streets. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans."
Iaato,
Nice inverted iceberg chart.
Where did you get it from? {Citation please if you don't mind]
IMHO it is just the tip of the iceberg because, despite their claim to be "accountants" and to account for everything, economist actually fail to (intentionally) account for everything.
More to the point, they don't account for Bads and Disservices.
If we are going to have an ecological accountant's accounting for "Domestic Production", it should include all the bads and disservices we produce domestically.
That is part of what I was trying to get at when calling it "economist's babble talk".
GDP is not "gross". It is subtotal; and intentionally so.
Sorry, Step Back. I gave attribution but no link. I've been using the pyramid a lot lately to get my points across.
http://resourceinsights.blogspot.com/2007/07/upside-down-economics.html
And if you compare that inverted pyramid to the real system below (Tom Abel on Transformity), we've got a whole lot of morphing yet to occur to get back to a normal food chain hierarchy/distribution. Fossil fuels have a lot to answer for; stealing your opponent's game pieces will shorten the cumulative length of the game. Fossil fools only fool us into thinking we can do without ecosystem services and natural resources for a while. Then reality catches up, and the more we've stolen, the worse the backlash.
http://www.youtube.com/watch?v=n7Fzm1hEiDQ&feature=player_embedded
Thank you everyone for these comments. In this guest post I tried to provide a bit more context and interpretation than there are in the peer-reviewed paper. Regarding the role of the financial system in the sustainability of economic well-being - the financial system is a system of property rights and other institutions. Good institutions are important for promoting economic activity and are probably the main reason why some countries are poor and others are rich into today's world. On the other hand they can in theory be changed in a way that isn't true of the availability of natural resources or the state of our technological knowledge. Property rights can be changed. So this article largely ignores the role of institutions or rather just treats them as background.
"I argue that criticism of mainstream economic growth models that ignore energy is legitimate, but theories that try to explain growth entirely as a function of energy supply, while ignoring the roles of information, knowledge, and institutions, are also incomplete."
What's missing is an economics of scarcity. Energy wasn't ignored, per se. Rather, the model was incomplete because it ASSUMED resources are available in any quantity needed. Energy is no different than copper, aluminum or labor. We are now in a situation where the model boundary conditions are coming into play -- i.e. what happens when supply of ANY resource is constrained, and there is no good substitution?
Congrats on getting a step closer to a holistic model, but it still seems the folks in the peak oil community are only open to the ecological model. Just look at how you raised Gail's hackles (very predictably) over your anti "dark ages" prediction.
What concerns me in this kind of analysis is the reliance on the veracity of measures of output like GDP. Since some of the "values" aggregated under this rubric include money created by the financial system (i.e. not tied to real wealth due to its speculative nature) how can we tell that the relation between real physical wealth and energy use (as implied in the top graph) hasn't been much closer? Even allowing for increased real efficiency due to technology, I would not be surprised if the energy and "wealth" curves were much closer together than the energy/GDP curves indicate.
Reliance on measures like intensity are OK for correlation. But isn't it hard to derive causality when one of the numbers used is suspect?
[Caveat: I have not read the working paper, so the answer to my question might very well be covered in that.]
Hey George,
I just want to take this opportunity to emphasize that "physical wealth" does not have a 100% correlation with "subjective well being" aka "happiness". A quick search on happiness index delivers an interesting collection of web sites. The happyplanet.org site, in particular, provides some data visualizations of this theme with an environmentalist spin.
I think this is important because I am skeptical that we will "scare" people into changing their lifestyles with predictions of global warming or peal oil.
I would much prefer suggesting to people that they can be significantly happier after adopting a low-consumption lifestyle.
Best Hopes for Voluntary Simplicity.
Jon
Hi Jon,
Too true. Happiness does not depend on material goods per se.
Just to clarify, what I mean by "real" wealth is the accumulated physical assets of all classes of a society including all human biomass and human-managed biomass (e.g. pets!) All of this incorporates embodied energy directly from the amount of work that needed to be done to produce and maintain it. The human biomass may or may not derive psychological pleasure (or higher order happiness) from the other assets, though I argue they do satisfy a basic biological drive. It's just that it took energy to produce them. Since money and the value of transactions that feed into the computation of GDP has been inflated over time, irrespective of the actual production of all assets and biomass, I question the derivation of some causal relation (e.g. whether energy is a cause of growth or merely an enabler)
In fact I will go a step further and assert that growth of assets and biomass and growth of energy production were mutually causal, i.e. form a causal loop. This follows from the nature of all biological systems attempting to maximize energy resources (c.f. optimal foraging theory) with success leading to phenomena like overshoot (e.g. Jevons' paradox). We just happen to be more clever in our pursuits and found fossil fuels do the trick. So clever, in fact, that we could use formerly abundant energy sources to compensate for Leibig's law of the minimum and to fuel effective substitution of material resources.
While I'm at it I will also mention that I am skeptical of claims of efficiency increases contributing that much to decreasing intensity. There is a well documented phenomenon (related to Jevons) that a local increase in efficiency in a process is bought by a global increase in energy usage to support the technical improvement. In other words you can insulate your house to improve its thermal characteristics and save energy (and money) but the insulation manufacturing process may actually end up expending more energy per unit house served! Life cycle/whole systems EROI may, one day, demonstrate such phenomena. In general, a local optimization does not necessarily produce a global optimization. We need to be careful about using the Greedy method in decisions!
George
some of the "values" aggregated under this rubric include money created by the financial system (i.e. not tied to real wealth due to its speculative nature
That doesn't seem to make sense to me. Money supply and credit are generally understood by conventional economists to not be real wealth, and are not counted in GDP.
I took that phrase to mean the income generated by the "bankers" in financial manipulation that did not enable resources to flow to productive assets that created jobs/infrastructure/etc. Surely that is counted in the GDP, isn't it? And surely it concentrates wealth without improving the general well being.
Actually, if banking is done properly it's very valuable. Directing investment to the right projects is extremely valuable. Any activity, whether it's farming or banking can be done improperly and waste value. A big problem is that the US, and US citizens, are borrowing too much and producing too little - that's not the bankers fault (mostly).
Heck, the kind of speculation that brings future problems into the present is also very useful: we depend on the futures markets to alert us now about scarcity in the future. That's one reason why complaints about speculation raising oil prices is unreasonable: we want that to happen.
OTOH, I agree that finance in the US is out of control, and pulling in too much money which is paid out in excessive salaries, bonuses and dividends. That's classic capturing of government by a special interest.
I'm going to have to disagree here Nick. There is very little need for, and value from, banking in the modern world, despite what all the grand HSBC ads plastered all over everywhere would like us to believe. Fractional reserve banking was invented as a way to fund the European expansion and conquest of the rest of the world -- to facilitate rapid economic growth. Since continued economic growth is neither viable in most countries, nor desirable, we no longer have a need for fractional reserve banking. I'd argue that we have no more need for banking, period, at least in terms of supplying credit.
Banks do not invest anymore; what they now do is enable and promote misallocation of resources (ie, excess labour and increasingly scarce raw materials) into hopelessly misdirected pursuits to fund one ponzi scheme after the next, to skim wealth off from the middle class through defaults when those bubbles crash.
And the fact that in the US citizens are borrowing too much and producing too little (this isn't entirely true because actually US citizens have started to save more, and the banks aren't lending the trillions the Fed is handing over to them) is indeed almost totally the bankers' fault. Banks own the Fed and the Fed sets interest rates and therefore controls which bubble will next inflate and pop. And it is bankers that institute and manage currencies, and therefore it is the bankers who have set up the ponzi scheme to inflate the dollar and suppress the Yuan and subsequently fuel the catastrophic transfer of productive capacity from the US to China; so in this respect bankers are almost entirely responsible for the lack of "production" by America. Without this banker currency manipulation, on a level playing field, the Yuan would have long ago appreciated in value to offset the industrial gains China was making and the dollar would become more competitive, and America would retain some of its former glory as a manufacturing superpower (although I also have to lay blame on the luddites in American industry -- just look at the opportunities squandered over the years by the suppression of the electric car movement and the unfair subsidies granted to the oil industry)
If anything, I would presume that speculation (by the Fed's arm's length banks) is driving oil prices down.
We really have no need for banks anymore (I'd argue we never really did), other than as a depository to store our money so that we don't have to walk around with it in our pockets. We would all be just fine if there were no longer such things as bank loans, because we no longer need to produce more stuff. If and when the economy stops growing (it already has) then why would we need new loans to go buy new houses? Why not buy existing houses?
It is both. Asia and Africa is transforming rapidly, for the good of their peoples.
Loans are a very nice way to let people even out consumption over their life times, and to enable new businesses to flourish and compete (otherwise, people with ideas and drive would have to find and subordinate themselves to rich companies that are willing and able to take them on.)
This is not true. Banks do what they can to fund sound businesses and people, and overall, they do it quite well, the latest financial crisis notwithstanding.
1. America's production has increased all along, it's just that productivity has risen faster than production, so you've lost jobs.
2. The Chinese decide this mostly by themselves, and you should be glad you can convert green paper into nice goods. It makes you all a lot richer.
3. The yuan is appreciating, Chinese wages are increasing and production is starting to move back.
The global economy is growing fast, and America will pick up eventually too. Internal migration patterns and increasing population, as well as some houses getting to old and shabby, necessitates building new houses.
"It is both. Asia and Africa is transforming rapidly, for the good of their peoples."
We'll see how "good" that growth is for their peoples when Peak Fossil Fuels becomes more apparent... I tend to believe that ponzi schemes appear to be good on the upside of the bubble, but then they "disappoint" when everything inevitably crashes...
The productivity of the planet is like a pie chart -- technology is not increasing the size of the pie chart, but rather preventing it from crashing by using fossil fuels to cover up the damage we are doing. What happens when those fossil fuels run out? What happens when the environmental impacts of all of that fossil fuel use become apparent? What happens when technology gains cannot further artificially inflate the pie chart due to technological limitations? (for example, the limits in agricultural productivity we have hit with many crops -- it doesn't matter how much more fertilizers or pesticides we throw down, wheat and rice have basically hit their limits -- maize still seems to have some opportunities for improvement but this requires further fossil fuel input).
"Loans are a very nice way to let people even out consumption over their life times, and to enable new businesses to flourish and compete (otherwise, people with ideas and drive would have to find and subordinate themselves to rich companies that are willing and able to take them on.)"
Only within the framework of the current monetary system. That monetary system is fundamentally flawed because it is based on debt and usury, and this requires perpetual growth to function. When growth stops, the middle class is the first to lose out. It also throws everyone into a situation of artificial scarcity (P + I at the top is greater than P at the bottom), which then forces the middle class into debt slavery and effectively operates as a siphon to skim off excess wealth from the working class. This monetary system will soon end because growth cannot continue and there is no more middle class wealth left to skim. If wealth and control were restored to the middle class with a new monetary system based on interest-free and debt-free money issued by the government then banks would no longer exist to force everyone into artificial scarcity and debt slavery.
"Banks do what they can to fund sound businesses and people, and overall, they do it quite well, the latest financial crisis notwithstanding."
Agree to disagree.
"1. America's production has increased all along, it's just that productivity has risen faster than production, so you've lost jobs."
Production of what? Corn? How can losing the majority of the world's manufacturing base lead to greater production? And a lot of those supposed increases in production are statistical tricks where they understate inflation which then directly results in the overstatement of GDP.
"2. The Chinese decide this mostly by themselves, and you should be glad you can convert green paper into nice goods. It makes you all a lot richer."
Yes, Chinese bankers decide this... And if I was American I would definitely not be glad that I could convert pieces of worthless green paper over into nice goods, because I am aware that this is the result of greatest ponzi scheme in history which will soon end catastrophically -- I would much prefer that the money I had in my wallet was part of a legitimate monetary system that wasn't part of a scam to steal the wealth of my country and to enable me and 300 million others to consume more stuff at absurdly low prices when the planet is running out of the resources needed to make that stuff, hiding the true price signals that should be stimulating economic efficiencies, and destroying the planet in doing so.
"3. The yuan is appreciating, Chinese wages are increasing and production is starting to move back."
Yes, but domestic Chinese inflation is rising faster.
Very nice set of comments, Null; some systems thinking with no economic parseltongue. I'll repost two comments from Gail's post at her blog on the US's 65-year debt bubble that apply here as well, to put a theoretical spin on it.
http://ourfiniteworld.com/2011/10/10/the-united-states-65-year-debt-bubb...
The Maximum Power principle (MPP) says that “you can’t play for long unless you steal your opponent’s gamepieces.” And after the 1970s, and due to the US’s powerful momentum, oil prosperity, and military might, we did just that, beginning with Reagan. Through the IMF, World Bank, and other organizations, we manipulated the global currency system and achieved petrodollar status so that we could continue to expand our monetary system through expansive international loans, putting poor countries in debt to us so that they were forced to sell their resources to us at a disadvantaged “distress sale” rate. In other words, the system self-organized into a design where the US, already in power, designed new feedback loops to bring in even more power. The MPP basically says that in a situation with surplus energy, them that has typically get more. The MPP as a proposed fourth thermodynamic law explains what the second law doesn't; how energy concentrates, in contrast to how it disperses.
In descent without surplus energy, the positive autocatalytic loop stops working, and more cooperative, efficient system designs win out. Yes, dropping oil production/importation will mean less employment and eventually more strife, unless the government pulls an FDR and redistributes jobs. Since we are part of the way into corporo-political collapse, I don't think that's possible, because of all of the regulatory capture. (Orlov divided "commercial" and political collapse into two stages because of his views of the Communist collapse, but I don't think we can divide the two in this country.)
http://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.htm...
GDP measures churn in the economy, so the last two decades has been devoted to a self-amplifying spin-up of the financial, insurance, and real estate industries, bolstered by paper-trading on Wall Street. The graph at the link above suggests that the real economy separated from the FIRE economy around the same time the global per capital oil production peaked, and Reagan declared a new dawn in America based on borrow and spend.
The link below illustrates the MPP, Klein’s Shock Doctrine, or Predatory Capitalism, depending on what you want to call what we’ve done here. You can’t play for long unless you steal the other players’ gamepieces.
http://ukiahcommunityblog.wordpress.com/2011/02/16/predatory-capitalism-...
Which leads to the proposed fifth law of thermodynamics–Transformity. You shorten the cumulative length of the game the more you steal. The levels of hierarchy that we have built up in our amazingly complex system demand a new magnitude of energy inputs at each level. The higher we build it, the more impressive the downfall–kind of like the game Jenga. Fossil fuels have allowed us to winnow out our resource basis and expand our population as we borrowed more and more from overseas. The system gets more and more skewed and dependent on fossil fuels. Graceful descent then becomes less and less likely the further we go.
http://syzygyastro.hubpages.com/hub/Transformation-of-Energy-Principles
Fossil fools.
Illustration of the autocatalytic loops from Domhoff. It gives great credit to Nate who voluntarily stepped out of this arena. With awareness, we can choose to stop playing the game and adopt a different set of values.
http://sociology.ucsc.edu/whorulesamerica/power/investment_manager.html
You calling things "ponzi schemes" doesn't make them ponzi schemes.
That's a very strange thing to say.
Then we transition to other sources of energy.
That's an extreme luxury problem - to have perfect knowledge and perfect utilization of that knowledge. Stuff for sci-fi novels.
I've recently read chickens grow three times as fast and consume a third of the energy compared to the 50-ies. Mostly this is due to genetic factors. I don't think we are done improving crops and animals. Also, we are definitely not done deploying high-productivity agricultural practices throughout the world. And finally, agriculture is no problem at all - the sector has almost no employment nowadays.
No, it does not require growth to function.
This is ideological rethoric, not economics.
First, you're manufacturing more than ever. Second, the decline of manufacturing is a global phenomenon:
Third, regarding inflation, I think it's rather the other way around.
Steal by giving stuff away? Strange.
Yes, in the article I take the official GDP measurements for granted and don't get into all the issues about to what degree GDP drives actual economic well-being or happiness. These are all important issues, but my focus is on the potential role of energy in traditional growth theory.
GDP doesn't include the value of money etc. It is the value of all goods and services produced each year or all incomes received.
This is related to one of the things that I wonder about every time I see a discussion of GDP/energy. It seems to me (logically, and seemingly supported by some of Steve Keen's work) that GDP is essentially the sum of production and the change in debt. However, it seems like the change in debt is not clearly related to energy in that it involves the instant creation of fiat debt-based money. There's no energy input to this GDP component and, therefore, no energy constraint on this component's ability to increase (although other constraints likely do exist...I hope).
I think it would be interesting to see a version of figure 1 that adjusts GDP by removing the change in debt component. My gut feeling is that the correlation between energy and the productive economy (goods and services) is actually tighter than what is implied by figure 1. It just seems like the divergence in the energy and GDP lines corresponds pretty coincidentally with the massive increase in leverage we've seen in the last few decades. I'm sure that technology and knowledge improve energy efficiency/productivity over time, but I'm not sure that the degree of improvement is as significant as implied by figure 1.
Like I said, this is just a feeling, and I could easily be totally off base. I'd love to have somebody do the graph and/or have somebody conversant in Keen's work comment.
GDP is essentially the sum of production and the change in debt.
GDP is supposed to be "production" and only production. I've tried reading Keen's work, and found it....opaque. As far as I can tell, change in debt should not be involved except as a measurement error, or as a kind of shadow/reflection of the real economy.
Steve Keen is wrong on this, if that's what he said. GDP = total net domestic production = total income from domestic production = total net expenditure. The latter is the famous C+G+I+Net Exports.
You can't make sense of how much profit your small business produced last year when you leave out the $100,000 that you borrowed to cover your operating costs. Leaving out the increase of the national debt skews the data to put it mildly.
And if it's not already factored in, the effect of real (not official CPI) inflation would be heavy too. We're talking about the last several decades here.
Correct, your profit takes out the interest you paid on your loan. This net profit is the value added that is counted in the GDP.
There is a lot of controversy about what is the correct way to adjust for inflation. Adjustments to the US stats have reduced the measured inflation and as a result increased the estimated economic growth. This then affects how much change in energy intensity we see.
GDP isn't about profits. GDP is about production. Leaving out debt in production figures leaves ... production figures.
I don't understand Keen either, but is he, Keen, trying to get his head round the notion that 'debt' drives growth of GDP during a period of increasing labour productivity (e.g. petroleum-enabled averaged productivity - a period when it was sufficient to 'just invent the tools' and find uses for 'surplus labour'), and then during a follow-on period, 'debt' temporarily drives consumption, as in advanced economies in the last decade, also raising GDP? Then we reach a stage as now, when 'debt' can no longer be 'rolled-over', and must contract, and GDP declines?
Keen argues that a change in debt contributes to GDP. If you make $100 in income and borrow an additional $10 then you have $110 to spend.
Keen also argues that the change in GDP is a primary driver of employment because companies hire when they see an improving trend.
Therefore, employment is linked to the acceleration of debt.
Sure, debt is related to GDP, but that doesn't mean the two things are the same thing.
Just because something helps GDP grow doesn't mean that it's part of GDP.
If the President goes on television and tells everyone to go out and spend their savings instead of putting in the mattress, that will help GDP. That doesn't mean that we count that speech as more than whatever a few hours of presidential time normally contributes to GDP.
I need to read more of the great links posted here but I think in functioning markets any excess accrued debt would be factored into GDP through subsequent rising interest rates and slower growth. But today we don't have functioning markets, what we have is farcical absurdly low interest rates, about 1000000 X lower than what they should be based on fundamentals, allowing debt to be piled onto debt in the final throws of the longest lasting fiat currency in history -- about 40 years. We now have complete market manipulation from central banks printing money to buy further debt, with the resulting inflation being hidden by 1) near zero interest rates, and 2) deflation from a collapsing economy. So prices aren't going up nearly as high as they should be, but still significantly. This is stagflation.
We also have a totally screwed up global system of trade and reserve currencies (the dollar being the prime example, followed by the Euro) which are held as assets by other countries (China up to late), thus artificially inflating the value of those currencies and conversely artificially suppressing the purchasing power of Renminbi by not allowing it to be held as a reserve currency. Basically -- the greatest ponzi scheme in history, where no numerical financial analysis based on "fundamentals" can have any real relevance.
Plus the official CPI inflation numbers have become increasingly fantastical over the last few years as the government tries to hide its printing of 20 trillion dollars to bail out the derivatived-out financial system. So I think the apparently improving GDP-to-energy-used ratio, based on the official numbers, may be wildly overstated since GDP is now significantly overstated.
And a decreasing overall EROEI would also tend to drive this ratio back down. I don't see average gas mileage improving that much just yet but I do see an EROEI of about 1 or 2 for the Alberta tar sands, with a quarter of Canada's natural gas production going straight to Alberta just to turn tar into oil.
Assume a house is sold during a housing bubble for $100,000 more than the previous price, with borrowed money, by the buyer.
If this is counted as GDP, then it seems to me that the increase in the value of the transaction and the borrowed money are part of an increased GDP and little energy is expended for it.
It isn't counted as GDP.
The sale of a house is not counted as GDP? I do not understand why not.
What other items are not counted as GDP when they are sold?
Gross Domestic Product measures what has been produced; simply shuffling ownership from one person to another doesn't produce anything, and so doesn't contribute.
It couldn't be any other way, really - having two people sell the same house back and forth between themselves 1000 times doesn't produce anything of value, so it's correctly noted as not contributing to the economy.
