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Is It Really Possible to Decouple GDP Growth from Energy Growth?
Posted by Gail the Actuary on November 21, 2011 - 11:00am
In recent years, we have heard statements indicating that it is possible to decouple GDP growth from energy growth. I have been looking at the relationship between world GDP and world energy use and am becoming increasingly skeptical that such a decoupling is really possible.
Prior to 2000, world real GDP (based on USDA Economic Research Institute data) was indeed growing faster than energy use, as measured by BP Statistical Data. Between 1980 and 2000, world real GDP growth averaged a little under 3% per year, and world energy growth averaged a little under 2% per year, so GDP growth increased about 1% more per year than energy use. Since 2000, energy use has grown approximately as fast as world real GDP–increases for both have averaged about 2.5% per year growth. This is not what we have been told to expect.
Why should this “efficiency gain” go away after 2000? Many economists are concerned about energy intensity of GDP and like to publicize the fact that for their country, GDP is rising faster than energy consumption. These indications can be deceiving, however. It is easy to reduce the energy intensity of GDP for an individual country by moving the more energy-intensive manufacturing to a country with higher energy intensity of GDP.
What happens when this shell game is over? In total, is the growth in world GDP any less energy intense? The answer since 2000 seems to be “No”.
It seems to me that at least part of the issue is declining energy return on energy invested (EROI)–we are using an increasing share of energy consumption just to extract and process the energy we use–for example, in “fracking” and in deep water drilling. This higher energy cost is acting to offset efficiency gains. But there are other issues as well, which I will discuss in this post.
If GDP growth and energy use are closely tied, it will be even more difficult to meet CO2 emission goals than most have expected. Without huge efficiency savings, a reduction in emissions (say, 80% by 2050) is likely to require a similar percentage reduction in world GDP. Because of the huge disparity in real GDP between the developed nations and the developing nations, the majority of this GDP reduction would likely need to come from developed nations. It is difficult to see this happening without economic collapse.
Real GDP Growth and Energy Growth for Several Countries
I started this analysis by looking at trends (1) in real GDP and (2) in total energy consumption for a number of countries, and was struck by how different the patterns appeared.
Up until 2005, the USA was able to increase real GDP by 3% per year, while increasing energy use by only 1% per year. The 2% savings would seem to come from some combination of offshoring and energy efficiency. Since 2005, the relationship between GDP growth and energy growth has been closer.
Germany is another example with much higher GDP growth than growth in energy use. Between 1980 and 2005, energy use was close to flat, while GDP rose by an average of 1.7% per year.
Italy’s real GDP grew by about 1.7% a year between 1980 and 2005, while its oil use grew about 1.0% per year, so it too shows energy efficiency/offshoring gains, amounting to about 0.7% per year. This gain is less than that of the USA and Germany, but Italy was also less industrial to start with, so offshoring was less of an option.
The tie between energy consumption and GDP growth has been much tighter for Japan, especially since about 1987. Since 1987, the two have grown at about the same rate.
Spain has also showed a very close tie between growth in energy consumption and growth in real GDP, with both growing by close to 3% per year between 1980 and 2005.
Greece managed to grow its energy use faster than real GDP during most of the 1980 to 2005 period. This may contribute to its current economic problems.
China shows more rapid growth in real GDP than in energy consumption. Its real GDP grew by about 10% a year between 1980 and 2005, while energy use grew by a little less than 6% per year. Between 2005 and 2010, real GDP continued to grow by about 10% per year, while energy use grew by about 7.5% per year. The country has been changing so rapidly that a person wonders how accurate the early GDP numbers are.
Figure 9 shows that the pattern for the Former Soviet Union (FSU) has been very unusual. Both energy use and real GDP collapsed after the collapse of the Soviet Union, but the drop in GDP was greater than the drop in energy use. Recently, real GDP has been soaring while energy use remains flat, suggesting that outsourcing of high energy manufacturing is occurring, or that new sources of GDP that do not require much energy use are being created.
Changes in Energy Intensity
The usual way of measuring energy intensity is as the ratio of energy consumed to real GDP (the red line divided by the blue line in the above graphs), and these ratios vary greatly. In fact, it is hard to even put energy intensities for different countries on the same graph, because the amounts are so different.
It seems to me that what we are really interested in is the energy intensity of the world, (or perhaps of the world less the Former Soviet Union, if Former Soviet Union data is totally bizarre, reflecting very high energy usage in the past that is now disappearing, and cannot be replicated elsewhere). We show these in Figure 11:
Figure 11 shows that energy intensity on a world basis has been flat since 2000. This is also the case when FSU data is excluded. We expected recent world energy intensity to be flat, based on Figure 1 at the top of the page.
Why does world energy intensity remain flat, while energy intensity for many individual countries has been decreasing?
We are dealing with a large number of countries with very different energy intensities. The big issue would seem to be outsourcing of heavy manufacturing. This makes the energy intensity of the country losing the manufacturing look better. Outsourcing transfers manufacturing to a country with a much higher energy intensity, so even with the new manufacturing, its ratio can still look better (lower). It is hard to measure the overall impact of outsourcing, except by looking at world total energy intensities rather than individual country amounts.
Looking at world energy intensities, it appears that the huge amount of outsourcing is resulting in pretty much comparable energy use to the original energy that was outsourced. It is hard to make a direct calculation of the difference in energy use, because much of the new energy use is indirect. For example, the government of the developing nation may build huge amounts of new paved roads and concrete homes with tax revenues, and individual workers may buy new cars with their salaries. These amounts are not captured in a simple comparison of the energy used in making a widget in the USA relative to the energy used in making a widget in China, for example.