(Note that services are considered part of GDP, so a realtor's time spent facilitating a sale would add to GDP, based on my understanding.)
All of them. GDP is about what gets made, not what gets sold.
Note how inventories affect GDP; producing goods and sticking them in a warehouse counts towards GDP, so those goods are not counted a second time when they're taken out of the warehouse and sold.
GDP is about what gets made, not what gets sold.
Well, that is oversimplifying a bit. I think it is more accurate to say it is what gets made, that is intended for sale
From you link on "produced";
So what happens when something is produced, but never intended to be sold, and is never recorded as an "inventory"?
For example, if I put some solar panels on my roof, and offset half my energy consumption, the amount of energy produced and sold but the electric industy is reduced by the same amount. But there is no way for the official figures to account for what I have produced, so the official GDP number is decreasing.
Same if I grow my own tomatoes, or decide to bake my own bread. The same amount of flour is still being consumed, but there is now one less loaf being sold(and reported) each day, so GDP is again decreasing, even though total production has remained the same.
So, I would say GDP is about what gets made, that is intended for sale. This is why many third world countries have artificially low GDP. If every household grinds their own grain, bakes their own bread, grows their own vegetables, instead of buying them all from someone, the GDP numbers are much lower., even though the exact same amount of food is being produced.
I will concede that in a western economy the amount of home, or unrecorded production (the "cash economy")is very small in relation to the official GDP, but still, GDP is an imperfect measure - except in the economists idealised world.
As more people grow their own food and produce their own energy, and do work for cash, we will see apparent decreases in GDP (and tax revenues) and worried politicians, but it doesn't necessarily mean that people are eating less - just that they are using the politicians accounting system less. And, really, who can blame them?
Good point Paul. This is why our governments and banks really don't want the average person to become energy self sufficient and (more) food self sufficient, because then they'd be buying less stuff and therefore tax revenues would dry up. They want and need us to become increasingly dependent on buying stuff. Without this dependency the western economies would collapse because the US economy is based 70% on consumption.
It's a fundamentally flawed system where the economy will collapse unless products (and therefore the resources needed to make those products) are consumed in exponentially increasing amounts. It literally is a ponzi scheme. We're damned if we do and we're damned if we don't. If we don't consume and instead all become better conservationists and ride our bikes around everywhere then the monetary system collapses. On the other hand, if we continue consuming on this exponential trajectory dictated by our monetary system then ultimately resource depletion will destroy us in a final Malthusian catastrophy. And ironically when this collapse happens we will all be DEpendent on that very system, not independent, and therefore even less prepared to fend for ourselves when the system stops. It is insane and amazingly, the vast majority of people out there truly believe that the way to help the economy is to "buy more stuff". Ummm, no ... that's "how to inflate a ponzi scheme".
This is why our governments and banks really don't want the average person to become energy self sufficient and (more) food self sufficient, because then they'd be buying less stuff and therefore tax revenues would dry up.
IIRC there was a point in European history when it was illegal for the average person to own a flour mill.
Only the landed gentry were allowed to own a flour mill, and every person who brought grain to be ground was required to hand over a significant percentage of it as taxes (or payment for the grinding "service").
Resource capture, enclosure, extortion. The song remains the same.
Gross Domestic Product measures what has been produced
Here I think is the most profound error of all -- not pointing fingers at OP, but at the common parlance of our times.
Nothing is "produced" by human industry. Matter is not created. Matter is transformed -- generally from a low-entropy to a high-entropy state, from potential usefulness to "waste". Energy is consumed -- that is, dissipated or dumped into a sink which in turn has limited absorption capacity.
When we talk about oil "production" for example, we kid ourselves. No one is "producing" gasoline: we are consuming reserves of crude oil, and we are spending more oil to transform the crude oil into more useful refined products like gasoline. Similarly, when we produce houses we destroy (among other things) trees -- often entire mountainsides' worth of forest, often with collateral damage that includes whole watersheds, accumulated topsoil, etc. We don't "produce" anything. The food/sunlight web creates biotic wealth; original planetary/volcanic/tectonic activity concentrated mineral ores in certain locations from which we remove them; millennia of biotic wealth were compressed/concentrated in locations from which we remove them (in the form of oil and coal). But we "produce" nothing, we just move stuff around and expend energy transforming it into other stuff.
We use the word "produce" as if we produced a rabbit out of a hat -- creating something from nothing. This is one reason why economists remain blind to "externalised costs" (the destruction and high-entropy outputs of our "productive" activities) -- the word itself obscures the underlying physics. We say "coal production is up" without having to remember or admit that what this really means is "coal destruction is up" -- we are burning it, transforming it into a high-entropy output which cannot be reconstituted (on any time scale meaningful to our civilisation anyway).
The only thing that "produces" is plant life, and even that is really transformation: capturing solar energy (plus trace amounts of minerals) and transforming it into sugars, etc. Only because of that transformation (capturing an external-to-the-planet energy source and transforming/concentrating it) can plants multiply, "producing" more plants which in turn are consumed by animals which "produce" more animals. Remarkably, the food web manages to re-use its "waste" outputs seamlessly as inputs -- they are reconstituted, after several stages of microbial activity, as more plants. To put it in cartoon form: Bear shit turns into trees. Trees stabilise soil, capture and respire water, provide shade and enable permanent stream and river formation. Appropriately shaded streams and rivers harbour recurrent salmon migrations. Bears eat salmon. Bear shit turns into trees. Closed-cycle reprocessing. The food web is able to produce a surplus each year (animal populations and species diversity grows towards a climax ecosystem), but that surplus can never be more than the energetic content of a year's worth of sunlight each year. Localised negentropy, but no miracles (unless you count the remarkable, crazy niftiness of life itself).
Burnt coal, however, doesn't turn back into more fresh coal. Combustion is just plain entropy, with no neg about it.
Basically, our planetary budget consists of a fixed quantity of minerals and rocks [modulo the occasional and relatively trivial addition of meteoric arrivals], plus a relatively fixed quantity of water, plus a remarkable assortment of evolved micro and macro flora, plus a yearly allowance of solar energy which the flora can capture and transform to make it directly available to other flora and herbivores; large carnivores live on the surplus of two layers of mediation between them and sunlight; but all biotic existence on the planetary surface is predicated on the transformative activity of plants and the external input of sunlight. [1] Humans are consuming more and more of that surplus, plus drawing down the fixed capital of minerals and accumulated "savings" of previous biotic activity. That's what we mean when we talk about "production".
There really isn't anything else. Everything we call "production" is actually destruction/transformation of some other resource, with associated dissipation of energy. We don't produce. Plants and micro-organisms produce, or rather, transform received sunlight into a modest annual biotic surplus. We live off that surplus. I wish we could stop talking about "production" and start talking about "extraction," "combustion," and "transformation." But that would mean outing the man behind the curtain.
[1] I qualify "surface" here because of the strange and interesting critters living around the "black smokers" far from sunlight on the ocean floor. they're chemoautotrophs, harvesting energy from the hot core of the planet, another fixed quantity established during planetary formation. the food chain is similar though: micro-organisms as the basis, with a pyramid of heterotrophs built on their transformative activity.
Which is why we need to live off of current solar income (wind, solar power, hydro, wave, etc) with some nuclear, perhaps; and recycle our captured mineral wealth.
That will work: current solar income is 100,000 terawatts, far more than the roughly 12-20 TW humans currently capture for their use.
The amount of sunlight is somewhat irrelevant. What is relevant is what proportion of that can humans safely divert for their own use. Similarly for drawing energy from the indirect sunlight of earth's other energy systems, and for damming rivers for hydro. There will be an impact no matter what we do but we need to ensure that impact is as minimal as it can be and still give us a reasonably happy and satisfying existence.
Remember that 100% of the sunlight that falls upon this planet and is not reflected back, is currently employed in sustaining life and powering the earth's energy systems, and those energy systems have some use for maintaining our current climate and environment. Of course, we're now altering things somewhat but you get the idea.
I think science is only now starting to look at how much energy we can safely divert.
Then start with that which falls on roofs. Cuts down on distribution infrastructure too.
NAOM
100% of the sunlight that falls upon this planet and is not reflected back, is currently employed in sustaining life and powering the earth's energy systems, and those energy systems have some use for maintaining our current climate and environment.
A large percentage of the sunlight that falls upon the planet is simply reflected. If we change the albedo of the earth slightly with PV or CSP, it's pretty trivial to adjust for that by changing the albedo of other human infrastructure.
Similarly, a large percentage of the sunlight that falls upon the planet is very, very quickly turned into heat. Capture of some light with PV or CSP and then into space heating, EV power or lighting simply delays that transformation for a few hours.
The percentage that is used by vegetation is well below one tenth of one percent. We're not in much danger of hurting the earth's ecosystem by using solar power.
A new house sale is "production". That's part of GDP.
An existing house sale is not production (it's just property changing hands), and isn't part of GDP.
That makes no sense.
What if I buy a fixer-upper house (a dilapidated one), fix it up and sell it?
Haven't I "produced" something that wasn't there before (the fixed up house)?
You have, but it isn't measured if you do it in your spare time (except for the stuff you buy to do the job, of course). If you employ professionals to fix it, their work will be included, but most non-salaried production simply isn't captured by GDP.
Thank you for your explanations. It makes me wonder how the costs of production of many things are determined in GDP.
For example, how do they know how much the builder paid for the lot and building materials? From what you indicate they should not be a part of GDP for the production of a new house.
If it is the profit that is counted as GDP, how does a bubble of inflated sales price fit into GDP?
And how does it get counted if the builder has to sell at a loss?
The whole thing is a farce.
However, with the right dosage of mental manipulation and with clever choice of a cool-sounding label (brand name) as well as a 3-letter acronym, "G-D-P", the thing is given the illusion of legitimacy.
You can get to GDP in three different ways and in principle the result should be the same: You can sum up a country's production, its incomes or its expenditures. Yields the same result.
The expenditure method goes by the formula:
GDP = private consumption + gross investment + government spending + (exports − imports)
A common way of calculating GDP by income is:
GDP = compensation of employees + profits + taxes less subsidies on production and imports
And by production:
GDP = Value of output – Value of Intermediate Consumption
There's a number of variations of the formulas, of course.
Great paper and good comments. Taking into account the energy transformity (quality) between FF's and electricity was brought up in the paper and may be an even larger factor in explaining the divergence of these GDP vs Energy curves.
Thanks for this post.
Figure 4 showing how including traditional biomass transforms the 'rise and fall' picture of Energy/GDP ratio is very important.
Angus Maddison was one of the few people to stick his neck out a give some estimates of global traditional biomass use. Everybody else just seems to have ignored it.
But traditional biomass is still very important in developing countries and perhaps there are lessons to be learned from the past on how the Energy/GDP ratio can be improved without the use of fossil fuels.
BobE
A few observations / questions from Figure 4. The inflection in modern fuels around 1920 - is that the ICE kicking in? During WWII efficiency seems to have ticked up significantly - domestic energy savings in favor of wartime production? And post WWII traditional fuels play no part in generating GDP - there is a message in there somewhere I think?
Finally, on current trend, by 2070 we won't need energy to generate GDP.
During WWII efficiency seems to have ticked up significantly
Either GDP went up, or energy consumption went down. I'd say partly because GDP increased because WWII followed the Depression, but probably mostly because domestic consumption fell: the US was sending some of it's oil to both it's allies and it's own overseas armed forces, while suppressing domestic driving.
"on current trend, by 2070 we won't need energy to generate GDP."
Perhaps there will be neither energy nor gdp? '-)
Is there any hint of a curve setting in that would extenuate that possibility indefinitely?
BobE
Interesting point.
EDIT Figure 4. for the USA can be illustrated by examples from farming both in USA and UK, and even more recently farming across much of Europe. I explore a little how these changes might differ or compare with changes taking place in Asia and elsewhere.
In living memory near my house in England, 27 pair of Shire horses on one large farm did most of the farming, fuelled on local biomass. In USA Peak Horses on the Great Plains was in the 1920s.
(Increasing 'horse-productivity' had been obtained fairly frequently by invention of new 'apps' over the preceding 180 years.)
On the other hand, petroleum 'horse-power' and synthetic N fertilizer use both more than doubled in 4 years in UK during WWII (50% more plowed land with only 10% extra agricultural workers), followed by a period in UK from 1960 when grain yield per cultivated acre doubled, and the agricultural work force fell markedly.
I do not pretend to properly understand the economics of substituting hand labour on the farm by horses or petroleum fueled machinery. EDIT Substitution by horses was and is not applicable in many traditional comparatively high-yielding areas, e.g. in China, and other highly-populated parts of Asia where yield per hectare and yield per person have both been increased substantially in recent 4 decades by N fertilizer application. These gains in yields per person have not been secured until very recently by introduction of very much machinery. If petroleum fueled machinery substitutes for hand labour the 'surplus' human labour must both find employment and 'consumption' elsewhere? Very tense situations, only partially resolved, are developing in the vast majority of the world that is not 'us'?
A number of fascinating points.
First, we see that OECD industrialization was not based on "cheap energy". Figures 3 and 4 make it quite clear that energy was much more expensive before WWII. Energy could become significantly more expensive than it has been in the last 40 years without endangering our economies. Wind and solar (and nuclear) are much cheaper than pre-WWII fossil fuel energy, and only slightly more expensive than the cost of post-war FFs when FFs were at their post-war cheapest. So we can shift to new energy sources without endangering our economies.
2nd, " Evidence also shows that trade does not result in reductions in energy use and pollution in developed countries through the off-shoring of pollution intensive industries." In other words, falling energy intensity in the OECD is not due to outshoring.
3rd, effective use of energy (aka "work", or "exergy") is important, but primary energy inputs...not so much. IOW, efficiency is more important than the volume of coal, or oil, etc.
4th, "when effective energy - the product of the quantity and quality of energy and the level of energy augmenting technology - is scarce it will strongly constrain economic growth, but when effective energy becomes more abundant it is much less of a limiting factor". Currently the OECD in general and the US in particular can be come much more efficient - this means that there is a lot of "slack", or reserve, available to power a transition to new forms of energy.
5th, that quote just above also means that our economies are not tightly controlled or determined by FF inputs.
Nick
Re: "Figures 3 and 4 make it quite clear that energy was much more expensive before WWII."
That does not follow. Please read more carefully.
The graphs show historically energy was a much higher portion of GDP (or a higher fraction of personal income), NOT that it was "more expensive" in real dollars.
e.g., See James L. Williams' Oil Price History and Analysis
The real price of oil was about flat near $20/bbl for 100 years from about 1876 to 1974. as well as between about 1984 to 2002, the first and second major OPEC caused oil crisis periods.
Nate,
1) the fact that energy pre-WWII was a much higher portion of GDP means that it was a much heavier burden on the economy. If wind and solar are a little more expensive, that means that the wind/solar sector has to be a little larger than otherwise to power the rest of the economy. This analysis suggests that this is not a big deal: that sector would still be a much smaller portion of the economy than pre-WWII.
2) the fact that oil's price was pretty flat pre-1974 is irrelevant to most of the history of US industrial growth, as oil was unimportant before WWI, and especially before 1900:
US 1900 5% of energy from oil:
oil: .4 quads (174k bpd @5.8Mbtus/b)
coal 7.2 quads (275M tons/yr @26Mbtus/ton)
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS2&f=A
US 1913 10% of energy from oil:
oil: 1.4 quads (681k bpd @5.8Mbtus/b)
coal 14.6 quads (560M tons/yr @26Mbtus/ton)
Re: "pre-1974 is irrelevant"
The actual data shows a continuous rapid growth.
Tad Patzek "Peaks"(Slide 19) where he shows US Oil production grew 9.1%/year for 80 years from 1870 to 1950
The actual data shows a continuous rapid growth...US Oil production grew 9.1%/year for 80 years from 1870 to 1950
Yes, but it started at a very low level, right? Again, oil was only 10% of US energy consumption as late as WWI. The US started the industrial revolution many, many years before that.
--------------------------------------------------
I'm fascinated by the presentation, which is from 2006. Take a look at page 26, where we see that by 2011 natural gas production was going to fall off a cliff! I'm reminded of Hubbert's analysis in the late 1970's, which also predicted that NG would fall off a cliff: in the 1980's!!
Also, see page 20, which entirely fails to anticipate the recent reversal in the decline of US oil production.
I think we can see some limitations to Hubbertian analysis here...
"The US started the industrial revolution many, many years before that."
Just to be clear: The industrial revolution started in the English midlands at the beginning of the 18th century, almost 100 years before there was a "US"
How about ""The US started it's industrial revolution many, many years before that."?
Nick
Re: "5th, that quote just above also means that our economies are not tightly controlled or determined by FF inputs."
That is wishful thinking, not supported by the evidence. Stern only says that some reduction is possible in energy per GDP.
e.g. an electric fluorescent lamp or LED light is much cheaper and uses much less primary energy per light output than a kerosene lamp. See:
Technical and Economic Performance Analysis of Kerosene Lamps and Alternative Approaches to Illumination in Developing Countries Evan Mills, Energy Analysis Dept. Lawrence Berkeley National Laboratory June 28, 2003
i.e. technological advance can reduce energy per physical output. However, when energy use drops below that improved relative technology level, you loose the service provided by the energy.
See Robert L. Hirsch, The Impending World Energy Mess for further perspective on the consequences of the loss of transport fuel, showing that GDP will likely decline in direct proportion to declines in transport fuel in the near term.
If fossil fuels are replaced by renewable transport fuels then yes it is possible to decouple from fossil fuels - but not "green energy" per say - which is commonly pushed as electricity, and almost all cars do NOT run on electricity.
Stern only says that some reduction is possible in energy per GDP.
He says quite a bit more than that. He says that GDP has grown much more quickly than energy consumption. If "some reduction is possible in energy per GDP", then some increase in GDP is possible while keeping energy consumption flat or falling.
Hirsch's analyis is enormously superficial - he provides no evidence at all for the idea that GDP will likely decline in direct proportion to declines in transport fuel in the near term. It's obviously wrong: the US has reduced it's consumption of oil by 10% in the last 4 years, while GDP has grown. And that's not due to off-shoring: the world's GDP has increased quite sharply since 2004, even while oil consumption was pretty flat.
The average US car gets 21MPG - new US cars get more than twice that without even going hybrid. It's perfectly obvious that the US could reduce it's oil consumption sharply while still growing economically.
Re Hirsch "provides no evidence"
Only because you have not studied his presentation: e.g. see
Hirsch ASPO 2010 keynote: Slide 12
"while GDP has grown."
Only because of inflation.
Real GDP declined 1% from 2007 to 2010
See US Bureau of Economic Analysis
Current-dollar and "real" GDP (Excel)
Try being factual in your arguments.
Only because you have not studied his presentation
Oh, I've studied his reports in detail. That's where the devil is.
Now, if we look at slide 12, we see a loose correlation. Correlation is not causation. Have you ever looked at the same chart, but looking at copper instead of oil? You'll see an even closer correlation.
Real GDP declined 1% from 2007 to 2010
Yes, US GDP declined from it's peak, and it had not yet recovered back to that peak by 2010. But, that's not the period I referred to. I said: "the US has reduced it's consumption of oil by 10% in the last 4 years, while GDP has grown. "
And, that's true: US GDP has now recovered to a level above that of 2007.
So, please try to be more attentive to detail and up to date in your arguments. Or...we can avoid entirely comments that seem to be veering towards the personal....
While we're on the topic, it's worth noting that US Net Imports have declined even further: about 25%. Consumption has declined, while production has increased. Seems to suggest that market pricing still has at least some effects on energy...
According to: http://www.data360.org/pub_dp_report.aspx?Data_Plot_Id=768
GDP, four qtrs through April 2011, is still below 2007 in real $.
Imports are about 6% above 2007 in unadjusted dollars. Maybe down 2% in real dollars according to BLS:ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
Where do your numbers come from?
My GDP numbers were from the US BEA: http://www.bea.gov/national/xls/gdplev.xls
Now, the numbers in the 2nd quarter, and at that point are only .4% below the 2007 peak-the 3rd quarter has ended, so we've likely regained that .4%. If not, would it make a difference to the basic point?
Oil imports are sharply down when measured in barrels, which is the usual method, especially on TOD.
Net imports peaked at 12.48M bpd in 2005, and now are down to 9.07M bpd, for a total reduction of 27%. Meanwhile, GDP rose by about 5%.
He says that GDP has grown much more quickly than energy consumption
Of course another way of saying that is that each unit of energy now provides more units of GDP than it used to--which means that if you remove units of energy a greater number of GDP units are now removed with them. Of course using energy more efficiently could ameliorate that depending on the rate of efficiency increase. But spending more energy just to produce energy does remove energy from the economy that would have been available for other work. Of course the dog chasing its tail effect of spending more energy to get energy still shows up as GDP growth (if the energy is produced domestically) but it likely loses much of its multiplier power even in GDP calculations as it is effectively a tax on all households who's consumption makes up 2/3 of GDP.
The average US car gets 21MPG - new US cars get more than twice that without even going hybrid.
but does the average new US car get better than 42mpg?
if not it certainly is not
perfectly obvious that the US could reduce it's oil consumption sharply while still growing economically
at least in the near term.
if you remove units of energy a greater number of GDP units are now removed with them
As you note, that's only if energy efficiency can no longer be increased, which is unrealistic in the current situation.
spending more energy just to produce energy does remove energy from the economy that would have been available for other work.
Which would be a problem if we didn't have an enormous surplus of energy currently.
does the average new US car get better than 42mpg?