Another issue is that the energy use of interest is per dollar of real GDP, and a savings in energy that results in a cost savings may not be very helpful in lowering energy intensity of GDP. For example, suppose that a manufacturer creates a new, smaller car, that is 20% cheaper and uses 20% less gasoline on an ongoing basis. More workers will be able to afford this car. Furthermore, a well-off worker who can afford this new cheaper car (and who could also have afforded a more expensive car) will have left-over money. With this left-over money, the well-off worker can purchase something else, such as an airline trip, food flown in from overseas, or a new iPod. All of these extra purchases take energy as well. So when the overall picture is viewed, the fact that more energy-efficient cars are being manufactured does not necessarily translate to lower energy intensity of GDP.
One issue mentioned in the introduction to this post is the fact that EROI for fossil fuels is declining because the easy-to-extract fossil fuels have mostly been extracted. As a result, we are now extracting the more difficult to extract fossil fuels, requiring more energy.
A similar situation occurs in many other endeavors, because we live in a finite world, and we are reaching limits. In mining, the quality of ores is getting poorer, meaning than more energy needs to be used in extraction. In farming, we are stretching our resources tighter, requiring more fertilizer, pesticides, and more irrigation, all requiring energy. We are running short of fresh water in some places, so water is pumped from greater distances or desalination is used, adding to energy usage. Pollution is an issue, so we require utilities to add scrubbers to old coal plants. All of these efforts require energy, and likely contribute to an upward trend in energy usage, offsetting efficiency savings elsewhere.
Another issue that tends to raise energy intensity of GDP is the long-term trend toward using machines and additional energy to do jobs, rather than simple human labor. For example, if a person chops down a few trees and builds his own house, most calculations would say that there is neither GDP nor (outside) energy used. If a person hires a builder to build a house, and the builder uses hand tools to chop down trees and human labor to build the house, the result is an increase in GDP, but little fossil fuel energy use. If the builder becomes more “modern” and uses earth movers and concrete to build homes, then energy use rises relative to GDP created.
Carbon Dioxide Emissions
As might be expected, carbon dioxide emissions per unit of GDP are closely related to energy intensity. In fact,
(Co2 Emissions/GDP ) = (CO2 Emissions / Energy Used) x (Energy Used / GDP)
The ratio (Energy Used /GDP) is simply energy intensity, which was graphed in Figures 10a, 10b, and 11. The other ratio is (CO2 Emissions / Energy Used) graphed below in Figure 12. It shows a similar pattern: declining prior to 2000, and then leveling.
The ratios in Figure 12 reflect changes in energy mix over time, and their relative propensity to generate CO2. Since 2000 these emission per unit of energy use have, in fact, started to rise a little, because of the greater use of coal in the energy mix. The CO2 measurements used in this analysis are BP’s calculations, based on the types of energy used each year (including renewables*). They do not reflect actual measured CO2 in the atmosphere.
The ratio of new CO2 emissions to Real GDP reflects a combination of these ratios (C02/Energy and Energy/Real GDP) and is shown in Figure 13.
Figure 13 indicates what we would expect from Figures 11 and 12: A declining ratio of CO2 emissions to real GDP until about 2000, then fairly flat thereafter. In fact, there is a distinct upturn in 2010. Thus new CO2 emissions from energy sources have been rising about as fast as real GDP since about 2000, and a little faster than real GDP in 2010. This is no doubt discouraging news to those who adopted the Kyoto Protocol in 1997, thinking it would reduce CO2 emissions.
A Few Thoughts on Energy Policies
Carbon taxes and cap and trade policies seem to encourage outsourcing of manufacturing. The primary benefits of outsourcing would seem to be (1) a reduction in imported fossil fuels, (2) lower cost of manufactured goods to the consumer, because of lower labor costs, and (3) possibly higher profits to the company selling the new cheaper product. Offsetting these benefits are a loss of jobs for the country doing the outsourcing and a loss of control over what types of energy are used in the manufacturing process. It seems to me that we would be better off not encouraging this outsourcing, especially when essential goods are being created.
One misconception that seems to guide much energy policy is the view the biofuels will substitute for oil, and that use of additional electricity use will substitute for oil. Oil use is pretty much maxed out. Oil supply is very close of inelastic, regardless of price. Someone, somewhere, will use any oil pulled out of the ground, perhaps at a slightly lower price, even if a particular country can reduce its oil consumption through the use of biofuels, or if a car can run on electricity.
This means that any biofuel that is created will add to world energy supply, by using natural gas and coal supplies more quickly, since their use is still somewhat elastic. Similarly, by moving energy demand from oil to electricity, we what we are really doing is expanding total energy usage, by burning more coal and natural gas to make more electricity.
Thus, from a world CO2 perspective, biofuels and increased electrical usage are not helpful. Individual countries may still find biofuels and expanded electrical use helpful, because they can reduce oil imports, if oil use can be shifted to another country. There is also the hope that we can continue our motoring lifestyle longer, using electric cars.
If our intent is really to reduce CO2 emissions, it seems to me that we need to look much more broadly at the issue. Maybe the issue should be viewed in terms of (1) fossil fuel resources that we are willing to use in each future year, and (2) how much real GDP can be created from those resources, given the issues we are facing. The quantity of fossil fuels to be used each future year might consider CO2 goals as well as limits on the amount of oil that can be extracted each year because the “easy oil is gone”. The amount of real GDP that can be created from these fuels would depend on a number of factors, including declining EROI and increasing efficiency.
If the plan is to reduce fossil fuel consumption, then we may very well be expecting real GDP to also decrease, perhaps by a similar percentage. In fact, looking at the experience of FSU in Figure 9, the GDP decline may even be greater than the energy decline.
Conclusion
We are facing a challenging time. This post seems to suggest that there is yet another story that we are being told, that isn’t quite true. It seems to me that we need to examine the issues ourselves, come to our own conclusions, and start telling the real story.
*I have not attempted to discuss the impact of renewables, since to date their impact has been small. The front-ending of energy use of renewable makes their impact on energy intensity of GDP less beneficial than standard comparisons would suggest.
This article first appeared on Our Finite World.
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More on this topic....UNEP decoupling report http://www.unep.org/resourcepanel/Publications/Decoupling/tabid/56048/De...