They could - that's just a social choice.
at least in the near term.
And in the long-term: if everyone drove EREVs like the Volt the US would eliminate 50% of oil consumption. Move trucking to rail takes care of another 10%. The remaining 40% varies in it's resistance to substitution, but in the end we don't need oil for anything we do now, and we have quite a long time to get there.
As you note, that's only if energy efficiency can no longer be increased, which is unrealistic in the current situation.
its the rate of energy removal/rate of efficiency gain that matters. It could be a very bumpy road with bottlenecks (seems to be my word of the week)
Increasing the percentage of energy needed to produce energy can be a big drag on the economy--of course if the new more expensive energy is being produced domestically and is replacing cheaper energy that was bought abroad the net effects short and long term are much more complex. Debates have run long and heated here on just how much wind and solar really cost. The big two questions 1. how much extra energy it will take to produce just what we use now (counting transport) with them? 2. and how will it be financed? That is why I have to agree with ROCKMAN that to keep things rolling coal coal and more coal will probably be at least the US answer. Don't know that we 'are smarter than a fifth grader' by locking in on that one.
And in the long-term: if everyone drove EREVs like the Volt the US would eliminate 50% of oil consumption
well if westexas is right on his ANE projections we'd best 'gets to hoppin' on that one.
its the rate of energy removal/rate of efficiency gain that matters. It could be a very bumpy road with bottlenecks
No question. OTOH, we could reduce our oil consumption in weeks by 10% with carpooling, with not much inconvenience. We could get 25% with carpooling, though with a lot of inconvenience. But, everyone would still get to work. And, we could reduce oil consumption by 25% in 15 years just by doubling MPG, with no inconvenience at all.
Increasing the percentage of energy needed to produce energy can be a big drag on the economy
Windpower has a high E-ROI, probably 50:1 - that's higher than oil, now. So, going to wind won't really increase the % of energy needed.
how much extra energy it will take to produce just what we use now (counting transport) with them?
It will take much less: a gallon of gas has about 35kWhs, and will take the average US car 21 miles. 35kWhs in an EV will take you about 100 miles.
how will it be financed?
Utilities can pay for it out of revenue.
coal will probably be at least the US answer
Could be. It doesn't have to be, but the coal industry may continue to succeed in buying Congress and the media.
we'd best 'gets to hoppin' on that one.
Yes. Of course, the US has reduced Net Imports by 25% in the last 4 years, so we're on the way.
Nick, unfortunately, some of that 25% reduction was due to the higher unemployment rate and reduced industrial production. Hopefully we can reduce the oil demand further without those negatives occurring.
some of that 25% reduction was due to the higher unemployment rate and reduced industrial production.
Well, the economy has grown to a point higher than where it was 4 years ago (in terms of both general and industrial production), while oil consumption is 10% lower. Combine reduced consumption with increased production and we get a sharp reduction in net imports.
For better or worse, labor productivity keeps growing whether we need it to or not, raising unemployment in periods when production isn't growing fast enough.
Hopefully we can reduce the oil demand further without those negatives occurring.
I agree. It's very, very possible. Heck - just choosing higher MPG vehicles (much higher, ideally) will get us most of the way.
Care to explain that to me in more detail?
A gallon of gas has the energy equivalent of about 35kWhs, but the average US vehicle only uses about 15% of it in it's small, inefficient infernal combustion engine. On the other hand, the electric motor in an EV is roughly 90% efficient.
FWIW, the Chevy Volt is rated at 93 miles per gallon-equivalent (33.7kWh), so 100 miles is a pretty reasonable ballpark estimate.
Yes, thanks.
Also, the Nissan Leaf gets 99 equivalent MPG.
The Volt is handicapped a bit by being a 1st generation Extended Range EV - the 2nd generation will get better, with improved charging efficiency, aerodynamics, batteries and a custom ICE generator/engine.
It will take much less: a gallon of gas has about 35kWhs, and will take the average US car 21 miles. 35kWhs in an EV will take you about 100 miles.
This is where you seem to miss the point. How many kWhs are expended in delivering the gallon of gasoline to the car? That is the important number, not how many kWhs the gallon contains. Then you calculate how far the kWhs expended to deliver the fuel to the car will carry the car. That will give you an apples to apples comparison with an EV mileage. An ICE rig could waste ninety-nine percent of the solar energy stored in the gallon of gasoline and still get better 'mileage' than an EV using its electric supply with ninety-nine percent efficiency if kWhs expended delivering the gasoline to the car was a small enough number. We didn't expend any of our effort storing the energy in fossil fuel, we only expended it in delivering (the whole process from exploration through to the gas pump) the gasoline to the car.
I guess I'm not really clear on your point. Oil in the US probably has an E-ROI of about 5, so a gallon of fuel at the pump probably means 1.2 gallons of fuel total. On the other hand, delivering the electricity to the point of EV charging probably has similar overhead: 7% transmission losses, etc.
Again, windpower has a higher E-ROI than oil at this point (50:1 versus about 10:1). In other words, we don't expend much energy procuring the power for an EV.
I do not believe the wind power has an ERoEI of 50:1 at the household outlet, it is more complicated than that, but that is not important here.
It still takes 1 kWh of produced energy delivered to the EV to take it set distance. It also takes 1 kWh of energy to produce a certain amount of liquid fuel delivered at the retail pump that will take the ICE a set distance. Those are the kWhs and distance numbers we must compare, not the total potential kWh of the what could be gleaned from burning the fossil fuel. The kWh used to deliver the gasoline to the pump could theoretically come from the same wind source that the kWh used to charge the EV comes from. Of course in practice that is not going to happen, but this key post is about GDP economics, little inconveniences like that are totally ignored in those type calculations.
You and I are really talking about embedded produced energy. If the homeowner's wind gen or solar panels are powering the car, we will only have to consider the kWhs required to make, install and operate the products that deliver the power to the EV, not the actual power required by the EV since we put no effort into producing the sunlight or wind but only into the harnessing of it. This gets extremely complicated and is why embedded energy numbers are generally so suspect (determining the energy embedded in a dollar of capital is a can of worms that elicits near endless debate-but the total kWh embedded in any item must include that as well). But regardless of all the twists and turns, the actual kWhs a kilo of fossil fuel could theoretically produce are not important in the calculations. We just need to know how many kWhs that kilo sucked up in getting to the end use point and how much work (and will call moving a car work for these purposes) was done with them.
If I understand you correctly, you're really talking about the E-ROI of oil vs alternatives.
If oil has an E-ROI of 5:1, then it takes an input of roughly .2 units of energy to deliver 1 unit of energy. Similarly, if wind has an E-ROI of 50:1, then it takes .02 units to deliver 1 unit.
Now, there are other considerations, such as the cost of the grid (transmission & delivery to the homeowners outlet); the fact that oil isn't scalable, while wind, solar and nuclear are; and the fact wind and solar have intermittency. That last is a long discussion, but suffice it to say that it's not a big cost until wind & solar become a large percentage of the grid: above 35%.
obviously something huge is missing somewhere if 50:1 is the wind number and much lower ERoEI coal is a more preferred large scale generation method.
this is going round and round, lets get back to where this started
It will take much less: a gallon of gas has about 35kWhs, and will take the average US car 21 miles. 35kWhs in an EV will take you about 100 miles.
The number needed for your comparison is how many kWhs it takes to get that gallon of gasoline to the car pure and simple-not the kWhs in the gallon of gasoline or the ER0EI of wind. Like I said earlier wind could theoretically supply all the kWhs that the gasoline needed to use in order to get to the car. Then when you have the kWhs used to get a gallon of gasoline to the car you see how far that car gets on those kWhs. Then you can compare that to how far an EV goes on the same number of kWhs. That is all I'm aiming at. Pretty simple in my mind, but I don't seem to be expressing it simply.
obviously something huge is missing somewhere if 50:1 is the wind number and much lower ERoEI coal is a more preferred large scale generation method.
First, I have the impression that coal's E-ROI is still fairly high, at least as long as we don't include pollution and other externalities.
2nd, when E-ROI gets over anything around 10:1, it starts to lose it's meaning. Consider: you have a choice between picking up 100 gallons of fuel at two locations. The first location allows train travel which consumes 2 gallon of fuel, but 20 hours of travel. The other requires car travel that consumes 4 gallons of fuel, but takes only 4 hours. You save 16 hours of travel time by consuming two more gallons of fuel - when fuel costs $3/hour the choice is obvious, right? You take the car, despite moving from an E-ROI of 50:1 to "only" 25:1.
The number needed for your comparison is how many kWhs it takes to get that gallon of gasoline to the car pure and simple
Boy, I'm still confused. Why would we use electricity to move fuel to a car? Why not power an EV with the electricity?
Boy, I'm still confused. Why would we use electricity to move fuel to a car? Why not power an EV with the electricity?
Was there electricity in the a gallon of gas has about 35kWhs?
Is that starting to make it clearer? Probably not.
What I'm trying to make clear is that it for this comparison we are only interested in how many kWhs it takes to deliver a gallon of fuel to the car and how far they take it. Make all produced kWhs equal for this calculation--oversimplified yes but far more accurate than
It will take much less: a gallon of gas has about 35kWhs, and will take the average US car 21 miles. 35kWhs in an EV will take you about 100 miles.
2nd, when E-ROI gets over anything around 10:1, it starts to lose it's meaning. Consider: you have a choice between picking up 100 gallons of fuel at two locations. The first location allows train travel which consumes 2 gallon of fuel, but 20 hours of travel. The other requires car travel that consumes 4 gallons of fuel, but takes only 4 hours. You save 16 hours of travel time by consuming two more gallons of fuel - when fuel costs $3/hour the choice is obvious, right? You take the car, despite moving from an E-ROI of 50:1 to "only" 25:1.
no doubt time is something very big, and time is intrinsically tied to the value of capital. ERoEI, though helpful for comparison, does not exist in a timeless vacuum and that is point often overlooked on this site.
we are only interested in how many kWhs it takes to deliver a gallon of fuel to the car and how far they take it.
That sounds like E-ROI?? As far as I know it takes about .2 joules to deliver 1 joule of petro-fuel (gas or diesel) to an ICE car, if you include exploration, production, refining and delivery. And, it might take something close to that for wind power, if you include all of the transmission and delivery overhead (I'm not sure we should include transmission losses - that's kind've more efficiency than an energy input, but I'm throwing that in): .2 joules to deliver 1 joule of electricity to an EV car.
But...1 joule of electricity will propel an EV 3-6 times as far. And, windpower joules are as cheap as oil; far cleaner; domestically produced; and are far more abundant.
Well you are getting closer. Here is the difference. That joule of produced energy delivered to the EV could deliver five gallons on gasoline to the pump--using your numbers. So on miles/produced unit of energy between the EV and and a 21mpg ICE rig it looks like it is about a wash at this time. Another way of looking at this is that by using some of the stored solar energy joules in the liquid fuel we don't have to generate as many joules elsewhere.
I have not been arguing the merits of one energy source or the other here, I was just trying to get you to this point. And of course earlier you said new ICE vehicles can get over 40mpg which would mean, using your numbers, a 40+mpg ICE rig would go about twice as far on a joule of produced energy as an EV. Oddly enough that appears to be what the market is saying as well.
We don't need to start talking about night load charging or on the other side of the coin maximum wind integration to the system here, those items merely point up the fact tha all joules are not created equal. Personally I think using the plentiful, if increasingly difficult to extract, oil supply we now have to responsibly build high qaulity hydro, wind and solar generation along with intelligently intergrated electrified light and heavy transport infrastructure is the only way to go. The energy density and thus portability of oil is likely to give it many heavy construction advantages for a while to come.
So on miles/produced unit of energy between the EV and and a 21mpg ICE rig it looks like it is about a wash at this time.
We're not really making progress here. The EV will go 3-6 time farther than the ICE vehicle on the same number of joules.
that appears to be what the market is saying as well.
The market is responding very strongly to EVs - there's a big order backlog for Leafs and Volts. OTOH, fuel is badly under priced and EVs are still in their first generation (with modern batteries), so EVs are still only slightly cheaper than ICEs over their lifecycle - but that will change.
The energy density and thus portability of oil is likely to give it many heavy construction advantages for a while to come.
Have you used portable power tools lately? The battery powered versions are more powerful than the line-powered versions.
Electric motors have many advantages over ICE engines, and I expect extended range EVs to take over in construction. Of course, like any industry change will be slow, just due to inertia...
I did the calculations a while ago and a gallon of oil would power an ICE about the same distance as an EV, once you consider converting that oil over into electricity. But the advantage of EV's is they aren't dependent on that oil like an ICE is. With Alberta tar sand derived oil, you can instead take all the natural gas that was needed to make the oil and just burn it to make electricity and then drive the EV as far as the ICE would go on the tar sand oil you'd no longer be producing because you bought an EV instead of an ICE.
you can instead take all the natural gas that was needed to make the oil and just burn it to make electricity and then drive the EV
Seems easier, doesn't it?
Yes it sure does. I don't want to get sucked into the whole debate you are in here with others, and I don't have enough experience following your posts, but I have to fully agree that EV's offer a fantastic opportunity to lessen our impact on the planet and continue to enjoy technology. I tend to agree that the anti-technology doom and gloom attitude of many posters on TOD is a bit unwarranted and speaks to higher agendas or mindsets that aren't willing to accept certain uncomfortable facts.
The fact is: in terms of energy, we would need 400 x 400 km of solar panels in a desert to power the whole world, assuming our machinery could use electricity. Of course, a lot of it can't, and that is why we should be aggressively switching over to EV's as quickly as possible.
There is about a gazillion watts of energy shining down on us every day and that can be easily turned into electricity at 10% efficiency. Those solar panels apparently, according to sources regularly posted by TOD'ers, have an EROEI of about 10. Therefore, using solar energy to charge and drive EV's will completely get us off oil for transportation energy for those applications that can accommodate electric drive (which I'd argue is the majority of situations).
Then we have to ask: how do the solar panels and EV's get produced, and is it reasonable to assume this could be weaned off oil as well? Well, since solar energy capture has an EROEI of about 10, then setting up solar breeders should be possible. We could use some of that electricity and use it to make hydrocarbons with the Fischer Tropsch process at some efficiency, and the overall efficiency of this only has to be above 10% considering the EROEI of 10.
The numbers work, the only problem is scale and timing. I am not naive. There is no way this transition is going to happen before things collapse. But I do not accept defeat and that we should all be relegated to using donkeys for transportation when you only have to go outside in the daytime to see how much free energy there is all around us (a 100 Watt light bulb disappears in the daytime sun). In this sense I agree with Nick that the doom and gloom attitude is potentially used as an excuse to drill baby drill because there is no hope otherwise, when there actually is hope.
Yeah!
http://energyfaq.blogspot.com/2008/09/can-everything-be-electrified.html
We're not really making progress here. The EV will go 3-6 time farther than the ICE vehicle on the same number of joules.
I have been very patient but it is obvious you simply cannot grasp this. The joules the EV uses have to be produced, every one of them has to be produced. On the other hand (in a perfect economic world where all joules are equal) the produced joules the EV needs could have gone elsewhere. One place they could have gone was to the production of liquid fuels where each produced joule invested liberates the equivalent of five joules of the stored solar energy that we are actually able to use. So each joule used to produce liquid fuel gives us five joules we can use that we didn't have to generate elsewhere. So like I said joule for produced joule the 21mpg ICE and the EV are about a wash. I won't hammer this at you any more, you either get it or you don't.
One more example might help but I doubt it. The discussion about the energy density of batteries and liquid fuel often comes up with the promise from some that the energy density of the former will be able to approach that of the latter before too long. Well lets say that happens. Do we have to produce all the energy that will be stored in the battery-every joule of it-of course we do. Did we produce any of the joules that are stored in the liquid fuel, no they were already in the fossil fuel we appropriated for ourselves. We did have to produce the joules to get the fossil fuel from its raw form located in the ground to its easily usable form conveneintly stored in the filling station tank. But we only had to produce one joule to get that fossile fuel to the filling station for every five joules we get from the fossil fuel when we burn it in our ICE. That's the clearest I can make it, sorry if it isn't clear enough.
The market is responding very strongly to EVs - there's a big order backlog for Leafs and Volts. OTOH, fuel is badly under priced and EVs are still in their first generation (with modern batteries), so EVs are still only slightly cheaper than ICEs over their lifecycle - but that will change.
No arguement on the change coming. Silicon carbide semiconductors are just one of many tech advances that will speed the change. Of course when you talk under priced fuel you are inserting your own judgement call (with which I happen to agree). Just for personal info--how does EV miles per dollar bought power work out when a person is stuck paying $.20-$.25 / kWh? I know few Americans are stuck with that but our local generation mix will depend heavily on fuel oil for some time to come. You do seem to have those kind of number handy.
Have you used portable power tools lately? The battery powered versions are more powerful than the line-powered versions.
Yes I am familiar with the advantages and limitations of battery and line powered tools, probably much more familiar than you are. The battery powered circular saw, for one, can't touch the primitive worm drive cicular saw for the heavy continuous work that is very, very often required of it. Even all the wanna be 'more efficiently designed' line powered worm drives that attempted to compete with the Skil version in the US just couldn't cut it on the big sites. The old beast doesn't care how far down you drop the voltage with hundreds of feet of extension cord, it just cuts slower. Its competitors just ended up lying burnt up at the bottom of the gang box. Maybe the European and Japanese job sites they were designed for weren't quite as hostile environments as US 'get er done' sites.
...and
often times the batteries for the cordless tools I have used had to charged on a gasoline or diesel generator. That is the only power available early on and sometimes all the way through the construction cycle on many, many, many sites--little bitty ones and great big ones like the Susitna Hydroelectric Project we are making an all out effort to finally make happen. Take a gander at the maps in the civil final and explain how you would power the construction without massive amounts of fossil fuel. Charging up heavy equipment the size of D-9s or better from job site diesel powered generators would not be efficient. You will find that many, many new power generation sites for hydro, wind and solar do not have line power available until they are built and hooked to the lines themselves. ICE will rule in these situations until maybe 'nuclear batteries' can take the stage. So change will be slow away from ICE in heavy construction but it will have to do to many factors most much more significant than inertia...
The joules the EV uses have to be produced, every one of them has to be produced.
Well, no. If they come from a wind turbine, then they're free from the wind. We just pay for the wind turbine, which has an E-ROI of 50:1. Now, there are losses from the windfarm to the wall socket, which if we're very conservative reduce that ratio to perhaps 5:1. But, that's at least as good as oil.
It's exactly the same as oil: the energy in the crude oil is free, and so is the energy in the wind. We get a bonus because they both have reasonable E-ROI.
Now, the joules that come from the wind turbine are in the form of very high quality electricity, which can propel an EV 3-6 times as far as a liquid fuel joule can propel an ICE. Plus, of course, the wind joules are cleaner, domestic and abundant.
how does EV miles per dollar bought power work out when a person is stuck paying $.20-$.25 / kWh?
Good question. An EV like the Leaf or Volt gets about 3 miles per kWh, so if power is around $.24 then you're paying about $.08/mile. That's about the same as $3 gas in a 37 MPG car. Now, you may be paying more than $3/gallon: if your power is expensive then your gas may be as well.
And, you should check with your utility: I believe that legally they have to have smart meters available for the asking (even if they don't advertise it), and you should be able to get cheap night time power: probably under $.10 per kWh.
More later...
Thanks for getting those numbers back to me.
I believe that legally they have to have smart meters available for the asking (even if they don't advertise it), and you should be able to get cheap night time power: probably under $.10 per kWh.
not here, no such rate just a couple/few levels of commercial and a residential
makes for spendy power and 14,000 heating degree days makes for a heck of heat load to go with it. Not cheap in the north.
Well, no. If they come from a wind turbine, then they're free from the wind. We just pay for the wind turbine, which has an E-ROI of 50:1. Now, there are losses from the windfarm to the wall socket, which if we're very conservative reduce that ratio to perhaps 5:1. But, that's at least as good as oil.
I mentioned wind could go directly to EVs earlier, wind could theoretically go directly to producing usable liquid fuel from raw fossil fuel in the ground as well. With a 5:1 ERoEI you end up with five times as many joules you generated with the wind if you 'turn those joules into' fossil fuel. You end up with the same number of wind of generated joules you started with if you put them into an EV battery simple as that. In both cases its just all the better if the wind is getting 50:1 ERoEI.
Believe me if this wasn't important I wouldn't keep trying to explain it.
And to be clear, I certainly haven't been trying to prove that producing oil to run ICE rigs by dedicating wind gen to produce the oil (assuming this possible) makes sense. We have less harmful options and they become more viable every day. There are applications where this might make sense such making aviation fuel because of the energy density thing is so critical in heavier than air flight and in transoceanic shipping where fuel stops are far apart but the big two stroke ICE engines provide a likely very hard to beat 50% full fuel efficiency.
Putting aside the fact that we generally use natural gas, not electricity, to get usable oil out of the ground (at least where I live), couldn't we flip your above statement around the other way and say that since solar panels have an EROEI of 10 then we should be using oil liberated at 5:1 (my local tar sand oil has an EROEI of only about 1.5) to make solar panels to produce electricity in Nevada, making for an overall EROEI of 50:1? In this case I could rewrite your statement as:
"NATURAL GAS OR OIL could theoretically go directly to producing usable ELECTRICITY VIA SOLAR PANELS from raw SUNSHINE IN THE SKY as well. With a 10:1 ERoEI you end up with TEN times as many joules you generated with the NATURAL GAS OR OIL if you 'turn those joules into' ELECTRICITY VIA SOLAR PANELS. You end up with A GREATER number of GAS OR OIL generated joules than you started with than if you put them into an ICE simple as that.
The same would also apply to wind, although admittedly it has greater logistical issues due to intermittency.
"NATURAL GAS OR OIL could theoretically go directly to producing usable ELECTRICITY VIA SOLAR PANELS from raw SUNSHINE IN THE SKY as well. With a 10:1 ERoEI you end up with TEN times as many joules you generated with the NATURAL GAS OR OIL if you 'turn those joules into' ELECTRICITY VIA SOLAR PANELS. You end up with A GREATER number of GAS OR OIL generated joules than you started with than if you put them into an ICE simple as that.
no need to stop there put those joules back into getting more petrol and do it all over again--gee, we just described classic economic theory
Go back to the beginning of my entry into this part of the thread--this long round and round is merely to show that Nick's methodology in calculating miles per kWh (which later went to the somewhat more appropriate miles / joule) in the following
It will take much less: a gallon of gas has about 35kWhs, and will take the average US car 21 miles. 35kWhs in an EV will take you about 100 miles.
was in error.
You can do whatever you want with the liberated stored solar energy in the produced fossil fuel. You will find my suggestions of a couple better uses for it in my post with the pie chart from our local electric co-op that shows our very unfortunate dependence on fuel oil for electrical generation up here. You can also follow the links to Susitna Hydro I provided to Nick that show what we are trying to do about that in the part of the thread where I indicated just how important fossil fuel will be in helping us accomplish this. There are certainly better places to put a finite resource like oil than in a commuter car gas tank to burn it these days.
By the way how the heck do you think we are mining the iron, coal, copper and other resources needed for wind--whole lots of fossil fuel contributions, probably some of the better use we put it to and yes I know we have big electric shovels wired to power plants located at the strip mines the shovels are digging up. The very best bang for our fossil fuel buck=big hdro-funny that's about the fourth time I mentioned hydro this thread. And yes I know just how much hydro reservoirs alter the landscape-trade offs always...no easy choices with 7 and half billion. But damn we are doing some neat things and learning so many incredible things about ourselves, our neighboring species and the universe we live in theses days...trade offs...trade offs...trade offs
I have and I don't follow it. Nick's statement is roughly accurate, but not exactly of course since a kWh of fossil fuel isn't exactly convertible to a kWh of electricity due to 50% conversion efficiency, but whatever, it's still good.
Your argument that we should take our solar panel- or wind turbine- produced electricity to instead liberate more oil rather than driving an EV with it is no different than saying that we should take our liberated oil and use this to liberate further oil rather than driving ICE cars. Of course we don't do this, because we need that energy to drive cars!
We mine the resources necessary to make wind turbines largely using fossil fuels -- this is where the EROEI factor of 50:1 or 10:1 or what have you comes from.
not here, no such rate
They may be hiding it. I believe that the Energy Act of 2005 mandates that all US utilities make smart meters and time-of-day metering available on requrest. They don't have to advertise it, or offer it generally. I've told a couple of people about this who were very surprised. Once, I managed to find it by poking around on their utility's website.
Believe me if this wasn't important I wouldn't keep trying to explain it.
Thanks - I appreciate your persistence and patience. We'll get there.
I think I figured out the problem: you're treating the two energy sources differently by investing the ICE fuel and then using the 5:1 dividends, but not the wind power. Why not invest the windpower and then use the 5:1 multiplied power?
I think I figured out the problem:
That is kind of what I was doing. Jeppen spelled out my error plainly
a few entries down the page from here. And of course investing 50:1 wind in more 50:1 wind even pays better--you can do that in the magical world of I created for the discussion where all kWh are equal and equally interchangeable -well I didn't create the world but rather appropriated it from the many economic models in which it lives (and it helps even more if 50:1 wind lives where there is no discounting returns that are farther in the future).
I still think using the actual kWhs in the gallon of fuel is the wrong way to go about the mileage calculation but with the appropriate efficiencies factored in it should work out the same.
I believe that the Energy Act of 2005 mandates that all US utilities make smart meters and time-of-day metering available on requrest
Smart meters were specifically mentioned at our electric coop's meeting this year. The response was that we have not implemented time-of-day rate structure. The fact that we had just spent a bundle on digital remotely read meters, mostly ERTs that broadcast a very low frequency, low wattage AM radio signal up to about 300 yards to the meter reader tech's in truck receiver figured into the not pursuing the time-of-day rate structure/smart meter option just yet. It will be interesting to see if our the little 25MW windfarm that just got permitted will move that along as well, its supposed to be online come Septermber.
You keep saying that if we put the energy into extracting fossils, we get 5 times more energy, and that this would outweigh the 5 times higher efficiency of EVs.
To me, that's nonsense. You could cycle any energy extracted (fossil, wind) back into production of more energy (fossil, wind) an arbitrary number of times. But when you stop, after N cycles, the wind electricity drives the EV five times farther. Sure, you could do one extra cycle with fossils and get five times more fuel and thus be able to drive as far with the ICE. But that extra fossil cycle comes at a cost, environmentally and economically.
This whole ridiculous go round was just to show that when counting miles per kWh for an ICE rig and comparing it to an EV you don't count the 35kWh in the gallon of gasoline but rather the produced kWhs it takes to get that gallon from the oil well to the gas tank. Every other example I gave was to try an illuminate that point and all they did was muddy it. All ERoRI numbers I used were the given by Nick I really don't know how many kWh it takes to get the nominal gallon of gasoline from the nominal oil well to the nominal car. I'm done trying I will leave it to the pros.
But you don't produce energy, you fetch it, whether you fetch it from the wind or from the oil reservoir. You expend energy to fetch it, whether from the wind or from the oil reservoir. You seem to try to show a difference that isn't there.
Fetch a kWh from any source, then you put it somewhere. Put it into an EV battery and it will take the EV a set distance (we won't worry about storage or conversion losses they show up in how far that fetched kWh carries the EV). Fetch an identical kWh from the same source and put it in the oil production/distribution chain and it will get you a certain amount of liquid fuel (we are talking avg everything well through filling station here) which will carry the ICE car a certain distance. All we want to know is how far the fetched kWh we stuck into the oil production chain will carry the ICE car. Its exactly the same as the kWh we fetched and put in the EV battery. To make apples to apples you may fetch that kWh from any source you wish but you must fetch it from the same source for both vehicles. We don't even care how many potential kWh are in the set amount of fuel we fetched with our fetched kWh only how far that fuel will carry the car. That way we are only counting the identical fetched kWhs that we put into the EV battery and into the oil production/distribution system as inputs and the distance the EV and the ICE vehicle travelled on those identical inputs as outputs. Seems simple to me.
You compare:
1. energy -> battery -> wheel
2. energy -> oil production -> gas tank -> wheel
I think the problem is that you keep giving oil the benefit of one more round in the energy multiplication system. A fair comparison would be:
1. energy -> wind production -> battery -> wheel
2. energy -> oil production -> gas tank -> wheel
Could be why no one understood what I was trying to do, funny I actually went from windmill to battery at a homesite one time in the thread but somehow couldn't seem to do that with the whole system-probably because oil has to have the extra step so I just kept giving it to it. Well I guess its really all about energy density of batteries and the fact that not all joules really are not created equal. I think I knew that before I fell on my head.
No prob. Easy to go wrong here. The major problem with EVs vs ICE is that EVs are likely to be powered by coal electricity, in which case the efficiency is about the same in coal->wheel as in oil->wheel. EVs just make possible lower carbon emissions, but is far from a guarantee. Worst case, they'll make carbon emissions continue rising past peak oil.
Well occasionally I do persist in pursuing with intense focus an errant path I began upon while almost all of my attention diverted elsewhere. Those occasions do leave me more than a little red in the face though.
Yes the coal EV connection can be most disconcerting. There is a heck of a lot of coal out there and the biggest part of it is close to ice free tidewater for a longer season every year these days.
Less than 10% of Sweden's electricity comes from burning fossil fuel, how does that work out for consumer prices and overall economic productivity?
The coal-powered EV is really just a red herring put out there by anti-EV people trying to protect oil. Don't let them confuse you (Jeppen - I'm talking to you too).
First, even if powered entirely by coal and EV produces less CO2 than an ICE.
2nd, and far more important: EVs mostly charge at night, when nuclear and windpower dominate. The biggest problem for both nuclear and windpower is the lack of demand at night, when both are still producing.
Night time excess production is actually a bigger problem for wind than intermittency. And, EVs help with both the night time problem and the intermittency problem.
There is an enormous synergy between EVs and nuclear and windpower.
Nick,
You would have been better off to never have raised that debatable issue because it simply detracts energy and focus away from your much better point of argument:
Far more important: EVs mostly charge at night, when nuclear and windpower dominate. The biggest problem for both nuclear and windpower is the lack of demand at night, when both are still producing.
That second one is a good talking point.
Additionally, excess electricity from at-night nuke or wind could be used to make ice up-river of an electricity plant's water feed. The colder the water during the day, the better is the thermal efficiency of the plant's condenser portion.
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[i]= image, [+]= more info
river-fed electric plant: [ i.mage.+]
more info: [ i.mage.+]
I see EVs as a step in the right direction with potential carbon benefits, but to realize the benefit, carbon should be taxed or we risk gaining little or nothing. Btw, nuclear + wind is a particularly bad match.
carbon should be taxed or we risk gaining little or nothing.
Sure. EVs will grow slowly until we recognize the cost of oil and carbon one way or another.
nuclear + wind is a particularly bad match.
Well, that's why wind advocates and nuclear advocates argue so much: both are capital intensive, have little or no fuel cost, and produce as much or more at night as during the day.
On the other hand: We'll need to take roughly the same measure to deal with excess night time demand for either power source. For instance, Ludington's pumped power for a nuclear power plant. And, EV night time demand will grow, helping both. I don't think there's a really essential conflict there.
It takes quite a lot of oil to produce a vehicle, whether EV or ICE.
I think it's an insignificant point, though, because our problems (resulting in a predicament) are a lot bigger than personal transportation options.
It takes quite a lot of oil to produce a vehicle, whether EV or ICE.
Have you seen good data on that? I've been looking for quite a while, and haven't seen anything quite as definitive as I'd like.
In any case, what I have seen says to me that the fuel used for operation is much, much larger than the energy used for manufacturing, and that most of the energy of manufacturing is electricity from other sources, not oil.
our problems (resulting in a predicament) are a lot bigger than personal transportation options.
Personal transportation is more than 50% of oil consumption in the US, and is reasonably close to that elsewhere. The vast inefficiency of personal transportation gives a very large buffer/reserve for the transition away from oil.
It used to work out very well, but since we've decommissioned a pair of fairly modern, well-placed nuclear reactors in a political power-brokering deal, and we've built some electricity lines to other countries, and those we use to import higher electricity prices from the continent.
But still, we're blessed with hydro capacity matching continental electricity per capita, and almost as much nuclear capacity on top of that. Good for thermo-mechanical paper, for instance. Nowadays, it's Finland that invests for the future, though. Sweden just meddles half-heartedly in wind instead of renewing our nuclear fleet.
I think using the plentiful, if increasingly difficult to extract, oil supply we now have to responsibly build high qaulity hydro, wind and solar generation along with intelligently intergrated electrified light and heavy transport infrastructure is the only way to go.
I definitely agree. We probably agree pretty closely, despite the technical disagreements above.
Yes we are looking for the same solutions Nick, but to call our above discussion a
technical disagreement???
It was merely about what fossil fuel actually is--no less than that. If you don't actually understand that you can't possibly properly weight the difficulty we are in properly nor have the right framework in which to rank the potential solutions.
I did find your discussion with Rethin interesting. I'm just curious about the man behind the mask as well though I'm not certain that phrase was gendered properly?- )
Well...it's a big technical disagreement, I'll grant you that.
The thing is, we seem to agree on at least part of the problem and many of the solutions, so the disagreement on E-ROI of liquid fuel vs windpower seems a little less important.
I'm just curious about the man behind the mask
Well, I don't disclose much. I can't really explain without...disclosing stuff. Suffice it to say that I've been bitten by disclosure in the past, in a different context.
My hope is that it doesn't really matter - the info we discuss stands on it's own.
My hope is that it doesn't really matter - the info we discuss stands on it's own.
Naw it's just one of those cyberworld mysteries to me. Have a good weekend
Thanks. You too!
One could produce fuel from electricity in the form of hydrogen, dimethyl ether (CH3OCH3)
http://www.dotyenergy.com/Markets/DimethylEther.htm
or perhaps ammonia.
" 2nd, " Evidence also shows that trade does not result in reductions in energy use and pollution in developed countries through the off-shoring of pollution intensive industries." In other words, falling energy intensity in the OECD is not due to outshoring."
Sorry to contradict , but it is also due outshoring:
Wagner (2010, "Energy content of world trade", Energy Policy) shows that rich countries use less energy in their industrial production, whereas they still consume relatively large amounts of energy indirectly by importing energy-intensive goods from poor countries where energy and pollution-intensive production have migrated. This allows rich nations to consume less energy while not changing their consumption habits:
"While energy and pollution-intensive production migrates to poorer countries, rich societies do not alter their tastes accordingly. Trade enables richer economies to consume less energy yet still benefit from energy and pollutionintensive production...."
http://www.sciencedirect.com/science/article/pii/S0301421510006373
Basically , a rich country would be able to sustain economic growth and decrease energy consumption insofar as it can outsource the “dirty job” of energy and pollution-intensive production to developing and/or poor countries. No surprise that 16 out of the 20 most polluted cities are Chinese.
It's puzzling then that world industrial production and GDP have increased by about 25% since 2004, while oil production has been flat.
Since 1979 US GDP has risen by 150%, and it's manufacturing has risen by 50% while oil consumption is no higher than in 1979.
-------------------------------------------------------
Actually, your argument isn't with me as much as with Stern - have you looked at the literature he cites?
Yes I looked at it and Wagner (2010) is not present (it is a very recent result just published).
As for GDP numbers, particularly after 2004, it is better to be rather cautious since those numbers are terribly inflated due to the effect of bubbles in private and public debt. Steven Keen has worked a lot in that regard and the interested reader is referred there for more details.
Well, it's obvious that off-shoring will have some effect. The real question is how large is that effect. As best I can tell, it's swamped by the overall trend in rising efficiency.
People in the US tend to focus on employment, which gives a misleading picture. The US manufactures 50% more now than it did in 1978. People are misled by the fact that US manufacturing employment has dropped substantially in that period. But, that was caused by sharply rising manufacturing labor productivity, rather than by a decline in absolute levels of manufacturing output. See nice charts at http://www.dailymarkets.com/economy/2010/10/03/increases-in-u-s-worker-p... .
Here's production data at http://www.census.gov/manufacturing/m3/index.html, including http://www.census.gov/manufacturing/m3/historical_data/index.html , especially Historic Timeseries - SIC (1958-2001), "Shipments" .
It would be very hard for US manufacturing to grow faster than labor productivity, which tends to grow 3-5% per year. So, the best we can hope for is flat employment levels. That, of course, would be a relief for US workers in manufacturing.
The question at hand is energy intensity of GDP (EIOG): the ratio of oil to GDP. Some argue that the US and Germany can pretend to decrease their EIOG because they've actually pushed off their really energy intense industries to China.
The answer is to look at the whole world's EIOG -that eliminates boundary problems, like outsourcing. World EIOG has been falling steadily. That makes it clear that EIOG really can decrease, and very sharply, too.
That's not surprising. Any manufacturing engineer will tell you that manufacturing doesn't use that much oil. The big kahuna is really ground transportation. That can move from truck to rail (reducing energy intensity by about 70%), and from diesel rail to electric rail (eliminating oil entirely).
The question of the role of off-shoring is more controversial than I stated in the paper as there have been recent studies that apparently contradict the ones I cited. Including one coauthored by Edenhofer who is head of IPCC WG3. The reasons seemed to be based on differing definitions. This will be an area of a lot of discussion controversy still going forward I think.
EIOG (awful acronym!) may be the question at hand, but ratio of oil to GDP is certainly not the answer. if we were to compare the "energy intensity" of the OECD countries with their "oil intensity" we would certainly see some different results.
As you note, manufacturing (in westernised countries) doesn't use that much oil, but ground transport does, especially in the US. Innfact, a lot of US oil use is not related directly to GDP production, but to driviong to/from places of GDP production. Europe and Japan have been much more successful in reducing this un productive oil consumption.
I think what would be a more accurate measure is exergy intensity of GDP. This is the actual energy that is used, rather than the fuel sources consumed. A society that replaces all fossils fuels (for electricity production) with hydro, wind and solar, and does nothing else, still consumes the same amount of exergy, but much less energy.
Electrification of industry has resulted in large energy savings - going from the coal fired steam driven sawmill to the diesel engine sawmill to the electric sawmill - but the exergy consumption has not changed much. Similarly an aluminium smelter that switches from coal fired electricity to hydro would show a large decrease in energy consumption, but no decrease in electricity (and thus exergy) consumption. There are process improvements that do decrease exergy consumption (i.e. increases in efficiency, such as LED's, no till farming etc)
What I'm getting at is that we can, and should, separate the question into two parts - the type of energy supplied - i.e. fuels, and the way that energy is used - process efficiencies, or more simply, the supply side, and the demand side.
If we took a hypothetical all-electrified economy, that used electricity for all transportation (no air travel), the oil:gdp is meaningless, but the exergy/GDP is very relevant, and may not even be better than other economies, in fact, it could even be worse.
Doing an exergy analysis along with an energy analysis will reveal whether the improvements are in exergy (process) efficiency or in the creation of exergy (i.e. efficiency of engine, power stations etc).
I suspect that most of the gains have been in the creation of exergy rather than how efficiently it is used. One look at the vehicle mix on freeway is confirmation of that!
Paul
RE: "consumes the same amount of exergy, but much less energy."
I think your confusing exergy vs fossil fuel. You need to count all energy input in exergy. That is very different from distinguishing between fossil fuels and renewable fuels.
I wondered the same thing. Or does he mean that the efficiencies of hydro are that much more than of coal??
I think a clarification of "exergy" is needed. It's roughly "work done". So, in the case of personal transportation, it's getting someone to work. All the primary energy or even applied energy used to do it is very different. It doesn't even include the energy used to move the SUV or bicycle - it's just the final energy of moving the person that counts.
Of course, these are tricky terms. Technically, moving someone doesn't really involve any "work" at all, because it's what a physicist would call "translation": in theory all of the energy of acceleration could be recaptured when braking, leaving no net energy consumption at all.
So, really, all of the energy used for transportation is wasted: turned by friction into heat. Reduce the friction, recapture the energy of acceleration, and you can improve efficiency by many orders of magnitude.
And, finally....as efficiency increases, it reaches an end point, where consumption is less than the energy than can be collected from the local environment. E.g., a car, train (or even plane!) could collect what it needed, and just use batteries to level things out. The roof on this building in rainy Switzerland produces 448% more energy than the factory underneath consumes:
http://www.ee-news.ch/de/article/22889 (hat tip to "anyone")
The roof on this building in rainy Switzerland produces 448% more energy than the factory underneath consumes:
We are a very long long way from producing (mining-including making the mining equipment-through installation) the roof on that building with the energy produced by the roofs of such buildings. Take fossil fuel's contribution to that roof away and it will look like swiss cheese.
You would have to produce a roof for the building anyway.
NAOM
That isn't the point, the point is how much contribution fossils make to that roof and how much of their input will be required for how long into the future. That is the important peak oil consideration. I am not arguing against the solar panel roof at all.
Carrying the need for renewables to replace fossil fuels for everything into the middle term (centuries or millennia) isn't required either. Coal will be available for a long time for smelting if that is almost all coal has to do. It's this near term (decades) transition that gets very sticky in the details.
Not really. PV has a pretty decent E-ROI, once you take into account energy quality.
Ok, here's a clarification of exergy: it is the available work - not quite the same as work done, but close.
It is the work available from an energy input, after the irreversible losses to entropy (mainly generation of low grade heat) are taken out. So a rough analogy is the thermal efficiency of an engine.
From wikipedia on exergy:
The best example I can think of is a train. The very first "trains" were wagons on rails pulled by horses. A wagon of weight X with rolling resistance Y (and air resistance Z, if we want to be really picky) needs a certain force applied to maintain a given speed. The force per unit distance is the work required, or work done, and will also be the available work from the horse - this is the exergy. but the energy input is the horse feed, which is much greater than the exergy, as the horse is a relatively inefficient heat engine.
Then the trains went to the steam engine. The wagon - assuming it is unchanged - still needs exactly the same amount of work done to move it, but the coal fired steam engine is more efficient than the horse - though only about 7% thermal efficiency, so it needs less energy to provide the same exergy.
The diesel train is better still, at around 35% thermal efficiency, so it consumes even less energy to create the same exergy to pull this same wagon.
We then get to the electrified train, where the energy input - electricity - is transformed to exergy at 90+% efficiency.
The ultimate train would, I guess, be a train that rolls down a gradient under gravity power alone - here the energy input - decrease in elevation - would equal the exergy output - the work required to over come rolling resistance and air resistance.
So we are still with the same wagon,. and the same exergy requirement, but the energy inputs have decreased dramatically.