As I look at the UNEP presentation that is related to the report that you are linking to, what has happened in the last ten years is a major shift in the trend of commodity prices. Between 1900 and 2000, these commodity prices had been trending downward; since 2000, they have been trending upward. To me, this could very well be related to falling EROI and to limits we are reaching of other types--cannot irrigate more land, for example, and land is becoming more saline where irrigation is used. A couple of exhibits of interest:
If a person believes that the last 10 years is just a random fluctuation upward in resource costs, then one can believe that the pattern of 1900 to 2000 is repeatable. But if the recent pattern represents a new trend, based on declining EROI and resource limits, then we are in a new world altogether.
Gail,
These two graphs from the report are interesting but I am surprised that UNEP made no effort to combine them somehow. As is, they are not that useful together: they cover different time periods; they are on different scales; one is composite while the other is individual components. One also wants to know which points were used in the linear fits and what the R2 is or whether they are "eyeball fits". It is impossible to say anything quantitative about the recent upward trend in commodities shown in figure 2.5.
Indeed, you are correct that IF the recent trend shift in commodities prices is due to EROI then our understanding of economics will have to change. But that's a very big IF.
I would like to remind people that commodity prices do not exist on some absolute scale measured in unassailable physical units. Price are an inherently 'squishy' concept when taken over longer periods of time. I have always been partial to price ratios as being more informative than "constant dollar" prices.
A quick google image search on "commodities vs. stocks" sent me to Cycles of commodities -vs- stocks, 110 years which has the following chart:
and the following description:
If I am to be convinced that declining EROI is the primary reason commodities prices are rising, someone will have to explain in great detail how this cycle is different from the previous three.
Don't get me wrong. I do accept that EROI is declining globally and that this will eventually affect commodity prices. But I happen to believe that the current rise is primarily driven by cyclical economic issues and only secondarily by EROI.
Jon
Thanks for your comment.
As I said above and in the post, I don't think the problem is just declining EROI. I think it is running into limits in other ways as well, such as fresh water. If one goes from collecting water from a stream to using a desalination plant as a source of water, clearly a huge amount more energy is used in the process, and the real cost goes way up. In fact, going from steam water, to water pumped from a deep aquifer, to water from a desalination plant represents the progression we are seeing.
When we saw spikes in commodity prices in the past, it wasn't because world energy supplies were hitting limits. The limits we are hitting now add a whole new dimension. I don't think I can quantify the effect in one comment, though.
Gail
I believe there is another effect that has been strongly evident in the last decade. That is the disparity between commodity costs and commodity prices.
In a free and fair market you would expect that prices will directly reflect the cost of commodity extraction. However, when you go through a period of rapidly rising consumption of any product companies expend large amounts on capital assets. They naturally want to see a rapid return on those assets, so prices rise disproportionately to the direct cost of production. Even for the market producers that do not make capital expenditure they will increase prices to match those that do. When/if the commodity returns to a stable production level then normal market forces return the prices to be relative to the cost of production.
The last decade has seen an unprecedented growth in commodity production driven by China and to a lesser extent India. I think you will find that this has had a much more serious impact on commodity prices than ERoEI or lower resource quality. That is not to say that these two effects will not come into play in the coming decade.
Not so. In a free and fair market the cost of any product will reflect always supply and demand. The cost of production or extraction is only the base line, or the lowest price any producer can take and still make a profit, or at least not take a loss.
The cost of extraction of oil varies greatly, from the dollar single digits for the old fields to over $80 a barrel for some deep water sub-salt fields. The highest price is the marginal cost or the lowest point that the price of oil can fall before production starts to eventually decline. (As Rockman has pointed out producers will often keep producing oil at a loss because they have already made the investment in the well because it is better to recoup part of their investment than none of it.)
But the world price of oil is over $100 a barrel because that is the price that must be paid in order to make demand down to equal supply.
Ron P.
Not quite exactly any of the above, in the sense that one be more specific than handwaving about "supply and demand".
In a "perfectly" competitive market, one would expect competition to drive the price down to near the marginal cost of production. That would be the cost of producing the most-expensive-to-produce barrel of oil actually sold. Some can produce oil quite cheaply, and that capability is tied to location, so they can can enjoy a sweet ride for the time being. OTOH with manufactured goods, the sweet ride often ends when the patents expire, since there are rarely huge permanent cost differences tied to location. (And since people privileged with sweet rides naturally want to keep them, there is constant lobbying to make patents and copyrights last ever longer and longer.)
Observe that the "marginal cost" formulation highlights a possible financial instability, since the marginal cost is usually lower than a total cost that includes capital expenses. Thus if demand growth slows or stops, the price may fall too low to carry the capital expense. One then sees a cascade of bankruptcies of the sort Rockman has alluded to, followed eventually by yet another price spike that goes high enough to attract capital again.
Middle East countries have to keep their population pacified as well, or they will have a revolt and overthrown government. So I would consider payment for social programs as part of the cost of production. When food prices are high, these costs are high. This is part of the reason the Saudis want high prices.
ME countries would have those costs whether they had oil or not, so I don't think you can consider it part of the cost of producing oil.
If they want to keep on producing oil, they have to keep their populations pacified. Also, rising oil production is what allowed population to rise to such an unsustainable level in the first place.
They really, really need to keep their populations pacified, whether or not they produce oil. Otherwise, the ruling classes just need to decide whether they want to live in the South of France, or Miami. And, whether to stash their money in gold or Cayman accounts.
OTOH, I know what you mean: countries like Iran, KSA etc need oil prices at a certain level in order to get enough revenue to pacify their people. Still...I hate to call that a cost of oil production - you can think of it that way, but it would be confusing things, I think. After all, if your people demand more money, has the cost of oil production gone up? Not exactly.
Paul, sorry to be so disagreeable but that is simply not the case. The price must always be well above the cost of production because farmers must make a profit, oil companies must make a profit, especially national oil companies. That being said however, there is nothing in any free market that would cause the cost of a scarce commodity to reflect the cost of production.