The train was always a very exergy-efficient transport system, we have progressively come up with better ways of providing that exergy. This, in my opinion, has been the key transformation of the industrial revolution -mechanising processes did not change the exergy inputs that much, but it enabled much more exergy-efficient sources of energy to be used to power them, so the energy intensity of production (GDP) has been decreasing accordingly.
When the electricity comes from wind or solar, we can effectively assume the the exergy is equal to the energy input. The wind turbine only harnesses 1/3 of the wind energy, but the wind was blowing anyway, is "free" in every sense of the word, and we are not creating any irreversible changes in the wind/atmosphere. The "energy efficiency" of wind and solar is relatively meaningless - what counts with these is the $cost per unit energy output, as there no inputs.
With hydro, it is the same in principle, as we are not putting any controlled energy into the system to create our exergy (electricity). The difference is that it is much easier to measure the amount of water than wind, and a given hydro site/installation will only have a certain amount of water available, and there are design choices on the available head, length of pipe etc, so an efficiency term is used with hydro., and they have been relatively efficient ever since the invention of the Pelton wheel (although even the old water wheels can get >80% efficiency) Still, like wind and solar, there is no input cost, the ultimate thing there is the construction cost per unit of power output.
And, finally....as efficiency increases, it reaches an end point, where consumption is less than the energy than can be collected from the local environment. E.g., a car, train (or even plane!) could collect what it needed, and just use batteries to level things out.
Yes, the world solar challenge is, of course an example of just that.
And consider the freight train again. If the cars are each of length 20m and 3m wide, the roof area is 60sq.m, and using 20% efficient solar panels , on a summer day, each wagon could generate 12kW. The force required to move a train at moderate speed on level ground, in a straight line is about 4 lbs per ton of weight {source}, so if our car weighs 50 tons, it will need 200lbs (908N) of force, or "tractive effort". To travel one metre will need 908Joules - this is the exergy per metre. Our solar panels produce 12kW, or 43.2 MJ/hr, so they could, (assuming 90% efficiency for the motor) move the train 43km in one hour, or 27mph.
So a self powered train is possible, at low speeds and/or low weights.
if our autonomous, solar powered passenger train(=lightweight) is running around all day, without any external energy input, what then is the energy intensity of it's GDP contribution? The supplied energy is zero, but the real energy use is the exergy use. Which number do the economists use? if they say zero, because no "economic" (i.e.produced and sold) energy was used, then we have a zero energy transport system, which is impossible (except in the world of economists). if they use the exergy input, then we have a scientifically accurate system but it might be hard to measure.
The economists use "primary energy" meaning "supplied energy", from fossil, biomass and nuclear sources. Wind and solar are not included as primary energy, and never have been (there has never been any accounting in GDP of the wind energy used by sailing ships, for example)
So I will return to my original hypothesis - that the (primary)'energy intensity' of an economy, used by itself, can be misleading. A corresponding "exergy intensity" analysis will complete the picture.
You can't have GDP without consuming exergy, but you *can* have GDP without consuming primary energy.
Of course, it is much easier to use less primary energy if you use less exergy in the first place -as any "off-gridder" is well familiar.
Thanks for the train example - that's great.
mechanising processes did not change the exergy inputs that much
I think a close look at manufacturing would give a different interpretation. For instance, going from hand sewing to a sewing machine dramatically reduced the energy consumption and labor input for making clothes (the first sewing machines were human-powered). Same thing for reaping and milling farm output, and many other examples.
I'm not so sure about the reduction of net energy in mechanised processes. Hand-milking cows, I have read, takes less energy (expressed in calories) than mechanised milking systems, per gallon of milk. But by throwing fossil energy at the problem, we can do the task faster; kinda like you can travel on a bicycle and you can travel in a car over the same 4 mile distance; the car will burn far more energy (the cyclist can do it on just a half as bagels and some juice), but it will get you there faster (and dry, and warm, blah blah).
So I think we should regard with caution the claim that mechanised processes reduce net energy usage for a given task. They may reduce human labour, but they replace it with fossil (or other) energy. They may work much faster than human labour, but not necessarily with lower overall calorie-equivalents. What we mostly buy with fossil fueled mechanisation is not energy efficiency, but time/motion efficiency, i.e. eliminating or minimising human labour and speeding up the extraction or transformation of resources.
we should regard with caution the claim that mechanised processes reduce net energy usage for a given task.
Oh, I wouldn't suggest that kind've rule. In a world in which extrasomatic energy is abundant and cheap, mechanized processes won't make efficiency a priority. On the other hand:
1) before fossil fuels were around, mechanization created dramatic efficiencies. Farms didn't get the benefit of oil until the 1920's, but they were becoming far more efficient long before that, due to the reaper, and other innovations. Sewing machines were human-powered, but were enormously more efficient.
2) in a world in which efficiency is a priority, electric machinery will be very efficient.
before fossil fuels were around, mechanization created dramatic efficiencies. Farms didn't get the benefit of oil until the 1920's, but they were becoming far more efficient long before that, due to the reaper, and other innovations. Sewing machines were human-powered, but were enormously more efficient.
This doesn;t actually prove your point. More efficient in terms of what? Yes, reapers and sewing machines allowed more stuff to be produced per man hour, but what is the proof that they required less joules of mechanical work per foot of stitching or for threshing a bushel of grain? The energy needed to push a needle through the cloth, or to separate grains from the head and husk, is the same regardless of whether it is being pushed by man or machine.
The cow milking example above is a great one, which I can personally attest to. As a boy on the farm I used to hand milk the cows (2 per day). We then bought a one stand milking machine. It needed a 1/3hp electric motor to run it, and it was no faster than I was, and I certainly can't produce 1/3 hp. Also, I had to use hot water (more energy) to wash the machine before and after, plus some chlorine bleach (embedded energy). So the energy efficiency of hand milking was actually much better, but the only way to scale it was more people. Electrification was less energy efficient, but much cheaper than paid labour.
Same thing for a couple of guys digging shallow trenches for pipe laying. Two guys can actually dig and lay as fast as a mini back hole (like one on a bobcat) while clearly expending much less energy than the bobcat fuel burned. Their digging process is more energy and exergy efficient - but it can't be scaled up like a backhoe can be to an excavator.
In most mechanisation, the process often actually consumes more exergy than when it is done by hand, but it allows for fuel/electric energy to do the job, cheaper/faster/larger/24 hrs, no workers comp/medical, etc etc....
Given that we must mechanise many/most hand done tasks to run a modern economy, powering them by electricity is the "least inefficient" way that we can do so.
I think you're underestimating the value, and energy cost, of human labor.
If a seamstress goes from 3 shirts per day to 30, that's enormous. It doesn't matter if the very narrow energy analysis of pushing the needle is unchanged: it's the overall picture. In a world without fossil fuels, it's the human energy that matters. Of course, in a world with fossil fuels, labor becomes even more important relative to energy per se. hmmmm...kind've the same either way. hhhmmm.
Further, I think you're underestimating the energy content of human labor. Right now, on average it takes 9 joules of energy to provide 1 joule of food on the dining room plate (probably more for milk - refrigeration is the biggest component of that 9 joule figure, and milk needs a lot of refrigeration). Add in the human conversion efficiency of what, 20%?, and we get 45 joules of wheat (or what have you) to one joule applied to the milking. So, 1/3 HP is about 250W: 1/45 of that is about 6W. I'm pretty sure you expended more than 6W of effort doing the milking.
Remember, plowing used to be done by humans, or humans and mules. Modern plows reduced the energy needed dramatically. Multiplying the amount of reaping that could be done dramatically increased the E-ROI of farming, long before diesel showed up on the farm.
Finally, in a world in which efficiency was a priority, electric machinery would be far more efficient. Of course, it will probably always make more sense to invest in another windmill instead of deeply optimizing efficiency: consider that a onetime capital investment of $2,000 in windpower will power your average EV for it's lifetime.
The economists use "primary energy" meaning "supplied energy", from fossil, biomass and nuclear sources. Wind and solar are not included as primary energy, and never have been (there has never been any accounting in GDP of the wind energy used by sailing ships, for example)
The energy used to get the wood, sails, tackle and sailors to enable a ship to sail is counted though. Much the same as the energy used to get the coal and the energy used to build and run the power plant are counted. The output of the ship is counted in the value added by shipping, the output of the power plant is counted as the power sold. No real difference. For GDP purposes the economist could care less how efficiently we extracted the energy available in either the coal or the wind, only the effort we made in extracting that energy (which shows up in the product we made out of it) is counted as economic activity...and only the monitized portions thereof count in GDP calculations. At least that is how I understand it.
Your physics is off, here.
Think about accelerating something in outer space where there is essentially no friction.
It takes energy to accelerate, and then it takes more energy to decelerate.
The only reason regenerative braking works is because you are in a resistance-rich environment.
So, no, even theoretically, you could never recapture all the energy you used to accelerate by regenerative braking (and, by the way, I am a big fan of regenerative braking).
The only reason regenerative braking works is because you are in a resistance-rich environment.
Sure. But...that the environment we're in. We're not in outer space, where we need to use propellant to decelerate. We have the earth as an enormous battery of kinetic energy (or, more properly, momentum).
Of course, we can never get 100%, but we can get pretty darn close.
Here are my pertinent thoughts on inputs and outputs, from an engineering perspective and insight :
Consider where we have been on the Hubbert Curve (see curve at http://www.drmillslmu.com/peakoil.htm) for the last 50 years. During that period, there was growth in oil production and a reasonable expectation of continued stable growth for decades to come. Hence it made good business sense for banks to make 30 year loans on housing during that period (especially in the 1950 to 1990 time frame), as there was little risk that a typical loan would default. These 30 year housing loans were very solid investments for decades. However, as we neared peak oil (and surpassed the peak and got onto the downslope of the curve), housing investments and 30 year loans started getting riskier. The implications of where oil production will be in the next 30 years started to get factored into the world economic situation due to higher oil prices. Those higher oil prices caused higher prices for basic necessities and all downstream goods. A combination of higher actual prices for goods and services and a higher awareness of forward looking risks to the economy in the coming decades started triggering growing worldwide unemployment. It may very well be that the rise in oil prices to $147 a barrel triggered higher unemployment and that helped to trigger the subprime and other housing crises, which are now helping to trigger and expose the macro crises of PIIGS, Egypt, Libya, Tunisia, etc, and the food crises too. The banking powers (FED, IMF, ECB, China, etc) have tried with difficulty to address the debt burdens and debt related links to the world economy to preserve the status quo. But structural changes associated with several flavors of resource depletions (for which there are no easy substitutions available) will force changes to the status quo. These changes are first shunted by the government and corporate interests onto the general population with austerity measures and higher government debt levels. As a result there will be higher unemployment and less government services available as we are currently seeing in not only PIIGS, but in China and America too if one has been paying attention to local and regional economic affects.
Looking forward to the coming years, what are the reasonable expectations for housing and all other aspects of the world economy if oil production does decrease as projected by the Hubbert Curve? Is the banking business model of providing 30 year home loans at risk? It would seem so. I have seen reasonable projections that expect oil production to decrease by anywhere from 2 to 5 percent year after year after year (again see http://www.drmillslmu.com/peakoil.htm and scroll down some). Do 30 year home loans (or any long term loans of any type) make good business sense under a 2 percent decrease (year after year after year) in oil production which is the worlds most critical natural resource? Would they make good business sense under a 5 percent decrease (year after year after year)? I think the banks are finally starting to "get it" and so are other smart investors too, and long term credit is tightening as a result.
As an engineer, I like to deal with equations, and it would seem to me that there are some fundamental relationships at work here. When considering the world economy as a whole, the economic relationship of certain aspects of the economy to the production of oil might be quantified by a few approximate linear equations.
I think that credible arguments could be made that the linear equations below are approximately correct and applicable. The equations imply that for any given amount of Oil (X) produced in a given year that there would be corresponding amounts of various outputs (Y) that can be economically supported as a result. From an engineering mindset, it may be more correct to rephrase this to say that "For any given amount of Oil (X) produced in a given year that there would be corresponding amounts of various outputs (Y) that can be ENERGETICALLY supported as a result.
X amount of Oil for the year = Y amount of Total Jobs for the year
X amount of Oil for the year = Y amount of Middle Class Jobs for the year
X amount of Oil for the year = Y amount of Food Produced for the year
X amount of Oil for the year = Y amount of GDP for the year
These relationships could be approximately extrapolated to other things too such as
X amount of Oil for the year = Y amount of New Clothing for the year
X amount of Oil for the year = Y amount of New Shelter for the year
Please note that money is not a part of these equations. Money is essentially a derivative that has value only due to it's acceptance as collateral for future product or services. With decreasing energy, the value of money can be expected to decrease as well, as there will be less products available. Indeed, the printing of money to support the debt burdens would tend to quicken the decrease in value of money, as when there is more money in the system and less products available, the price of the products would tend to increase.
So, if oil production does decrease by 2 % per year, do you think that might cause a decrease by 2 % per year in Total Jobs, Middle Class Jobs, Food Produced, GDP, New Clothing, and New Shelter? How would that tend to ripple through an economy? Wouldn't it in fact look a lot like Austerity measures? The evidence of wide spread high unemployment in many countries and economies does suggest that we might be there now. If there was enough energy and resources available to give the people jobs who are currently unemployed and demonstrating in the streets in many places in the world, don't you think that the powers that be would be putting those people to work so that their actions are constructive and stabilizing (and even generating profits for corporations!) instead of letting them be unemployed, protesting, and destabilizing the status quo in places? Money would not seem to be the issue as the Central Banks are creating money in vast quantities right out of thin air with their quantitative easing approach in their attempt to keep sovereign debt loading and banks stable.
On a lay man level, consider that for each typical production job in the world, something is made that must be sent somewhere else. It takes energy to ship that product somewhere, and the energy we use mostly today to do that is oil energy. If oil production is reducing by 2 % per year, wouldn't it be reasonable to expect that jobs will decrease by around 2 % a year, and hence unemployment may increase by near 2 % per year?
The militaries of the world are finally waking up to the systemic nature of the economic crises that are currently being experienced. Several credible military organizations have recently written reports documenting how there may be a need to react to civil unrest in other countries as well as their own in the near years due to oil production decreasing worldwide. Here is a link to various military reports. I would expect that the more recent reports are finally "getting it" and most credible. http://www.energybulletin.net/stories/2010-09-28/energy-security-annotat...
The economy is closely linked with the physical resources that underly it. Looking at the economic system as an engineer would, the resources are inputs to the system, and the outputs are jobs, food, services, finished goods, and a growing population. If one increases the inputs (as was done in general in the years from lets say 1900 to 2000) then one can expect an increase in the outputs and that is exactly what happened in general throughout those years. However, if one decreases the resource inputs, then it would reasonably be expected that there would be a decrease in the outputs. The governments and monetary powers that be can try to recognize this and make tradeoffs and sacrifices to preserve certain aspects of the status quo.
The problem is that humans have tended to be very short sighted and self concerned, possibly in part due to most individuals being unaware of the predicament that we would eventually face collectively on the city, county, state, nation, and world levels. It is only relatively recently that a good understanding of how the economic system truly works has come to light and only a small percentage of the people understand this. Most people are still in the dark on many of the issues, and there is an inertia in the economic system to preserve the status quo. However, it is late in the game and a decrease in the outputs such as with austerity will not be readily welcomed in Greece or elsewhere. Since we have now gotten to the point where serious structural resource issues are rippling through and affecting economies at every level, one would then expect some serious economic and social restructuring to be an output of this process. On almost every level, people will have to try to do more with less.
Let's hope that wisdom and compassion are used to guide most people in how they confront their individual situations. In many ways, a simpler life can be comfortable and maybe even happier in ways.
Please consider that an attempt to convert over to manual labor to replace the loss of oil energy would still result in less of everything even though in theory there could be full employment. At approximately 23,000 man hours of equivalent work being producible from one barrel of oil, just the loss of roughly one percent of world oil production (roughly 900,000 barrels per day) would result in a loss of (900,000 x 23,000) around 20 billion man hours of equivalent work per day. With an 8 hour work day, it would take around 2.5 billion people to do an equivalent amount of work just to make up for a one percent decrease in oil production. If production decreases by 2 percent a year, then in just 2 or 3 years, the amount of work potential missing from the decrease in oil production would overtake the work potentially gained if everyone alive today (including the old and young) were able to contribute an extra 8 hours of day of labor. It is interesting to note that even if employment levels were to increase to approach full world wide employment, there could still be less food, less new clothing, less new shelter, and less real GDP if oil can not continue to do the heavy lifting for us as it has in prior decades with all the extra man hours of equivalent work that it has been providing for us.
The farther we go on the downslope of the Hubbert Curve the more obvious the effects will be. In general what we are experiencing now is a situation where the energy that was expected to be there for growth is not available to us and hence there is high youth unemployment and in general high unemployment in most places. And after some time the energy that was expected to be there for sustaining operations and for repair and maintenance of infrastructure will no longer be available either. As oil production is decreasing, the system will have to figure out ways to keep operating in a degraded mode, always trying to find ways to do more with less. Hopefully, we will not slide all the way back to a mostly agrarian society which was the relatively stable and sustaining business as usual model for thousands of years. The pace of life will slow, and the world will become a much larger place again. But our knowledge of math and science should preserve some things for us. In the long run, maybe we will all end up in a more advanced version of the Swiss Family Robinsons.
I do think that it is very possible that most economies will be transitioning at some point in the future to some flavor of what is called a "command economy". When the current business models no longer work, governments and militaries will likely try to adjust to keep stability and there are aspects of a command economy that do provide more stability in ways. I would think that places like Egypt, Greece, and a few other countries are getting close to the need for command economies. Here is a definition of command economy. http://www.investorwords.com/951/command_economy.html
Many economists seem to be differing on whether the economic system will head towards inflation or deflation. My insight reasons that both inflation and deflation will be occurring but they will happen in differing areas of the economy. Assets that require longer term loans to purchase where there is a forward looking expectation that the debts incurred in today's transactions will be able to be repaid in future years will suffer deflation and falling prices and asset valuations. The reasoning for this is as follows : The Hubbert Curve strongly implies that future real economic activity will be decreasing since there will be less energy available in each successive year, so less will get done in each successive year, which implies that there will be less jobs in each successive year. With less jobs available, and more unemployed people competing for any job openings that do become available, the wages for jobs will be dropping too, as there will be more competition between the unemployed to get any given job. Employers will be able to do price discovery for wages where supply and demand work somewhat in reverse (but not counterintuitively). With a high demand for jobs, and a small supply of jobs, the price (or wage) of jobs goes down! So, with less jobs in the system, and a tendency for there to be less wages paid for existing jobs, we can expect the funds that will be available in future years to repay long term credit to be decreasing. This is a fundamental change for the long term credit business model used in prior years. Prior to peak oil/debt/GDP/etc, the trends and expectations were that there would be more funds available in future years, and 7 yr. loans for CRE, and 15 and 30 yr. loans for housing made good business sense. Now that we are post peak the long term credit business model is structurally challenged with higher risks of defaults due to an expectation of less wages being available to repay loans.
Inflation can be expected in the price of real/hard assets and commodities that don't require long term credit, especially where basic necessities (BN) are concerned. Discretionary spending will obviously decrease, but BN purchases will be made first. With money printing increasing the funds available, more money will be competing for BN and for real assets where there is immediate value and need. And the Hubbert Curve implies that there will eventually be less supply of BN and real/hard assets, so supply and demand will tend to drive prices up in these areas and cause inflation in them.
One might consider that even if there is a level plateau on the Hubbert Curve that population is still trying to increase and as a result the competition for BN and real/hard assets (for which production has now leveled) increases and that could drive prices up too.
Let's consider the affect that austerity measures and weak economies have had in Egypt, Greece, and Libya in recent years, and what the Hubbert Curve implies about the future. People have gotten out into the streets seeking change, and some change has occurred but it was difficult to obtain. In Egypt and Greece the change was mostly non-violent. A show of force and collective action by the poor and economically disadvantaged has resulted in changes in the leadership for Egypt and for public and world awareness of the push back to austerity in the Greece case. In Libya violence and disruption resulted.
For the people seeking change, typically they want more of everything, they want stronger economies, and they want jobs. Most of the people in those countries only see the deceptive causality of money, as more money typically means more goods and services. The poor and middle class might think that by leveling the playing field between rich and poor, that things will improve. But the Hubbert Curve implies that there will be by definition less goods and services available. Hence, the change that the people in those countries are looking for will be very hard to get. Even in leveling the playing field, with the Hubbert Curve forcing a decrease in goods and services, the people in the streets might not get the change that they seek. They may be better off than they would have been under other conditions, but they may not even recognize that relativity and so they will keep seeking more change. Indeed, I just saw news articles that the people of Egypt are back in the streets as many aren't happy in the changes that have been made so far. But at least Egypt and Greece hasn't been losing infrastructure, as is the case in Libya with the violence and destruction.
As austerity measures kick in around the world, the importance of preserving the infrastructure is paramount. With less energy available, and less goods and services available to do maintenance and repair, losing infrastructure will only exacerbate weak economies.
Many sources posit the timeline for events to be in the "coming decades", and the media likes to project various trends in the 2030 or 2050 timeframes. But if we are past peak, we could already be on a decline rate of 2% year over year. Consider that when we get out onto the part of the Hubbert Curve where the decline in oil production might be at a rate of 2 to 5 percent a year, I think most people don't realize how quickly that becomes troublesome. If there is a corresponding drop in employment and wages of the same percentages, then in 5 short years we could be adding between 10 and 25 percent more unemployment worldwide. What would the countries of America, China, Greece, Egypt, Spain, etc. look like with even just a 10 percent increase in unemployment from the already high unemployment levels everybody already has? It will quickly be impossible to pay back the debts on the book now with decreasing wages underfunding every level (city, county, state, national, international) of funding available to make debt paybacks.
The media and TPTB do make it hard for the general public to assess exactly where we are at. The fact that military studies are signaling possible near term affects in the 2012 to 2015 timeframe that they may have to respond to suggests that they have better information than most, and their outlook is pessimistic. Systemic factors like the struggle in Libya can quickly take 1 to 2 percent of production offline unexpectedly and this could cause a steeper downslope in oil production than even natural depletion.
The economic discussion in the media and various blogs and such often makes reference to "slowing growth" or "soft patches" as either a symptom or part of the problem in national and world economics. But the Hubbert like Curves for oil and other resources will be structurally enforcing contraction (and not growth), year after year after year. "Slowing growth" is a phrase that we try to fool ourselves collectively with to keep hope. Many can't mentally or emotionally handle the type of change to be expected when a comprehensive forward looking economic analysis and risk assessment is done under the constraints of the declining inputs. There may have been some benefit from spin using that deceptive phrasing. In ways for some, it is better to be hopeful than worried and concerned. Fooling ourselves collectively in some ways worked as the various economic crises were not anticipated by the general public and the status quo was mostly preserved for years. Stability is a good thing from most points of view. Only now, when the contraction and austerity affects are being forced by the declining inputs and affecting significant percentages of the world population it cannot be ignored any longer by the masses. Serious changes to the status quo are looming and possible in many places. However, change is dangerous, just like a box of chocolates. "You never know what you are going to get" as Forrest would say.
That's my humble take on things. Thanks for reading.
When I first saw your post I thought there was no way I would read it all. But once started it proved quite incisive. It would have been great to have 3 seperate copy buttons to hold different parts for inclusion in a response later, however the following one will need to suffice:
That is particularly poignant in my opinion because the current illusion is we collectively averted disaster in 08 via intervention, stimulus, QE's etc. However, it's more a case of holding BAU together with duct tape and bailing wire. But, as we can all see the banks are not doing as well, trying to raise more money via debit card fees to make up for lack of income from long term loans. The illusion will be short lived.
As you mention holding together infrastrucutre is most important as we move down the net energy decline ladder. However, that can only be done for so long and at some point some bridge somewhere will fall and it will not be rebuilt. When that occurs it will mark the point when there is no way to stop civilization from quickly degrading.
Just like many others on here the big question is when will world crude oil production begin declining from this elongated plateau started in 05? That will also be a point in time worth noting, much like the fallen bridge above, or when annual net exports began declining.
BAU is headed down and out, but how fast is the question. However I agree with you that it will occur faster than most people think. At the same time though the real condundrum, the bottleneck to pass through, will be how to feed 7 billion on that downward trek, as mechanization providing millions of loaves and gallons of milk, etc., turns to more labor intensive ways.
Yes, Michael Engineer's post was a brilliant summation of the current situation IMHO. I agree with the vast majority of it.
People's inability to grasp the issue -
Most people don't understand that the world's economy is basically a system of ripping natural resources out of the ground and converting them into an easier lifestyle. I think it has to do with the fact that most people are not directly employed at mining or oil drilling or other tangible reminders of our resource dependency. They come in contact with mostly things related to other human beings' activities, so they carry around the mental picture of a world where human activities and thinking are the fuel for most of the economy. Then they wonder why it suddenly just runs out of gas. They blame the activities (or inactivity) of other humans for the problem.
The military getting better info about the worldwide situation than most -
I think maybe the military just isn't in as much denial as the rest of the world. The Corporate State is too well in control to be truly left out of the loop in relation to what the major govts know. I think it's more psychological. Big businesses will have certain opportunities to profit on the downside of a worldwide permanent recession but not as a whole. As a whole, the end of easy resources means the end of easy money for most of them.
On the other hand, the military is one of the few institutions where huge economies breaking down means their "business" is booming. I think the psychological effect of that is hard to overestimate. I'm not saying the military is salivating joyfully at the idea of chaos. I know they are decent human being behind the uniforms & brass. I'm just saying they are one of the few groups with access to all the good info AND the incentive to anticipate truly negative outcomes.
Nation-scale denial and crumbling infrastructure -
I look to failing business models for clues here. One of the biggest examples in recent years IMHO has been the music industry. In the 1990s they basically had a golden goose. Then the internet & filesharing hit big and took their total potential profit WA-A-AY down. The industry reacted by doing anything and everything under the sun rather than face the idea that the profit was just not there anymore. This went on for well over a decade while every random person off the street could have told them that the profits weren't coming back. It was a total case of fighting the change until they ended up worse off than if they had just accepted it earlier.
Unfortunately most of society will react in similar ways when resources get scarce IMHO. The institutions will still function without the knowledge that the system is mortally wounded long after most of the individuals (even the ones working directly within the system) are aware of it.
spec et al - "The ultimate limit to economic growth in an environmentally or resource constrained world is how much we can continue to improve energy productivity." I don't want to interpret the authors words so I'll let others judge his meaning of "energy productivity". It's difficult to believe he means in absolute terms...IOW not only can we maintain current energy production levels but increase them as the economies grow. If so he must see alts/nuclear replacing to a very large degree the depleting hydrocarbon resources. Perhaps he means we'll see increasing efficiency. That's certainly been true the last 20 years or so. Deep Water engineering, 3d seismic and horizontal drilling technology have given a huge boost to efficiency/success rates.
Most know I drill for oil/NG for a living and have seen these changes first hand. My perspective appears to be somewhat different than the author's. These tech advances didn't just happen just in the nick of time. They are a direct response to recognition of PO decades ago. Ignore the Chevron et al PR pieces. My first mentor in 1975 gave me a detailed explanation that at this moment, 1975, PO was THE primary problem facing the oil patch. And he never mentioned Hubble...I didn't hear of the man until at least 20 years later. We didn't need to see the curve...we we're living the curve and pushing very hard to stay off that down slope. As spec puts it: "...most people are not directly employed at mining or oil drilling or other tangible reminders of our resource dependency". OTOH it's easy to appreciate when you've been laid off because your company couldn't find enough reserves to justify its existence.
All the tech advances were driven by necessity. If we could find the needed replacement reserves by drilling 10,000' wells on dry land we would have. But such opportunities became ever more limited. In 1975 I was drilling 12,000' wells testing potential reservoirs that covered 2,000 acres. Now I'm drilling 17,000' wells (that cost 4X times as much as a 12,000' well) testing 100 acre targets...or less. And most are prospects that would have never been identified if not for 3d seismic. Essentially every play being developed today is using some combinations of this Holy Trinity (DW, seis, hz) of technology. No one in the industry is even hinting at any new tech of significance. Some improvements perhaps like Arctic drill/production but more a refinement that anything new.
The Holy Trinity developed because it had to. Companies, especially public oils, had to develop tech to move forward or shut down their operations. In recent years the HT is being applied more aggressively thanks to prices increases. The shale gas plays are a perfect example. Or were until NG prices collapsed and crippled many of the players. High oil prices are having the same effect in some of those plays today. But the fractured NG plays are still booming in many regions and could be viewed as part of the author's "improve energy productivity". But perhaps not quit as he envisioned the motivation. As pointed out before: the big SG players are the public companies not motivated by high oil/NG prices or the applicability of the Holy Trinity but by the demand of Wall Street to at least replace if not increase their reserve base. Though somewhat profitable these trends are of little interest to companies that drill strictly for cash flow profit and not stock hype. I've spent over $300 million in the last 28 months and not one penny went towards improving the productivity of any unconventional play.
There's still a lot of oil/NG left to develop. But to what magnitude? Norway just discovered a new multi-billion bbl field. That's great but we need a good many more discovered EVERY YEAR indefinitely. There's no new tech needed to accomplish that. We just need to apply the tech we have to unexplored trends. And there's the limitation: there's very little area left on the planet for "frontier exploration". The Arctic is about the last major area for such drilling. Offshore DW Brazil has been a great discovery. But we're at the edge of the continents and there is no geologic frame work for oil/NG accumulation beyond these trends. The vast majority of the oceans have a proven zero chance of oil/NG accumulations.
So the bottom line IMHO: In the short term we'll have some productivity improvements thanks to the Holy Trinity, higher prices and Wall Street's demands. But when all the Marcellus locations are drilled, all the DW trends have been developed and all the Canadian oil sands are striped out of the ground, there won't be much left to be productive. Economy requirements and prices won't matter. If it ain't there it won't be produced. $1,000/bbl oil and Star Trek exploration won't change the game in the end.
Your "short term" is quite long. And with a long time with high oil prices AND high production, the economy will move away from oil in an orderly fashion.
Interesting and very reasonable. As you note, once things start to change very much, linear models usually go wrong. Everything comes down to what kinds of substitutes and conservation measures are feasible when everyone realizes we need them. The original post seems like a useful step toward a more complete model. But it models energy, you talk about oil. These are very different as we have cheap but polluting coal and abundant but expensive renewable energy sources that will last much longer than cheap oil will. In my opinion, we need more work like the original post that can help make sense of choices that humans will make in the face of scarcity which (as Grautr points out elsewhere in the comments) is a standard way to define the discipline of economics. We have clear experimental proof from the last 30 years that future scarcity (even if nearly certain) has relatively little affect on most humans (at least with their current belief systems). But what humans will do in the face of obvious scarcity of oil is much less obvious. Many of the engineering and geological constraints are understood, but diving into the messiness of economics is the only way to model what humans will do...and I have to agree that this is very unpredictable.
gavn - I suspect you're correct about the author's perspective of energy vs. oil. That's why I gave myself an out in my response. Even so it appears he ignores the complications of the transitional period. A grand assumption: nuclear will be able to substitute fully for oil. We'll all be driving e-cars and all electrical power driving our industries will come your neighbor nuke plant. Ignore any the sustainability and environmental issues: we have entered the "too cheap to meter" age.
But how does the economy cope with getting from here to there? We're not building any nukes today that I'm aware off. In fact seems like we're more on the verge of a net loss. And if there is a huge sudden reversal of attitudes how long will it take for this massive build out? And can the economy fund such an effort in a short amount of time. Short being, let's guess, 25 years. Ignoring the approach of PO, even if it isn't here yet, can our economy deal with such a massive infrastructure expansion at the same time it deals with the worsening effects of resource limitations. From a technical stand point his view may seem plausible on paper. But the reality may be far more difficult to manage towards such a goal.
China has some 150 million electric bikes and scooters. What is the massive infrastructure expansion needed? I guess, in the US, infrastructure could be pared down a bit if more people goes e-bike.
Regarding electricity supply, transport doesn't require that much, so you could squeeze most of it into current electric demand, replacing some demand of less worth. Coal can keep bridging until you get the guts to do nuclear again.
'But how does the economy cope with getting from here to there?' This is indeed a central question...right up there with "what will 'there' look like?" And it is best to keep sight of our inability to predict.
I fully agree that there are massive infrastructure problems with transitioning from oil to non-liquid energy sources and the original post didn't consider these. But I understood the original post to be an attempt to bring energy constraints into standard economic modelling in a way that the economists can understand. I would agree with you that we eventually want much more. We eventually have to include the limited fungibility of different energy sources, the difficulties of rapid infrastructure transitions, problems with economic systems built on exponential growth, and other things discussed on this site. But you work on simple things first, and including energy in the way the original post does seems like an important step.
Ignoring energy constraints entirely (as much of mainstream economics does) doesn't work. But neither does simple minded attempts to assume that energy is the source of wealth. I suspect that attempts like the original post to adapt the tools of economics to address scarcity of energy and oil are more likely to contribute to understanding of the choices that humans will make in the future than attempts to completely reinvent economic modelling ignoring a few centuries of insights into human behavior that are encoded in mainstream economics.
michael_engineer, very nice summary of our predicament. Thank you. If you are not already aware of it, I think you will enjoy the work of Timothy Garrett.
http://www.inscc.utah.edu/~tgarrett/Economics/Economics.html
speaking of work...your thoughts have been and will be an immense help to me cobbling up my own presentation on offer to the school district where I work.
In particular: "The pace of life will slow, and the world will become a much larger place again. But our knowledge of math and science should preserve some things for us. In the long run, maybe we will all end up in a more advanced version of the Swiss Family Robinsons."
I would like to add that humanities may/will play a huge role in keeping people from tearing out each other's throats on the downslope. Or may not. While technical subjects may fix immediate challenges, ultimately, the whole aspect of knowledge will be needed for this species to survive.
Thank you so much for your effort and organized ideas.
Paul
I thought about answering the comment to which you are responding, and it didn't seem worth the effort.
But, now I'm alarmed.
Please don't use that as a basis for a presentation to children. It's unrealistic - we may have some birthing problems with a transition to sustainable energy, but we're not going back to a pastoral life - wind, solar and nuclear combined with improved efficiency will provide all the energy we need.
Nick
What's alarming about a pastoral life? Give me any bored kid in a cubicle and I guarantee he'd be happier sitting on an ox.
True, the pastoral life became onerous in the past century due to the demands of an industrialized society, not to mention the stigmatization of all things homemade in the age of mass production, but the pastoral life was once so pleasurable that the word pastoral become synonymous with pleasing.
Give me your average suburb, rip up the paved blacktop and parking lots, and put in cows, sheep, goats, chickens, gardents, etc and I guarantee that not only will life improve, the entire civilization will be strengthened as result.
That's the outcome that I expect to see due to PO, and in fact it's already happening.
"Dr. Jensen said he suspected that ADHD may be increasing because so many demands for sustained attention are being placed on today's children. "We expect our kids to learn more, do more, we expect them not just to go to college but to have 3 or 4 hobbies and activities they do in the afternoon and quickly get that homework done, and then we expose them to many different stimuli. They have the TV going, and the Game Boy going. All those things are competitors for attention. If you had a society where homework was not important, almost by definition you'd have fewer parents complaining about their child's inattention," said Dr. Jensen."
http://www.medscape.com/viewarticle/751596?src=mpnews&spon=12
New ADHD Guidelines Include Broader Age Range: The updated guidelines for the diagnosis and treatment of ADHD just released by the American Academy of Pediatrics have been broadened to include younger, preschool-aged children and older teenagers.
The layers of irony inherent in this statement regarding expansion of stimulant medication in the ADHD guidelines to children 5 and younger just boggles my mind. And then there's the 400% increase in antidepressant use over the past 20 years, below. Does that indicate a massive increase in morbidity and the biology of depression or maybe it just indicates a problem with the profession of medicine and regulatory capture by big Pharma? Mad Momma says maybe we should fix society and ourselves instead of medicating our children as the scapegoats? Our drugging approach to medicine in the US has gone off the deep end. Just say no to drugs.
http://www.medscape.com/viewarticle/751931?src=mpnews&spon=12
Dramatic Increase in Antidepressant Use: Newly released survey data show that although 1 in 10 Americans now take antidepressants, very few are visiting mental health professionals. That report also showed that use of antidepressants increased by almost 400% for all ages from between 1988 and 1994 to the period between 2005 and 2008.
Taken together, these two Medscape articles from this week demonstrate what's alarming about our current civilization. Our evolution has occurred too quickly, and our technology has outpaced our brains. We are fossil fools. Change is coming, Nick, whether you want it or not. And we'll see what our children think about that nukes idea.
"The world in which you were born is just one model of reality. Other cultures are not failed attempts at being you; they are unique manifestations of the human spirit.” --Wade Davis
Change is coming, Nick, whether you want it or not. And we'll see what our children think about that nukes idea.
Actually, the practical impact of most of the skepticism towards renewables and nuclear on TOD is to stall change. If you send the message that PO will cause collapse, you're sellling "drill, baby, drill"!
Nick
so the idea is to bury reality so that it takes us by surprise? When has that ever worked. IMO this sounds like cowardice.
Besides, the gist of this site is not to claim any kind of specific collapse, but just to identify reality from fiction, hype, distortion and lies.
I don't really get the skepticism towards renewables from TOD. Maybe in a comment or two. If it bothers you so much it's incredible that you express so much skepticism towards PO, since its widespread acceptance could only speed conversion towards sustainable systems.
the idea is to bury reality
Not at all. But, if you're going to send a negative message, you need to be sure it's realistic. In fact, economic collapse due to energy scarcity isn't realistic.
the gist of this site is not to claim any kind of specific collapse
I responded to a specific message, which assumed a kind of primtivist collapse.
you express so much skepticism towards PO
I'm not at all skeptical about PO - I think we're on an extended plateau right now (with a small upward curve - PO Lite). I'm skeptical that PO will cause the kind of dramatic effects assumed by the previous message.
widespread acceptance could only speed conversion towards sustainable systems.
Not if we get the details wrong - then we just lose credibility.
The fact is that we continue to pay the high costs of our addiction to oil because it benefits a minority. We can and should kick that addiction ASAP - and we'll only be better off for it.
Give me any bored kid in a cubicle and I guarantee he'd be happier sitting on an ox.
Have you ever looked at the rates of depression, alcoholism and substance abuse in farm communities? Pretty striking.
Farm life is extremely difficult and dangerous part of the time (those cows don't milk themselves, and they don't take a vacation); and really boring the rest of the time.
the pastoral life was once so pleasurable that the word pastoral become synonymous with pleasing.
I'd be curious as to the history of that idea. I suspect it came from urban dwellers.
Nick
Rate of depression, alcoholism and substance abuse in farm communities are misleading. These are not farming communities so much as big-agriculture shanty towns.
Can you show me the study comparison of a small community of family operated farm vs one of these big industrial ag villas? I read about one just recently - done by UC Davis in the 30's I believe. The results were predicable: the family farm community showed a rigorous tendency to self organize to produce literate, educated children, and were generally measured to be happy and wholesome places to live. The big factory farms were predictably miserable and lacking any community at all. The report was buried by a consortium of special interests at the time, but became a founding thread of the organic ag movement.
Have you ever lived and worked on an small farm? I spent a year on an organic farm in VT. I can tell you from first hand experience that it is hard work, but the experience is unlike anything I have ever felt. As you get into the flow of work and the lifestyly you develop a rhythm. The lives of the animals and the growth of the plants and animals, not to mention the woods and wildlife and everything around you seep into you. I began sleeping and dreaming better. I laughed more and women looked better. A real farm is something different. It stimulates some kind of old rhythms in you. It's the direct opposite of the sense of malaise and smell of rot and spectacle of human misery that you see in places like NY.
No, the pastoral ideal actually exists, all industry funded studies to the contrary. I've seen it.
I read about one just recently - done by UC Davis in the 30's I believe.
I'd be curious to see it - do you happen to have a link?
the family farm community showed a rigorous tendency to self organize to produce literate, educated children
Fascinating. Historically farm communities have very low rates of literacy and education - these just haven't been needed or valued.
I spent a year on an organic farm in VT.
I'm glad. But...and this is key...this was voluntary. You had a choice. Historically the poverty of farms meant that families had to be very authoritarian to suppress any aspirations towards impossible dreams.
"Historically the poverty of farms meant that families had to be very authoritarian to suppress any aspirations towards impossible dreams."
I'm pretty sure that you're assumption here is influenced by a modern bias and is not accurate. While there were obviously plenty of poor farmers in history, there were also rich farmers, educated farmers, etc. George Washington and many of the colonial aristocracy who founded this nation were farmers, for example, and they were incredibly well educated. Just by saying "historically" doesn't make your opinion authoritative. Rather it seems that you are working from a very modern and biased view of the history and culture of agriculture. There tends to be a stigmatization of farming communities in popular thinking due to the fact that we're living on one side of the industrial revolution, which essentially drove farming communities into the ground.
Most people were farmers a century ago, here in America, even if they did it only to feed themselves and families. People did a lot canning, pickling and gardening even in the suburbs - hell, my grandmother still bottles her tomatoes every year, and my grandfather used the full yard for a vegetable garden while he was alive. Point is, growing your own food used to be the standard way of life, so the idea that farmers were all poor, prohibitive, authoritarians isn't really accurate. Families farming for profit were also often quite successful, especially prior to industrialized farming. Sure we know stories of the dust bowl, and all the plagues and difficulties of farming, but historical accounts often are composed of extreme examples that appeal to our imagination instead of presenting an accurate picture of past reality. This real history of farming is a story of wealth and plenty, albeit not necessarily the glamorous kind.
Especially at the turn of the last century, when public schools were the norm, farm kids grew up learning to read and write. Aspiration was a characteristic of the nation and age. Americans at every social class felt that advancement was possible - so farmers did educate their children, and were themselves literate, and kept up with developments in science and technology. Many of our scientists, academics and inventors were born and raised on farms or in farming communities.
As for the link, I can't find it - it was a radio program that I happened to catch actually. I've looked around for it but I can't unearth anything on the web. However, there's no reason to doubt me.
I can offer this which link which I read the other day:
http://www.nytimes.com/2011/03/06/us/06farmers.html
Farming is hip and it's coming back.
you're assumption here is influenced by a modern bias and is not accurate.
No, I'm going way back. As best I can tell, flight to the big city has always been the way out of poverty and repression, going back thousands of years.
George Washington and many of the colonial aristocracy who founded this nation were farmers, for example, and they were incredibly well educated.