If the commodity is scarce the price will always be well above the cost of production, often several times the cost of production. After all that is the case of Saudi oil and Saudi oil is not overpriced. It cost less than $10 a barrel to produce oil from Ghawar but the demand for the scarce commodity of oil drives the price to over ten times the cost to produce.
If however there is a glut of any particular commodity then the price will more closely reflect the cost of production, but ideally slightly higher. Even if there is a glut producers must still make a profit.
But it is always supply and demand that sets the price, not the cost of production. Also, patented products are not usually regarded as commodities. We are talking about oil, gas, pork bellies, corn, soybeans and such, not medical products or electronics.
Ron P.
"The price must always be well above the cost of production because farmers must make a profit"
"Cost of production" includes a profit at least equal to the risk-free investments available, usually T-bills. If you can't beat a T-bill, there is no point in taking the risk of running a business. Now once you're committed, then you might find yourself in a position where all you can do is to lose as little money as possible. Yes, you could sell the company, but since it's losing money, you won't get much, and you still find you lose less by continuing to run it on on-the-cheapmode.
Been there, Management gets really grumpy. What's scary is that in a process plant, run it cheap means deferring maintenance, and that will get you in trouble later.
I think part of the issue is that the cost to develop new fields is very high, regardless of whether some oil is coming out cheaply from old fields. If prices are not high enough, it does not make sense to make the huge up front investments needed for these sources. As examples, there is the high priced project in Kazakhstan:
Biggest find in decades becomes $39 billion cautionary tale
The cost of exploration and drilling in the arctic has to be extremely high, and there are a lot of risks that things will go wrong in deep sea drilling. We are not growing oil production as fast as oil demand (as reflected by the long term rise in oil price, punctuated by recession), indicating that we are not really developing the new "Saudi Arabia's of unconventional oil" that are required, if we are to move production to the higher levels required by growing world demand.
I agree with the bulk of the responses above but, as per the original post, I was actually refering to the economics of commodities in general, not just oil. We were looking at a comparison of GDP/Equity prices compared to commodity prices over the last century. Oil only makes up a relatively small portion of overall commodity prices. The effect of large investment requirements has particularly hit other commodities such as coal,iron ore and other metals in a way that these products have not experienced in the past.
Oil pricing seems to exhibit the same trends as other commodities except on steroids. I suspect that this is a result of the relatively high return on investment criteria placed on oil development projects compared to other resources. This high hurdle rate in turn delivers price inelasticity. Price inesasticity leads to price volatility and the requirement for the rapid return on investment.
There are a lot of oil projects that don't turn out as planned, or that the costs turn out to be a lot higher than expected. I expect this is part of the reason for the theoretically high return. They also need to earn enough so they can build up capital to do work on the next big project.
Phoenix, you did use the word "extraction" in your original post that I replied to, a word usually associated with oil production and not other commodities.
Well inelastcity is the opposite of volatility soooooo... you lost me there. ;-)
Ron P.
No, inelastic implies that neither supply nor demand respond to the price, i.e. if the price doubles, consumption and production stay the same. Of course that descibes perfectly hard inelasticity, in reality there is some affect on both supply and demand, so a market equilibrium price other than zero or infinity is possible. So the adjective inelastic in this context means that supply and demand are only slightly effected by price, which implies that a small change in supply and/or demand can have a large impact on the market price.
Phoenix's main point, was that someone planning to drill a well, doesn't want to lose their shirt if the price of oil is lower than the centerline of the price prediction. So we havea trusted report that says oil in 2015 will be $100/per barrel, with an uncertainty of $30. Our not so intrepid investor doesn't want to lose his short if the price is the lower one, so he won't drill the well unless his estimated price of production is less than $70. The implication is that future price uncertainty has an inhibitory effect upon drilling and investment.
Oh for goodness sake. Enemy, I know we have often discussed demand inelasticity on this list. That is demand, some say, does not respond to price. That however was not what Phonex said. He specifically said price inelasticity.
I was just joking, not nitpicking because Phoenix likely had demand inelasticity in mind when he wrote that. That is why I put a smiley face by my reply. I was just kidding him about getting price inelasticity mixed up with demand inelacticity. Because price volatility is the opposite of price inelasticity.
P.S. I think most folks who argue demand inelasticity got wrong, price obviously does affect demand.
P.S.S. I don't recall anyone ever arguing that supply does not respond to price, on the downside anyway. Supply does drop, and did drop quite dramatically from non-OPEC nations when the bottom dropped out of the price in 2008. Obviously both supply and demand does respond to price. But of course OPEC exports have not responded to higher prices since 2005 because they are simply unable to export more oil due to limited production and increasing internal demand.
Ron P.
Ron
Sorry if I got the terminology wrong. I am not an economist.
I had thought that the term "inelastic" refers to the link between price and the demand/supply balance. I thought that if this link for a particular commodity was termed inelastic then it realy does not matter if you state that the demand/supply balance is inelastic to price or visa versa. For a commodity to display inelastic price/demand sensitivity it would therefore be equally logical to say either, a large price increase will induce only a minimal change to the demand supply balance or alternatively a small imbalance in supply/demand will induce a large price variation. It would therefore seem just as logical to use the term price inelasticity as it would to say demand inelasticity.
This seems to be the logical way of looking at the issue. But if I have it wrong then I stand corrected.
Pehaps the key here is that supply elasticity and demand elasticity are very different, and "price elasticity" doesn't make that clear.
Oil, for instance, has pretty low supply elasticity lately, but demand elasticity is higher than many think - depending on sector and location, of course. For instance, plastic containers are getting redesigned very quickly to reduce hydrocarbon content, and heating oil is getting phased out pretty quickly.
And, short term and long term elasticities are very different: if you think that prices rose temporarily you just spend a little more and don't worry about it. OTOH, if you think prices are going to stay high you might replace your SUV with a hybrid sedan/saloon, and overnight reduce your fuel consumption by 70%.