And, they were a tiny minority. Plus, you'll notice they didn't stay on the farm - they went to Philadelphia, and Baltimore, New Amsterdam, etc.
growing your own food used to be the standard way of life, so the idea that farmers were all poor, prohibitive, authoritarians isn't really accurate.
Yes, most people were farmers, and yes, most people were repressive. Think about the advances in civil rights in the last 200 years: that would not have and could not have happened without the Industrial Revolution.
Many of our scientists, academics and inventors were born and raised on farms or in farming communities.
But, did they stay there?
You're not going far enough back.
Remember the histories were written by conquerors. The people whose lives were lived in relative peace and prosperity didn't leave behind accounts of their exploits. The grim depictions of the past are just like the stories on the evening news - most people go about lives peacefully, but there's always something bad happening somwhere, and these get reported incessantly. Same with history books.
Your reading of history is slim if you take the history of "repression" as the only fact. Part of the big propaganda that is the product of cities, is to convince you that life in the cities is so much easier and better than elsewhere. Part of our cultural heritage is the notion that nature is cruel, and only by hiding in cities can we expect to escape a life of pure abject slavery. This is patently false - or rather, it ought to be false. One of our successful strategies as a culture has been to deplete resources so that most people are reliant on narrow, man made supply chains for their food. This is why we demonized and slaughtered the American Natives - they lived lives of plenty, didn't work to hard, farmed, hunted, and engaged in complex social institutions. They weren't dependent on tight lines of distribution, and hadn't become used to the artificial scarcity practiced by the Europeans.
But prior to the industrial age, even in old feudal Europe, most wealth came from farming and trading. There were all kinds of wealthy farmers. Sure, we hear all about how they were slaughtered and abused by the nobility, but again, these are the stories that filter through, while the vast majority of nobility were concerned with healthy, robust farms, with happy serfs.
Anyway, what you've said about farm communities in America isn't true - many may have been poor, but they did care about education and they were places of culture and aspiration. The scientists and academics who left the farm were and are outnumbered by the clever people who never did.
the vast majority of nobility were concerned with healthy, robust farms, with happy serfs.
The vast majority of the population were serfs. By definition, they were powerless over most aspects of their lives. They certainly couldn't choose a different profession or location. By necessity, farm families suppressed any dissent or tendencies toward dangerously free thinking. Men had their roles, women had their's: if a man didn't want to be a farmer, or a woman didn't want to have kids, these ideas were dealt with ruthlessly. Life for women was especially bad: 18 hour workdays, and having kids until dying at a young age in labor.
And, in order to prevent dissent in adults, children have to be suppressed ruthlessly from a very young age. No talking back, no talking when not talked to, no nothing. Disobedience got serious physical punishment.
Why do you think Afghans are so seriously repressive? Because they're poor farmers.
No talking back, no talking when not talked to, no nothing. Disobedience got serious physical punishment.
Sounds kind of like conditions in the average maquiladora. Industrialisation hasn't resulted in freedom for everyone, just for those populations in the industrial cores designated as "consumers". Slaves still toil w/o much choice or autonomy, just in factories instead of on farms. The abuse of power, fantasies of control, cruelty and exploitation, taking advantage of the vulnerable -- these things don't disappear magically when machine tools enter the picture.
footnote
And please can we not recycle the old neoliberal claim that all those factory wageslaves voluntarily came to the cities to escape even worse conditions at home?
Vast numbers of them -- probably a majority -- wuz pushed.
footnote
Suicide on farms? yes, but often the suicides of small farmers are due to debt and despair, not to some general, pervasive unbearableness of agrarian life (just as the misery of serfs in earlier times was mostly due to rapacious feudal overlords, cruel taxation, etc. and not to anything inherently miserable about country life).
footnote
Undercut by predatory marketing (selling below costs to capture market share and put competition out of business), indebted after the purchase of "Green Revolution" technologies touted by Western agents, unable to make ends meet, and facing the ultimate disaster for the small farmer -- losing the family land -- that's the predicament that has driven so many 3rd world farmers to despair and suicide. [Many have made a final statement by drinking the pesticides they were advised/pressured to purchase.] Anyway, to claim that country life and farming must be inherently awful because some farmers commit suicide is rather like claiming that urban life must be inherently awful because people in cities use more addictive/dangerous drugs; often the people using the drugs have other reasons, like extreme poverty, racial discrimination, unemployment, etc. which are not necessarily implicit in urban life.
There's no question that rural poverty is not the only problem in the world.
Industrial production raises the productivity of workers. The value produced is distributed into different areas such as wages, insurance, profits, taxes, labor standards/environments/conditions, shorter work hours and so on. As the value produced rises, these areas improves. Of course, early industrialisation may not improve productivity that much, and in the beginning, workers and society may put an emphasis on translating produced value into income, and not until later trading more of it for better conditions at work.
Btw, Indian farmers committing suicide is, AFAIK, due to generous compensation to the families of those who have committed suicide. The government essentially pays people to kill themselves, and shouldn't be surprised that some accepts the offer.
Nick
I'm getting a good sense of you're thinking on the subject, and it has been informative. Again, I think you're perspective is too narrowly here. What you're describing as family farming or historical agriculture sounds more like military or ship life. I don't think you're wrong in describing certain situations from history, but I do think you're missing the forest for the trees.
Specifically by seeing agriculture through the filter of European imperialistic culture, I think you have an exaggerated idea of the authoritarianism inherent in agrarian culture. What you are describing is the authoritarian demands placed on agriculture by a particular culture, specifically ours, and our imperialistic European civilization.
Also, your opinion is too narrowly informed by the status quo of a modern historical forms of education, which tend to rely on flash-points of change, disruption, or disaster that marked historical, while ignoring the plateaus of stability and cultural plateaus that were rich and full of sustainable plenty.
Keep in mind, agriculture and farming are about 12,000 years old, possibly older, and that farming was the first 'engine' of stationary, civilized culture on the continents. In other words, all wealth came from, or revolved around farm activity. Government, military, and cities were formed from the alliance of agrarian interests against external threats and pressures. Therefore to say that farms have always been places of authoritarian austerity under the pressure of their cities is to put the cart before the horse in the oldest sense.
Farms, even in the middle ages, were most often places of bustling plenty. We don't hear a lot about that, because the history books re-enforce the idea of past authoritarian/austere conditions. I don't expect you to believe me, so imagine you're reading in the future, and you read about the life of the average worker today. You read that his diet was crap, that he was fed corn derived products like a pig, and was forced to eat diseased, factory farmed meat for lunch. He worked in stuffy little office, and had to sit in a little mechanized box to get to work in the morning. His life was hell. Well, you might believe it, but you'd miss the fact that this worker believed he was better off, historically speaking, than anyone in history. He loved the food, and his car, etc. The same is true of the historical farmer. Sure there were good times and bad, some suffered and were turned into slaves. Many more enjoyed the riches and plenty of their life. And many became prosperous. Most lived very well.
To look at farming is a dire, unhappy life is to miss the bulk of civilized history. For example when the Europeans found America, what they found was essentially a vast, well-managed, farm. Most may not have realized it because they didn't recognize it, having already wiped out their native agricultural wealth and replaced it with more industrialized forms of agriculture. They did recognize its riches, which is why they took them, and exploited them beyond recognition.
The filter of European, imperialist, exploitive agriculture which you take for all farming, including the plantations, through the banana republics and up to our factory farms now, are not really the truth of agriculture or small farming. Even within the expanding European empire, especially in America small farms were cultural, progressive centers. Up until the industrial revolution in farming, the so-called "green revolution", family farms were the source of the pragmatic soul of our nation.
You pointed out that the many thinkers, inventors and politicians who emerged from the farming life didn't stay there, when the original point you made was that farms produced no educated individuals. You can change arguments mid-stream to try to win, but it's a dishonest argument. According to you they couldn't have come from there to begin with.
Anyway, good talking, good luck with all that non OPEC.
an exaggerated idea of the authoritarianism inherent in agrarian culture.
I'm not criticizing agrarian culture. I'm identifying a problem that inescapably comes with poverty.
to say that farms have always been places of authoritarian austerity under the pressure of their cities
I'm just saying that cities have been more affluent than rural areas.
Farms, even in the middle ages, were most often places of bustling plenty.... Many more enjoyed the riches and plenty of their life. And many became prosperous. Most lived very well.
Farmers may have felt prosperous, and reasonably happy. Still, their lives involved an enormous amount of work, and their life options were very, very narrow. Families had to be authoritarian. This isn't a judgement, it's just a fact: farmers couldn't change their profession, women couldn't choose not have children or not marry who they were told to marry. The idea of romantic love just didn't exist: marriages and children were arranged. The idea of freedom in these areas just was unimaginable.
when the Europeans found America, what they found was essentially a vast, well-managed, farm
Some native Americans farmed, others were hunter-gatherers. They may have been reasonably happy, but again, the average person didn't have much freedom.
Even within the expanding European empire, especially in America small farms were cultural, progressive centers. Up until the industrial revolution in farming, the so-called "green revolution", family farms were the source of the pragmatic soul of our nation.
The majority of those who worked in the fields in the US until the Civil War were...slaves. Right?
You pointed out that the many thinkers, inventors and politicians who emerged from the farming life didn't stay there, when the original point you made was that farms produced no educated individuals.
I never said that farms produced no educated individuals. I said that they came from a culture that valued education less than in urban areas. That's not inconistent with farms producing a minority of educated individuals. The people you're talking about were a very, very small minority, mostly living among and being supported by slaves. Jefferson is the quintessential example: he opposed slavery, and freed his slaves after his death, but he was dependent upon them for his life of intellectual work.
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This argument started with my contention that an involuntary return to full reliance on farming as a way of life (as opposed to hobby farming, or temporary sabbaticals on the farm) would be disastrous for most people, condemning them to lives of much harder work, uncertainty and relative poverty. Let's focus there.
Some native Americans farmed, others were hunter-gatherers. They may have been reasonably happy, but again, the average person didn't have much freedom.
???-how are you defining freedom??? There of course were vast differences between Native American cultures as there were vast differences between the landscapes on which they lived. Eating is a big item, how much time and travel were needed to glean sustenance from the surrounding landscape certainly set local constraints. The change that quickly evolved when the Plains Indians obtained the horse with which to pursue the bison is a most enlightenning story. The belief system endowing spiritual value to everything around was not as liberating as many imagine-to most reading here it would seem like being ruled by superstition but to those who had known no other life it certainly did not look that way and it most certainly afforded them freedoms we raised in the Judeo-Christian-Scientific method world do not appreciate.
No doubt your contention that an involuntary return to a full reliance on farming would be disastrous for most is correct. Interestingly as you and teh danced around city/farm you missed the greater context. We have only been farming for a ten or fifteen millennia but we have been modern humans for many times that long. We are hunter/gatherer-not farmer tied to a plot of land-deep down--though no doubt the great variation between individuals and selection through the last several millennia has produced a sizable chunk of people who do tend toward being near inseparably tied to a plot of land. But that is probably not the case for most of us. My contention is that something in the city satisfies the hunter/gatherer that is so deep within us as not to be noticed--if that wasn't the case cities would have never taken root. Just a thought.
We probably have been herder/hunter/gatherers a bit longer than farmers in some places--though I will be honest I'm only guessing at that. But anecdotally the nomadic herder/raider lies deep within me. Two accidental experiences I had in my Montana days while at the peak of physical condition in my early thirties showed me that.
The first: I'd come home from helping a friend put up hay--my payment was enough fodder for my mare for the winter. I went to check on my horse--she was gone. She had broke through the single thin wire that was the electric fence. It had just rained and tracks were easy to follow and there was an extra set. The hoove prints followed a dirt track through the woods that would exit into an abandoned homestead's hayfield. The moment I entered the field I saw my mare with a flashy Appaloosa cantering in her wake. I don't think I have ever felt wealthier than I did at that instant. I suddenly had double my livestock wealth. Of course the feeling passed and I found the horse's owner who had just moved into what had been a long empty ranch house near my home. The feel of sudden wealth was indescribable and I've never had it since.
The second: Weeks later early one fine Sunday morning I rode my mare out on a trail that passed through my new neighbors' yard. My two dobies were trotting ahead of me, it was a glorious feeling morning. Suddenly the dogs spied the newly occupied chicken coop, blasted through the unlatched gate and were on the birds in a flash. I immediately dismounted and was able to get a chicken out of my dog's mouth before any real damage was done. But for a very brief moment, as it all started to go down, I felt like a young Genghis Khan descending upon a hapless farmstead. This feeling welled up instantly, it was huge and I have never had it since. Just saying--our roots go deep and what we feel constitutes freedom necessarily goes just as deep.
Those are great stories.
Yes, our hunter-gatherer heritage is very important - we and our ancestors did that far longer than farming has lasted. Heck, hunting goes back probably to our lemur heritage...
And, yes, I was being a bit loose talking about Native Americans. I'm pretty sure their social roles were fairly rigid, and their lives not nearly as bucolic as some think (the death rate from inter-group raiding was high, infant mortality was very high, etc) but I'm not as knowledgeable about them as I'd like to be.
I've read a bit on Native Americans and spent more that a little time up close and personal with more than a few. The social rigidity varied a lot from culture to culture-lots of landscapes, lots of languages, lots of cultures, long period of time. Freedom is such a slippery thing to define-freedom to and freedom from are sometimes mutually exclusive ?- )
Genghis Khan's Urban Clan in the October National Geogrpahic touches on what we have just been discussing--worth the quick read.
Yes, freedom is complex. More importantly, it is silly to talk about Native Americans as a single monolithic group.
I'll try to pick up that story. We used to subscribe...
This real history of farming is a story of wealth and plenty
let's see Washington (the farmer you mention) was fairly wealthy after he married into the Custis family and the slaves doing the work on those farms were fairly plentiful, so yes wealth and plenty works there...
lets try Europe, the landowners were relatively wealthy and the serfs (who were tied to land so thoroughly that they were sold with it) were fairly plentiful , so yes wealth and plenty works there too...
maybe we should look at Asia and see how the traditional wealth and plenty are distributed...well there is a little more variation as China has been organized longer but it sure looks like as a general rule the nobles and landlords were fairly wealthy and the peasants were fairly plentiful so yes wealth and plenty works there too..
Not extreme examples at all...slaves, or virtual slaves did a lions share of the farming through a huge bulk of 'civilized' time. Relatively recent (last couple/few centuries) tech advances mostly facilitated the independent farmer to raised to level you are talking about.
" but the pastoral life was once so pleasurable that the word pastoral become synonymous with pleasing."
And short. Don't forget the short part. Expect to die around 50 of pneumonia. Half the children die by 12. If you are truly pastoral you don't even get eyeglasses.
Don't look too closely at the pretty picture, it was pretty nasty underneath. I don't deny there were good parts as well, but on balance, I'll take the civilization that can provide the hot shower, refrigerators, and polio vaccine. Wikipedia is just a pleasant bonus.
Michael--
Thanks! You have a lot of good ideas there!
Gail
Nice post michael. A few comments:
"Is the banking business model of providing 30 year home loans at risk? It would seem so."
I agree, but we also need to consider the effect of the $1.5 quadrillion derivatives market. Banks never made these loans because they were expecting to make a profit off them beyond 1 year into the future; certainly not for 30 years. In the runup to the housing bubble crash the Fed basically backstopped all mortgages which sewed the seeds for the subprime mortgage fiasco. The banks were given all this money from the Fed to lend to home buyers and the Fed guaranteed that they could not lose on these activities. All they had to do was leverage themselves with derivatives based on some fantasy valuation of the mortgage valuations, then slice and dice these into new exotic Mortgage Backed Security packages to then be spun off onto any number of gullible investors in the Over the Counter derivative market, then inflate the bubble for a year, and pull out at an opportune time with massive profits at the peak of the bubble, then let it crash and sit tight because they knew taxpayers would bail them out via the Fed (hmmm, the Fed is owned by those same banks...) Rinse and repeat for several years afterwards until the sovereign debt crisis / money printing orgy resulting from this scam destroys the world.
Plus with manipulated interest rates running from 20% in 1980 all the way to 0% now in the bond bull market, no one who owned debt had any intention of holding it to maturity since they were simply waiting for the Fed to lower interest rates some more in order to make profit on their debt holdings, then sell them and repeat for the next cycle (debt bonds become more valuable as interest rates drop). So they couldn't care less what happens 30 years down the road; they are interested in what happens a few months down the road; fundamentals had nothing to do with it.
"If there was enough energy and resources available to give the people jobs who are currently unemployed and demonstrating in the streets in many places in the world, don't you think that the powers that be would be putting those people to work so that their actions are constructive and stabilizing (and even generating profits for corporations!) instead of letting them be unemployed, protesting, and destabilizing the status quo in places?"
Exactly, governments are trying to put the people to work by increasing spending but of course this isn't sustainable because there is no economic base to support the government, beyond further money printing. The problem is that our economies can no longer grow for a few reasons -- one being runaway crippling debt, another being demographics, the other being Peak Resources. So therefore unemployment must go up since most people otherwise work at jobs building new and bigger infrastructure. Without growth, unemployment should go up to something like 30%. That doesn't work in a capitalist system. How do you reduce unemployment in an economy that can no longer grow? You divide up the remaining work better by reducing the work week, so that people only work 30 hours a week. The problem with this is that GDP would no longer be growing and the monetary system could no longer grow exponentially. Well that's a problem regardless. We need a new monetary system, one that can function in a zero growth system.
Regarding whether Peak Oil will reduce jobs, I think with Peak Conventional Oil jobs will increase because of the diminishing EROEI. It becomes more difficult to get additional energy out of the ground and this requires more labour. But this isn't good for the economy as a whole because we aren't doing nice things with that labour.
I don't think we will get inflation in the traditional sense because legitimate inflation by definition comes about when economies are growing and new credit money is being created and demand for resources rises. Since our economies are no longer growing in the western world, the price increases we are getting are in large part from money printing (increasing demand from Asia is also contributing). This is better called "stagflation". What seems to the the scenario is that we will soon get a catastophic deflationary collapse likely triggered by a crash in the over-leveraged European banking system which is beyond hope. Huge amounts of debt must be rolled over by the end of 2012 (there's that year again...) and the EU doesn't seem to be able to come together politically to just print over the mess. Then we will have huge deflation as money surges into the US from the EU but the US is in no better shape than Europe; this will last for a while but the Fed will have to print to infinity to keep the financial system going in the face of spiraling deflation, then once the deflationary shocks are over and the realization of the amount of money printing becomes well understood, and unemployment skyrockets, then we'll probably see hyperinflation happening fairly quickly. That's my prediction. I expect it within a year.
I think that while the role of energy in production is important, the relationship between energy and land/location is both more important and less analysed.
The definitions of capital and labour as factors of production - or bases of value, as I think of them - are ideological.
Mason Gaffney makes a good case - The Corruption of Economics - that neo-classical economics was funded by the rich and privileged as a response to the threat represented by the populist political economist Henry George, who advocated a tax on land rental values.
Now, the greater part of fiat money in existence came about from credit created by banks and secured by a mortgage. ie it is people-based but land-backed credit. So land value is an extremely important component of the economy, but is airbrushed out of view, and minimally taxed for ideological reasons ie a Labour-centric view of value.
The value of 'land' is essentially the value of exclusive use of:
(a) Location (3D Space) - which derives its value mainly from public investment in surrounding infrastructure of all kinds; and
(b) Private investment in the Location - which is the value of the material and immaterial energy embedded in the location, and the use value of intellect (eg Labour skills and expertise) and IP which are also embedded in the location.
The location does not depreciate, but of course the energy embedded in it does.
Since an enormous amount of GDP has involved the deployment and embedding of energy in location, I think that the role of the relationship between energy and location - in terms of economic growth - should receive far more study than it does.
Brilliant. Love the paper - I'm a big fan of Henry George, a fellow newspaper man. I think you're onto something here. What does "location does not depreciate" mean?
Economics as bought and paid for by the rich; the "field" of economics is done.
http://www.huffingtonpost.com/2009/09/07/priceless-how-the-federal_n_278...
sure, I remember thinking this in Macro econ 101 when they set capacity for human consumption equal to infinity and then jumped right into figuring out the best way to maximize everything based on that horrible assumption.
If economics isn't going to provide careful, advocative study of the best rules of human consumption, then it's horribly misnamed. Really, modern day economics is some bastard branch of calculus when what it should be is an amalgam of anthropology and medicine. It's only called Economics because by definition it can't be called Exploit-o-cryptics.
It's so obvious that economic theory would be written to satisfy the exploiting interests that it's almost trite - this has always been true, since the beginning of the 'field'. Of course it's all highly logical and mathematical - the language of math gives the illusion of pure fidelity to reality when actually it's a purely abstract notation that depends on sound philosophical underpinnings to produce anything useful. Economics isn't philosophically sound.
That's not to say Exploit-o-cryptics isn't extraordinarily powerful at doing what it does: producing wealth by the most cut-throat means possible.
Exactly... a bastard branch of calculus. I picked up the textbook "Economic Growth" by Barro and Sala-i-Martin for sh*ts and giggles. Couldn't believe what I was reading. These people really are clueless. Amazing. And they are our leaders. They hide behind their math and big words to portray some image of credibility but it's all done to confuse the average person and keep them from asking questions and understanding how economics actually works.
We learn all about calculus in engineering school but rarely ever use it in real engineering.
1. Energy is essential to life.
2. Humans need energy to stay alive.
3. With the exploitation of fossil energy, human population has increased.
4. When we are back to solar energy, the human population of the earth must decrease accordingly.
5. Big die-off event.
Technological progress has found us new ways to efficiently produce energy. Nuclear, for instance, is extremely dense and practical.