The situation we are in now is much different than in the past for two major reasons:
1) Countries and companies that were running low on resources or had over-priced costs simply went to lower cost and resource-rich locations around the world. Those "New Worlds" are running out.
2) We are reaching true limits to growth on many resources besides just energy resources.
The low EROEI on our major energy resources is just a symptom of running low on the easy-to-get, low hanging fruit. Even a monkey knows that it takes more energy to climb up high in that tree to get more food.
Increasing efficiency requires increasing complexity which requires more energy to maintain. People have to be educated to, say, design, maintain and secure nuclear power plants. The computers that are able to continuously monitor sophisticated sensors and adjust multiple parameters in real-time require complex computer systems that require a massively complex supply chains to deliver such performance. Outrageous semiconductor fabs are now required to produce these computer "brains".
We are just digging ourselves in deeper, less resilient holes. We have already expanded out all over the world and there is really nowhere else to go. The US can claim that their GDP is growing while their energy use is decreasing but of course they don't take into account the fact that much of their manufacturing has been exported. If we just consider the world as a whole, many of the arguments about this topic would be muted.
It should be obvious that economic activity requires energy, just as life requires energy. Now that us humans have grown up, and into, our world we can no longer fuel our fantasies of endless exponential growth in a finite system.
That is what most of the yeast thought before they started to bump up against the walls of the Petri dish and feel the toxicity of floating around in their own waste.
It is sad that the yeast model so closely follows our current civilization model. Yet, the same rules apply. Mother Nature's rules are a bitch.
Perhaps we should consider Peak Efficiency like Peak Oil.
Jevons Paradox describes how increasing efficiency of a resource increases its demand. However, what are the costs of increasing efficiency and what is that point where the complex systems, required to support the higher efficiency, use more energy than is being saved?
Since the most demanded and hard-to-replace resources (namely, fossil fuels) are hitting their peaks, they soon will no longer be able to support the complexity needed to squeeze out more efficiency on a global basis.
Getting a rare earth metal from China using rare petroleum from the Middle East to deliver the required resources for that new, highly efficient power plant in the US gets harder and more costly every year as those non-renewable resources are consumed and as the world's population continues to grow.
It just may turn out that peak efficiency is another wall to growth that many people are not expecting. It also can be used to model how our civilization may deal with depletion. As we wind down and localize, we also lose the efficiency that was gain through the use of highly complex systems. A double whammy.
That is a good point. Your other point in your post above it is a good one too.
A lot of people seem to think that adding efficiency at this point in time will be easy. But if it means trying to convert the car fleet to plug in electric, with all of the complexity involved in that, we are probably kidding ourselves. There is always a reward for companies to find the most efficient solution, so we have been moving in that direction a long time, and are reaching diminishing returns without adding huge complexity. I think we may very well be reaching peak efficiency.
what about efficiency gained by simply driving less? there's the efficiency driven purely by limit on supply isn't there? not sure I'm understanding the 'peak efficiency' idea quite yet.
Driving less is usually called "demand destruction". People would like to think that there will be enough increased efficiency (cheaper cars, or cars that use less fuel per mile, or cars that use a fuel other than oil) to avoid most demand destruction.
The issue with adding efficiency is that it often adds complexity, and complexity adds cost. So it is possible to reach a situation where a new more efficient car is so expensive, that there really is no energy savings over the long run. This would be going past peak efficiency.
Medicine is another area where we can theoretically keep diagnosing diseases quicker, and treating diseases better. But at some point we exceed the ability of the population to pay for new, more expensive treatments. I am not sure this is exactly "peak efficiency". It is more, peak "what people can pay for". Things that theoretically could keep getting better, reach practical limits, so we can't keep adding more complexity to improve performance.
I would be careful with the equation greater efficiency equals greater efficiency. This isn't necessarily the case. A 1960's VW bug is far less complex than a Hummer for instance. Greater efficiency can be produced by high tech means (a super fancy more efficient engine maybe), or by choosing a different series of compromise (smaller size than the buyer would like, because of the cost of fuel). Of course scrappin an old vehicle in order to buy a new one, has a nontrivial capital cost. Thats why we generally assume any major change in fleet fuel efficiency will take on the order of the vehicle lifetime. People can adjust to a change in fuel price by selecting a more fuel efficient car, when they buy a new one. But this can't happen very frequently, so the old vehicles stay on the road for years.
Medicine is another area where we can theoretically keep diagnosing diseases quicker, and treating diseases better. But at some point we exceed the ability of the population to pay for new, more expensive treatments. I am not sure this is exactly "peak efficiency". It is more, peak "what people can pay for". Things that theoretically could keep getting better, reach practical limits, so we can't keep adding more complexity to improve performance.
But it's even better than that, Gail. "Better care" wasn't good enough to keep the profits going up in a hockey stick fashion. Now we invent new diseases as fast as we can think of them, and medicalize as many normal conditions as we can, including baldness, shyness, menopause, menstruation, etc. Yet there is not one positive diagnosis in the DSM Manual, for example, such as happiness. And since that is not enough to support hockeystick profits, we've extended the range of acceptable medications to toddlers for statins, antidepressants, and stimulants. The bogus diagnoses impact their whole lives. And since that is not enough to support profits, we've expanded indications creep to off-label use, which means giving drugs for unapproved uses. We've gamed cancer trials until $95,000 drugs are being used to extend lives by 4 months. We invent new hazardous scanners every year, and eventually the medical scanners leak out into general usage for other things within the MIC, such as terrorism of citizens in our airports. And so on. Are we getting too much damaging care in order to profit the corporation? You bet.
http://www.jstor.org/pss/2955358
http://www.nytimes.com/2011/11/04/business/glaxo-to-pay-3-billion-in-ava...
I have spent quite a bit of my life, not too far from the medical field (worked in medical malpractice insurance, father was a physician), and my impression is pretty much as yours.