The entire global economy could be powered by 400 km x 400 km of solar panels in a mid latitude desert. The amount of solar energy striking the planet dwarfs all other energy sources by orders of magnitude. Technology enables us to convert that energy into electricity whereas plants growing in the desert can't due to lack of water.
If the whole world was included in the analysis I think the GDP / Energy relationship would more closely match.
If China and India (and other developing nations) are considered the new manufacturing hubs for the developed nations then we can see how less energy use in these developed countries can result in increasing GDP.
More thinking less tinkering - developed nations play money games, invent new technology while the developing nations burn the energy putting cheap labor to the task of supplying the privileged their value added goods.
The first couple of charts are for the world as a whole. Energy intensity has declined strongly in both China and India. It has increased in some other developing countries like Brazil.
As I understand it the conventional definition for economics is; the distribution of scarce resources, which is fine considering their systems boundaries are myopically centered on profit taking. Does ecological economics have an accepted (and different) definition which incorperates biophysical concepts?
With all due respect to the learned folks commenting on this article the situation is fairly simple. Remove energy - read liquid transportation fuels (LTFS) - from the economy and observe what happens. EVERYTHING comes to a screeching halt and the economy crashes. End of story! That there is any discussion about the role that energy plays in economic activity seems absurd. E. F. Schumacher cleared up this argument long ago in Small Is Beautiful. Energy and money are the same thing.
The discussion about energy needs to be reduced to the simplest terms; that is, what do reduced supplies of high quality energy imply for the citizenry? Without fossil fuel inputs agriculture, as it is practiced in OECD countries, demands 10 units of fossil energy for every unit of "food" grown (if corn and soybeans are indeed food). Remove LTFS and starvation ensues, at least among those who don't know how to garden. Without NG and fuel oil most people in cold climates will freeze to death the moment the pilot light extinguishes. When people can't find gas to fuel their cars they become paralyzed and, no, electric cars or fuel cells aren't coming to the rescue. These are but a very few of the impacts that oil depletion implies.
All of this economic discussion about a geophysical situation is pointless. The underlying problem is the infinite growth paradigm on a finite planet, the main thrust of the writings of Michael Ruppert and Dmirty Orlov among many others. Economic growth is the cause of all the troubles that are extant across the globe. Until the way money works is dramatically changed - eliminating the three-pronged monster of fiat currency, compound interest and fractional banking - collapse will proceed apace regardless of the information found in papers such Mr. Stern's.
The sad truth is that economic collapse is already well underway and no amount of jiggering with interest rates or any of the other stupid tricks that Geithner, Bernacke and the obscure cabal of moneychangers continuously offer as solutions can repel the reality of Peak Oil, the true cause of economic collapse. That the Oil Drum crowd, at least some of it, doesn't seem to get this is disconcerting at best.
This whole conversation reminds me of the story about the engineers in Edison's lab trying to calculate the volume of the light bulb they had recently developed. After watching his crew struggle with the calculus Edison took a syringe, plunged it into the light bulb, injected a known and measurable volume of water and, viola, problem solved. The simplest answer is most often the correct one. Economics has always been a ridiculous enterprise and this article reinforces my contempt for the psuedoscience it is.
Thank you.
An ancillary point is, even if we were somehow miraculously to shift all our energy needs to renewables tomorrow (and were able to draw down all excess atmospheric carbon to historic levels), what we are doing with that energy would still cause the earth's ecology to continue to collapse.
If all of your commercial fishing vessels, for example, ran on wind and solar, but still were sweeping the oceans clean of all life, the plunder of that vast and ancient ecosystem would continue to collapse. The same goes, mutatis mutandis, for nearly every other industrial and agricultural use of energy in our current economic system.
As enormous as energy issues are, the yet greater question that barely gets addressed here or anywhere else is what we are doing with all that energy, no matter what the source.
Beyond the question, 'Can we convert to a non-ff, highly efficient economy?' is the more fundamental, difficult and important question, 'Can we convert from an economy hell bent on consuming the living (and much of the non-living) world to one committed to restoring the world?'.
(And then there is the pesky question we'd probably mostly like to ignore, 'Is it already too late to do any of the above no matter how much political will changes to do so?'.)
You make a very important point. One might argue that with sufficient energy we may have the option to do the right thing, and without energy we will go feral and destroy everything. But given our genetically drive behavior I think we will destroy everything either way.
With or without energy, we have a choice of how heavy an impact we are going to have on the earth.
I don't claim to have any direct vision into our genetics, but our behavior suggests that the more we can put limits on our capacity for mayhem (energy availability), the better off for the planet, certainly in the long run.
The great project of Western (and now Global) society since the Enlightenment (and probably the Renaissance) has been to find ways to expand human capability, to empower humans. FF gave the "reborn and enlightened" humans the means to carry out this ideological program, and this has been a monumental disaster for the earth and for most human cultures (languages are dying nearly as quickly as species). People here tend to think that it was the discovery of ff that did it. But I think there was a necessary previous shift in culture--which had seen humans as dangerously desirous creatures who had to be controlled and limited, but which switched to a different mind set. It is a major debate among historians whether 'discoveries' of technologies or resources drive history an ideologies, or whether ideologies develop and then prompt and value such discoveries. Most around here tend to assume the former. I think it can be a feedback both ways, but that ideology can have a larger driving role than most assume.
The great project of global culture from now on must be how to limit humans and their impacts.
This may sound shocking, but most (around here at least) would agree that limiting population growth is an imperative. But even a tiny population with access to vast energy and technology and a will to do so (and an ideology to rationalize and promote it) can very nicely demolish the world every bit as well as our now 7billion--hell the top billion are doing the lion's share of that demolition already.
So beyond population, we now have to move to a mindset of limiting humans in nearly every other field as well, but particularly in consumption and ambition. And please don't bring up 'spiritual' or 'intellectual' growth. Growth is simply the wrong metaphor for what is most valuable in either of those areas, and using such language is simply a throw back to our second-half-of-the-second-millennium toxic ideology of 'increase' expressed most succinctly in the first line of Shakespeare's first sonnet:
"From fairest creatures we desire increase"
"Fairest creatures" (besides the direct object of the poem, Shakespeare's male beloved) means both humans ourselves and every creation in nature of our own devising that fosters our own "increase."
I kind've agree with the broad outline of what you're saying, except that if the term "growth" is too inextricably intertwined with a BAU consumerist POV, then we need to find a new term to replace it.
People want their lives to improve. They're not willing to give up on that. Fortunately, the fact is that we can stop consuming resources unsustainably and wrecking our environment, while still making our lives better. If we say that, we'll have a much better chance of gaining allies.
Can anyone here comment on the credibility of www.theoilprice.com ? Their recent article is being used once again to debunk peak oil (on the basis of the Bakken Formation etc.)
http://oilprice.com/Energy/Crude-Oil/Debunking-the-Myth-of-Peak-Oil-Why-...
To me, this seems like nothing more than the usual API line, rehashed. But I trust you folks who contribute here as a valid crowd source.
Thanks!
comments can also be emaiiled off-forum to me,
biodiversecity(at)att(dot)net
It's remarkably bad writing, but I think his target isn't really Peak Oil, it's Peak Energy. And...he's right - we do have enough energy. Of course, that includes all fossil fuels (especially coal) and renewables/nuclear.
We really should eliminate fossil fuels ASAP in order to not cook the planet and acidify the oceans, and that's a very, very big project which isn't likely to happen as fast as needed.
And, Steve below is also right - this has a lot of misinformation and is probably just part of a sales pitch.
Hi Bobby
It's far worse than API. It's the whole cornucopian/denialist package, specifically targeted to ideologically kindred spirits. This quote is especially precious:
OK. Because oil prices are so high today it provides incentive to drill for oil where we didn't before (take that, peak oilers!), but actually it turns out this oil is super cheap (take that again, peak oilers!).
He is so determined to debunk peak oil that he's chosen to do it with internally contradictory arguments. (a.k.a. throw it all out there and see if it sticks).
He quotes uber-cornucopian Porter Stansberry regarding oil from kerogen shale in the Rockies. Stansberry is nothing but a financial tout.
And, BTW, Al Gore is wrong about climate change, says a weatherman.
He relies on an endless chain of conspiracies to lend comfort to his views: oil should be really cheap but greedy oil companies won't let that happen, we should be able to burn all the fossil fuels we want but the Al Gore/US Govt/IPCC complex won't leave us alone.
There are some well-reasoned critiques of peak oil out there, but this isn't one of them. IMO, the web site you linked is mainly interested in hooking people up with investment schemes of dubious value.
This is a very interesting article. I've been giving some thought to how Energy and GDP are related. My efforts are limited by my less than perfect knowledge of economics, but I still have a few thoughts I would like to share anyway.
Any activity, including economic activity, requires energy by definition. If there was no energy available to humans than GDP would be zero. In fact just living requires a certain amount of energy.
I'm not sure exactly what is considered energy for the purpose of calculating its percent of GDP. In my own thinking I'm including food. Based on that I think that if you had a society that spent all of its efforts just to get enough food to live, then it could be said that 100 percent of that societies GDP is energy related. If the society were to develop new technology that allowed it to dedicate some of it's time and energy to other things then that society would no longer have 100 percent of its GDP being energy related, but all of its GDP would still need energy.
In my opinion, in many of the societies that exist right now the activities that are necessarily to meet people's basic needs are far less than the activities that are carried out for other purposes. This results in need based activities taking up a smaller percentage of GDP. This change has been brought on by the vast sums of energy made available for human use by the use of new technologies and the world's natural resources, and if the total amount of energy available decreased the change may start to reverse leading to energy becoming a higher percentage of GDP once again.
Without increases in efficiency decreases in the total amount of energy available will result in a decrease in the total amount of activity and with it GDP. The decrease to GDP from decrease in activity can be offset in part by shifts to value added activities that add similar amounts of value with less energy usage.
Increased energy efficiency is something that can be measured objectively, but measurement of value added, in my opinion, is a more difficult task. I have been growing somewhat skeptical of traditional metrics for measuring societal well being.
One problem I have with such measurement has to do with how you tell the difference between value added and inflation. Value is general measured by price. The reasoning is that if something is more valuable people will be willing to pay more for it, but not all changes to price are caused by changes in value. So how do people know if an increase in price is a result of value being added or if it is a result of inflation or some other factor? If the product remains unchanged than one can reasonable say that the increase is not a result of increased value, but in order to sell products that are increasing in price many sellers use gimmicks like 'new improved formulas'. So how do you tell what is a true increase in value, and what is an increase in price caused by other factors? To me this seems to be a somewhat subjective task which makes me mistrust the results somewhat.
Another problem I have I have with measuring value with price has to do with means. If a person is unwilling to buy a $20,000 dollar car it could be said that the car doesn't have $20,000 dollars of value for him/her. So if latter that person wins the lottery and buys the car does that mean that the value of the car to him/her increased? Does the value of everything become greater if you become richer? If the person took that same $20,000 dollars and spent it helping people in poverty would the value of that help be the same as the value of the car? If my understanding is correct both uses would increase total GDP equally, but I don't think both usages would have equal impact on the well being of humanity as a whole. This also makes me feel somewhat skeptical of price as a measure of value.
Despite my skepticism I can't seem to think of a better way to measure such things. I just wish people didn't take such measurements so seriously. The way the world is today it seems that many important fundamental things, such as the environment and community, are getting ignored while people are obsessing over numbers of questionable meaning. In regards to energy, I find I lack the faith I used to have in market forces fixing everything, and I would prefer it if there where competent people both working on and implementing a comprehensive plan for moving away from fossil fuels. Actually I would prefer it if this had been started decades ago.
A good thing with market forces is that you need no comprehensive plan, since stuff will happen as needed. It seems to me that market forces have been moving us away from oil since the seventies, and this is now accelerating. Non-fossil fuels seems to increase market shares globally, arguably due to different initiatives regarding renewables subsidies but anyway.
Also, there have been comprehensive plans to move away from certain fossils, but not many have been followed through. The most notable exception may be France's decision to transition its electricity production to nuclear power in 1973, and their near completion in 1992, after a mere 19 years.
Jeppen,
I mostly share your enthusiasm for a primary reliance on markets, but I think a little more emphasis on market failures is needed. Pollution and security of supply (both national and long-term) are not factored into markets properly without regulation. There many other things that require regulation, and many opportunities for market failure. For instance, futures markets (the designated actor for "market planning") don't work as well as they should because they only go out 7 years, and even that far is weak because of the risk of counter-party default.
Asking a state to transition its electricity production to one specific/sole option is not a reliance on markets.
This is actually called a planned economy which is something a communist state typically does.
Someone who would favor a reliance on markets would, for example, call for a CO2-tax and let the markets choose.
This measure would also be far more effective in reducing reliance on fossil fuels, since it would not only drastically increase the number of options, but also affect the entire energy sector which is about five times larger than a singled out electricity sector.
I agree. When I say "regulation", I include Pigovian taxes like a CO2 tax.
We should levy taxes for CO2, for other forms of pollution, and for supply insecurity (think Iraq war....).
Pollution, sure, but regarding security of supply - how do you know?
Yes, but much less, I think, than is the common perception.
I don't agree that futures markets is the designated actor for market planning. The futures market is more of an insurance market - one way of handling risk. Producers, reserve owners and consumers can also manage risk by leaving oil in the ground, hoard it above ground and otherwise handle and trade the real physical commodity.
regarding security of supply - how do you know?
Given the enormous effort, and the enormous amount of money the US has spent on the ME over the last 60 years, I'd say it's pretty clear that security of supply is a very, very high priority and also a pretty expensive one.
consumers can also manage risk
Sure, but they should be able to rely on price signals in order to know that there is a problem, not spend their spare time haunting TOD.
Everything I've heard about France makes me admire their strategy. I wish there was a similar plan where I live.
Blasphemy!
You are hereby banished from the Church of the Holy Invisible and Intelligent Hand.
/sarcasm
Slave markets, for example, didn't do much to remedy the abusiveness of slavery.
Markets are notoriously not justice-oriented. Hence they make a rather diabolical idol.
Do I get my membership fees back?
The Invisible Hand is all wise and all knowing.
Sometimes his answer is, no.
I'm quite surprised that none of the comments question the validity of official GDP figures; not in what goes into them or not but how they're calculated. I don't know about all countries but many countries have altered the way the figure is calculated over the years. Has this been factored into the graphs in some way? Also the GDP figure itself has been questioned for quite some time. For example, shadowstats calculates different numbers for US GDP and generally has the gap widening over the years, which would give a very different figure and trend for energy intensity.
Of course, it's pretty difficult to analyse anything these days without "official" or generally accepted numbers (like the BP stats, which, themselves use official numbers) but I wonder if we often overstate or understate something because we just don't have accurate data.
Oh hey, I didn't see your comment, I made the same one below.
The horizontal aspect of the latter part of figure three suggests sweden has come to a (local) minimum in terms of the energy required for a particular amount of GDP. The negative slope of the "modern and traditional fuels" curve of figure 4 suggests that the US is still improving its efficiency.
One assumes that the energy intensity (per GDP) of the US is still higher than Sweden, suggesting that the US has room with available approaches to be substantially more energy efficient.
A question to Dr. Stern. Is there any prospect that the rate of energy efficiency improvements can offset increased GDP (i.e., are there any countries which are both growing GDP and consuming less energy)?
A comment: the key concern on energy supply is centred on oil (natural gas and coal being not yet supply constrained). In this context, it would be interesting to explore the relationship between the role of oil and economic growth, and the oil intensity of GDP.
I fired up Gapminder and had a look at UK and Germany, which I suspected have been decreasing energy use while growing economically. Results, per capita:
Germany 2001: Energy 4.219, income $30061.
Germany 2007: Energy 4.027, income $32343.
UK 2001: Energy 3.804, income $28978
UK 2007: Energy 3.465, income $32909
So, Germany decreased energy per capita by 5% and increased GDP per capita 7%. UK decreased energy 9% and increased GDP per capita 14%.
(And yes, these are real inflation adjusted PPP dollars. And yes, both countries have negligble population growth, so they decreased energy use and increased GDP even in total, not just per capita.)
Connie Heddergaard a Danish minister for Climate changes said in 2008 that Denmarks GDP had grown in the last 25 years by 75% with no increase in Energy use
http://www.denmark.dk/NR/rdonlyres/31ABB583-4D8A-4AAC-B8B1-F5361A5A1ECB/...
I think any discussion of improving energy intensity must also factor into the analysis the fact that the CPI numbers are grossly distorted. The government continually invokes new tricks to understate inflation and this directly overstates GDP. Therefore, over a period from say 1980 to the present, an apparently improving energy intensity using CPI numbers may actually turn negative if corrected to remove the statistical gimmicks. Thankfully, John Williams at Shadowstats has been keeping track of inflation etc. using the same methods the government did in 1980 or so, and produces lots of graphs comparing this to official CPI numbers.
Since global GDP is measured in dollars, not just US GDP, then all global GDP should be netted down by these factors.
http://www.shadowstats.com/alternate_data/inflation-charts
As to US GDP, it seems that in the last 30 years America has seen negative overall GDP growth
http://www.shadowstats.com/alternate_data/gross-domestic-product-charts
Yeah, I'd be interested to hear from David Stern on this matter. Without accurate data, we can't have accurate analysis.
As an additional point, I don't think it's worth looking at individual countries on this. We now have a global economy with energy consumed elsewhere from where it shows up in GDP. If we could get a good handle on real GDP, measured accurately and consistently for the globe as a whole, along with energy use data, we might have the basis of some good analysis. I guess the fact that CO2 emissions and energy use, in the first chart, appear to be in lock step, the energy consumption data is probably reasonably sound (depending on how the CO2 data is calculated).
Yeah I'd agree, the energy and CO2 curves are probably reasonably accurate -- it's the GDP one I find suspect.
Good link, I might be tempted to call this the 'real feel' Inflation and GDP but AccuWeather might get upset ?- )
click charts to reach their web page home
How did you get them embedded like that? I couldn't figure it out.
[a href=(site url)][img src=(image url)][/a]
replace all square[] brackets with arrow brackets going same direction as the brackets being replaced
replace (site url) with actual site url no parenthesis
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hope that is clearer than my attempted explanation to Nick on why you do not count the 35kWh in the gallon of gasoline when figuring the miles per kWh but only the kWhs it takes to deliver the fuel from the well to the auto--that is all that entire upper thread is about. For those calculations all produced kWh are being considered equal and interchangeable
Except that Leanan is going to whack you if ...
The location from which your embed comes is a big file
... or the owner of the source image file complains
so be careful what you embed and how often
don't tick Leanan off
... like I do too many times
For more info, click on this: Tutorial: How to view source code
Shadowstats's numbers are not credible. This has been covered years ago:
"Inflation, as reported by the Consumer Price Index (CPI) is understated by roughly 7% per year."
i.e., the shadow stats guy claims Americans have about half the purchasing power the government claims they do. Since median household income has increased by only about 10% in the last 15 years, he's saying that average Americans can only afford to buy 60% of what they could in the early 90's.
And yet, the spending of American households in different categories (food, housing, transportation, etc.) is virtually identical to what it was in those high-rolling 90's. But it's not like the difference has been made up by more two-income families - labor force participation is no higher than it was in 1990. Only a little can be explained by increased debt - the saving rate has declined by 7 percentage points.
So he's saying Americans can only afford 60% of what they could before, and have borrowed enough to push that up to 67%, but spending on different quantities has not changed in relative terms. Accordingly, Americans must - if he's right - be able to buy 33% less of everything.
A quick look around suggests they're not buying 33% less food.
So his claims don't track at all with observable reality. I don't see how the shadow stats guy has any credibility. I suppose saying what your audience wants to hear is more valuable for keeping 'em hooked, though - the guy does have subscriptions to keep selling, after all.
The shadow graphs looked somewhat extreme. One item you have not addressed but which must be taken into account is how the skewed distribution of income affects all of the figures-median is helpful but how groups (and their spending) are distributed around it it does make a difference. The difference would probably be most significant (adversely that is) to a large group near the center if their income were steadily falling farther below the median--thus my real feel comment initially. Your linked chart does show average percentage spent on transportation rising again and the percent spent on food and alcohol significantly dropping. Food prices have not dropped lately, Americans are not skinnier hmm. But then those figures only go to 2003--back when, for one thing, oil was a fair bit cheaper. Mixing figures for median and average is tricky as well.
Shadowstats may or may not be closer to the truth than government figures. However, there certainly have been a number of changes to how inflation and GDP are calculated, over the years, and many seem to be, at best, subjective. Consequently, I don't think many countries have figures for GDP and inflation that can be entirely trusted to give an accurate view of economic reality and, therefore, analyses based on such figures will be unintentionally flawed.
According to this study 0.05% control 40% of the wealth of all companies/investors worldwide:
http://www.newscientist.com/article/mg21228354.500-revealed--the-capital...
http://j-node.blogspot.com/2011/10/network-of-global-corporate-control.html
http://arxiv.org/abs/1107.5728
These tight interconnections among few and powerful corporations explain why the world economy can react sensitively to even tiny disruptions.
The first 49 of the most powerful corporations are all financial institutions:
http://www.newscientist.com/article/mg21228354.500-revealed--the-captali...
This also explains why it's difficult to introduce or keep regulations in the financial sector, which would benefit/stabilize the entire world economy.