Health care is a money making business. Providers may say that they are concerned about law suits if they don't do the latest/greatest, but the truth is that proper diet and exercise are the important things in keeping well, and doctors don't go out of their way to make this clear--would like to sell you as much services as possible. In fact, they would like to dole out pills and sprays for every little thing that might be sort of wrong, and have you come back frequently for check-ups. At the end of life, huge amounts will be spent to extend life only a few months, if that--and sometimes for people who are very elderly. It is almost difficult to get away from the system, because the expectation is that you will do as everyone else does.
Yep!
Tanking
wait, i'm confused - is there maybe a difference between increasing efficiency of a resource without limits (not without them completely, but with plenty of buffer) and increasing efficiency with them?
if supply is limited, can't demand force more efficiency without supply increasing? For example, if gas hits $10, a lot more people would telecommute who currently drive to work. That's less energy spent without using more gas. True, there's more demand for computers and internet, but is the cost of installing and maintaining that infrastructure comparable to the amount of energy spent by 80 million commuters per day?
sometimes i'm not sure that all the complexity of a global commerce system is necessarily more efficient at improving production as it is at creating markets, eliminating competition, and generating profit. Efficiency changes depending on where you stand along the supply chain. It seems like localization might improve efficiency by allowing local production to climb out from under the top-heavy system of oil fueled trade. Like, it can't be more efficient energy-wise to grow a chicken in China, freeze it, then ship it to the US for dinner, than to grow one in your home town. It's convenient, and there's a whole supply chain, and American economy that maintains its inefficient structure so that some company that buys and sells frozen chicken can turn a profit. But remove the cheap oil part, and suddenly dinner costs less (in actual energy spent).
Also can't technology make more efficient forms of energy accessible thereby increasing demand for them, and consequently reducing demand for less efficient forms? What if we start mining space rocks for rare earths using electric launchers and solar sails - that's more complexity, and more energy, but also bypasses the complexity of the fossil fuel resource. By simply using a more direct energy source as our supply, we can suddenly add huge buffer of efficiency to exploit.
IMO it seems like we are a long ways from Peak Efficiency - there's plenty of room at the bottom as they say. But maybe I'm not understanding what you're saying exactly.
"What if we start mining space rocks for rare earths using electric launchers and solar sails"
This is analogous to connecting up another Petri dish for the yeast to grow into. You are correct, if we do go outside our finite system and into the expansive universe, it is similar to how things worked out for the US when the global economy first opened up. So, if we gain the ability to get new resources from outside Earth, other than our daily dose of wonderful sunlight, it is back to Game On.
We must remember that the reason we humans go all over the globe to do things is not because we like long plane rides in cramped seats. We do that for a cost advantage, usually from cheap labor provided by governments that have yet to fully appreciate the phrase "human rights".
Making 50 million iPhones in China for the whole world is a lot less expensive than doing that in the US for our small population (relative). If we had to bring that home, nobody could afford that level of complexity due to increased costs that come mostly from lower production volume, which is far less efficient that churning these things out in massive factories filled with near slave labor.
Let us look at farming, for example. We now use only 2-3% of our citizens to farm. In the past or in developing nations that percentage can be way over 50%, just like it use to be for us. That complex infrastructure is fuel by fossil fuels and as those costs go up, the whole system can start to break down. When we then go back to local farms, more people are going to have to be taken out of their McDonald's and mall jobs to work the fields. The entire, high-tech and complex society returns to the good old days.
In summary, it is all about the resources and the energy needed to make them dance for us. As our population levels grow (or not shrink - 7 billion is a lot of mouths to feed and bodies to keep toasty), and as the cheap, easy-to extract resources fade away, we must work harder and harder for the same level of performance, assuming the complexity of the system can be maintained, which I, for one, dispute.
Tanking
yea, make that two, and i see what you mean now. You're talking about production complexity in terms of efficiency - growth in complexity is a result of more efficient use of resource, with the result being an increase demand. So peak efficiency is some point between the complexity of the system and the resources available - still sounds a lot like peak oil to me, or maybe just peak complexity.
But what you're saying is that we can't rely on more complex systems - automated electronic farm laborers for example - to pick up the slack. Even if these systems are more efficient, the cost of producing them becomes impossible - efficiency adds complexity, which adds demand, and due to pressure on supply, and so it never happens.
IMO I think this is a debatable point, although I absolutely value the topic. The reason I think there is plenty of room for efficiency is because I think that, while efficiency does add complexity, complexity doesn't necessarily add pressure to supply. I feel that the next revolution in technology will be a breaking of this industrial age model of "supply" as a point of entry of materials, torn from the natural world, and into the human production cycle. Fossil fuel is the ultimate champion of this model. In the future, (if there is one), instead of a production cycle fed by supply lines, the idea of supply will be more cyclical - like a digestion cycle of production, instead of some magical gift from the abundant divinity.
Wild Eyed Example: a tobacco plant is orders of magnitude more complex than a one ton pickup truck, but the production of one ton of tobacco is dramatically simpler, more efficient and less resource costly than the cost of making a pickup: the tobacco "self-assembles" while the pickup is assembled by hand. My question is, would it be possible for a pickup truck to self-assemble? According to our current idea of how a truck is made no - but in since it is dramatically less complex than a tobacco plant, shouldn't a truck be able to self-assemble much more easily?
OK, so don't flame me - I know that probably reads as goofy techno babble, but it's relevant to our topic here, as it's worth considering optimistic future beyond PO from time to time.
Electric launchers? You mean a giant magnetic rail, inclined up a mountain to shoot the spaceship into space? Not likely. And solar sails will only carry you away from the sun, not back toward it. And solar sails must be truly gigantic to move a large heavy ship, many thousands of miles in diameter. That is why they are only found in science fiction.
The only way to move in space, other than space sails of course, is to throw something else in the opposite direction. Spent rocket fuel is what our space ships throw. And the inertia you generate is dependent upon the weight of what you throw and the speed you throw it.
That is why mining space for anything has always been and likely always will be... science fiction.
Ron P.
Darwinian:
well yea i was using examples that were outside of what we currently consider to be practical to point out that peak efficiency is just peak oil by another name.
and why not? there's nothing impossible about using an electric rail to launch mining systems into space and it seems likely to be more efficient than building rockets. A quick search: NASA is purportedly looking at it - it only would take about a mile of track, and would cost ~$600/kg vs $15,000 for rocket - if we want a space system post peak oil, it seems like rail might be pretty viable - why the skepticism?
Magnetic sails, or other non-propellant propulsion are also feasible and efficient ways to get around the solar system for mining - long travel times are OK for minerals.
Yea, like submarines or airships? :)
Anyway, I'm not sure if you are skeptical because you don't think these things are a good idea, or if you just don't think we'll ever do them. I don't know either, and i wasn't proposing - just attempting to illustrate a world beyond PO.
Both! I don't think it is a good idea because the time and energy involved would exceed, by a hundred fold, the benefit we would gain. And that is the very reason we will never do them.
Non-propellant propulsion? And what would that be? Really tehChromic you have been reading so many science fiction novels that you have lost touch with reality. That stuff is fiction! Come back to earth, come back to reality. Mining space is the stuff of science fiction novels. It makes really great fiction but that's exactly what it is... fiction.
Ron P.
OK! heh, thanks for straightening me out Darwinian, lol.
Seriously tho, the original example had to do with talking about efficiency in the context of different energy resources - I was pointing out that energy efficiency means something different when we're directly using EM energy from the sun instead of fossil fuels. I was using hyperbolic examples to make a point!
But not you've got me into this debate, I gotta defend my POV!
Rail propulsion is non-propellant! So is a solar sail, and gravity and magnetic fields can be used for propulsion: field propulsion. A space elevator doesn't use propellants - it's an electrical/mechanical. There are plenty of ways to get around the solar system that don't require rocket propulsion. Why else are we experimenting with quantum particles, antimatters, and string theories if it isn't to discover more fundamental methods of getting around? Same reason we theorized about heat and energy, and experimented with metalurgy and combustion in the early days of the industrial rev.
But I guess that was the original point - we're talkin' economy of scale when we're talking burning miles in outer space - sure it's not feasible or practical in our current state or state of sophistication or complexity, but when we're talking about linking our energy supply chain to the sun, well it's a bigger game. I guarantee you there was a time when people would have called traversing the oceans for trade or supplies an impossible dream - what would we need across the ocean that we don't have at home!?! The answer in space is the same now as it was then about the ocean - exotic elements, new territory, and adventure, lol!
cheers, Darwinian, i must like debating with you, all in good fun.
Right, but there are no railroads in outer space.
Okay, solar sails catch the solar wind. As I said earlier it would take a sail thousands of miles in diameter and it would only carry you in one direction, directly away from the sun. You must be joking if you are seriously suggesting that as a mode of transportation for mining deep space.
Magnetic fields? I did not know we still had Dick Tracy fans still around. ;-) Seriously, that is not a mode of transportation, only stuff found in Dick Tracy and science fiction novels, and rather silly ones at that.
Field propulsion? Hell I never heard of that one. But then I stopped reading science fiction novels thirty years ago. I guess I need to keep up with science fiction better. But then why should I?
No, that is total nonsense. The ocean is something primitive people could cross in a reed boat, or a raft, or anything that floats. Space is totally something different. Really massive amounts of energy are required just to escape the earth's gravity. Then for millions of miles we are still under the influence of the sun's gravity. Then you fall under the influence of the gravity of the body you intend to mine, or whatever you intend on doing there.
It is totally silly to compare the ocean to space. Not even close. Different physics. The ocean is part of our planet, still covered with air we can breathe, and no gravitational problems and plenty of wind to propel our floating craft. A 50 square foot sail can propel a small craft across the ocean. A fifty thousand square mile sail would not be nearly enough to propel even the smallest space craft. And then as I said, you can only go in one direction, directly away from the sun.
Really tehChromic, as I said earlier, you have been reading way too many science fiction novels. You have actually started to believe some of that junk is actually possible. You need to come back to reality. It is fiction. Great entertainment but only that.
Ron P.
Darwinian,
OK, LMAO here, but the example was hyperbole - I wasn't advocating a practical approach to PO, just speaking hypothetically about complexity and efficiency in the post PO era with a colorful example.
Also, come on, you're making out like i've proposed wormhole drives or something - nothing I've talked about is even remotely impossible or hypothetical.
Then why have both the Americans and the Japanese launched solar sails? Ikaros, the Japanese one, sailed past Venus in 2010, carrying a tiny spacecraft equipped with cameras according the sci-fi site Wikipedia - how big was that sail? 20m. Maybe it's you who needs to bone up on Sci-fi ;) Next you'll tell me that magnetic levitation is all hoo-doo and special effects.
Field propulsion: i'm not talking about magic - we use gravity all the time to get from space to earth. Planetary and/or solar gravity can assist in the propulsion of spacecraft - in fact it's done all the time, look here:
http://en.wikipedia.org/wiki/Gravitational_slingshot
I'm talking about using well known forces to get around the solar system, nothing fictitious about it. Why make out like I've suggested we power spaceflight with invisible pink unicorns. Sure it's speculation, but what's wrong with that? Now this I like:
That's the kind of statement I can get behind :)
That is absolute baloney! Venus is closer to the sun than Earth. You cannot sail toward the sun with a solar sail, you can only go directly away from the sun. Anyway you quote a site but you posted no link... strange.
Okay, you are a little confused here. Gravitational slingshot is not a mode of propulsion. The craft speeds up as it approaches the planet, then it swings around it and the gravitational pull of the planet slows it down by an equal amount as it heads off into deep space. Nothing is gained, only the direction is changed. Propellant is saved because it is not to be used to change direction. The gravity of the planet is used to change direction but it adds nothing to the speed of the spacecraft. From your link:
You cannot violate the basic laws of physics. Therefore there is no such thing as "field propulsion".
The only way to accelerate in outer space is to throw something else in the opposite direction. Of course you can fall into the sun, or another planet... but that is what you are trying not to do. Anyway any velocity gained by falling into a planet would only offset the energy expended by pulling away from the planed. There is no such thing as free energy.
Ron P.
OK Darwinian I can't argue with you again - you're too smart for me, besides I like you too much - you speak your mind, that's good.
besides we're disagreeing on definitions again: propulsion I take to mean "move forward", no matter what causes it, while you take it to mean movement caused by the use of a 'propellant'. By your definition there is no way I could be right. According to mine, using the gravity of earth to speed up my trajectory is a form of propulsion.
About solar sails, I'm not an astrophysicist so I don't know all the details about how to use them, but I know they can use them to steer as well as propel, probably based on calculating orbital trajectories - it's a whole different game than rocket power, but it works. I also know they are deploying real live solar sails - to your original point that they are science fiction. I'll let you look it up - the reason I don't leave a link is because of teh google!
I don't care to argue with you, it's all good, happy holiday.
The sail satellite was dropped off in Earth orbit by a probe on the way to Venus.
NAOM
Ron
I don't think you are correct here on two counts.
A gravitational slingshot can be used to increase the speed of a spacecraft. It has been done as a matter of course in most of the nasa missions to the outer solar system. I believe it can be used to increase velocity of the craft relative to the solar system as a whole. By decreasing the kinetic energy of the celestial body that you are using as a base of the slingshot you can increase the velocity of the craft. It most certainly does not defy the laws of physics.
You can use a solar sail to increase the velocity of a craft away from the sun and then swing around a planet or moon and travel toward the sun at increased velocity. In theory you should also be able to use a solar sail as a tacking device to increase or decrease the orbital velocity and thereby use the changed centripetal force to accelerate toward or away from the sun.
Phoenix, the Wiki article, Gravity assist, that I quoted from did not lie. But in case you did not read it let me quote it again.
Try as you may Phoenix, you simply cannot violate the laws of physics. Of course anything being pulled by gravity will speed up. But as it passes the planet it is moving away from the planet and the gravitational pull will slow it down by the same amount that it was sped up when moving toward the planet.
Of course anything falling toward a planet, or the sun, will be sped up by the pull of gravity.
The NASA spacecrafts you spoke of did use gravitational assist to change directions. That saved them a lot of propulsion fuel because a lot of fuel would normally be used to change directions. But they gained no speed whatsoever. Their direction or angle, relative to the sun, was changed and therefore their speed relative to the sun was changed. But the velocity through space did not change.
Okay, perhaps you did not understand the sun part. If a spacecraft is moving through space at 100 thousand miles per hour but is moving at a 135 degree angle to the sun, then it is moving away from the sun at something less than 100 thousand miles per hour. Then it swings around a planet and its angle away from the sun increases to 160 degrees. Then its speed relative to the sun would increase but it would still be moving through space at exactly 100 thousand miles per hour.
Hey, read the Wiki article. That guy explains it better than I ever could. But as he says the spacecraft entering and leaving its gravitational field, will remain the same—as it must according to the law of conservation of energy.
Solar sails can only be used for steering if you wish to move in a direction more directly away from the sun than the space craft is currently moving. In other words if a spacecraft is moving at away from the sun at a 135 degree angle and you wish the angle to be increased then they could deploy solar sails and cause the spacecraft to move at a greater degree away from the sun. (Moving at a 90 degree angle to the sun would be a circular orbit around the sun.)
I suppose that if you had a gyroscope on the craft that held the craft in one position relative to the sun then you could use the sails like a parachute and gain some directional movement. But the force of the solar wind is extremely weak and a very weak and it would take a very large sail to make any difference.
Ron P.
You're wrong. The velocity do change (kinetic energy is transfered from the planet), not just the angle, as the wiki article explains. This is because the spacecraft's speed relative to the planet is unchanged, but you used the fact that the planet was traveling at a certain speed. So it's not only the angle, but the speed as well. For instance, you could move directly away from the sun at a speed of 3 and then use a slingshot maneuvere around Jupiter and come out moving directly toward the sun at a speed of 5 (or whatever).
Read the wiki article again.
The nearest body to even possibly consider mining is the moon, and anything that is an asteroid or other planet is so far away, and in such different orbits, that the energy that it takes to go there and go down and up the local gravity well, and then to be able to bring things back is immense. And it is risky too. How many space missions have had problems from SkyLab to Hubble to Apollo 13, etc. And for anything that a shuttle and space walk can't get to for fixing won't be fixed. But just take the moon for instance, and consider the empirical evidence that we haven't mined it for anything and it is the closest thing to us. And the moon is a very friendly scenario with weak gravity and being in very close proximity unlike the much larger planets. We brought back some rocks for scientific study but at enormous cost. If there were profit to be made and useful resources to get from the moon, the fact that it hasn't been done yet should be strong evidence that doing so isn't cost effective and feasible from and engineering standpoint or from a business standpoint either. Using rockets to get to asteroids or other planets and moons takes many years to get there and those trips are pretty much one way because of the enormous energy that would be needed to send even a small lander back to Earth would be extremely cost prohibitive.
M.E: I just don't agree.
Read the earlier post - we were talking about complexity and efficiency. there's a relationship between the two. I was suggesting that the complexity of a solar energy supply chain would and could dwarf the current system. With complexity would come demand for all the heavy metals that are abundant in space rock as well as access to the massive EM energy fields up there in the big wide open.
It's idle speculation, true. But everything you've said about space was said about many frontiers before, and then the sophisticated technology was developed that made their exploitation possible, followed by an increase in efficiency, and demand, until once impossibly complex systems are now simply taken for granted as a way of life.
It's not going to save us from PO in any magic way, but purely for energy alone space is the place. What is all this X prize stuff and privatization of space about if there aren't riches and adventures to be had out there?
Anyway, just because it's about PO doesn't mean it all has to be all doom and gloom. There are other possible futures besides collapse however slim and unlikely.
Is it really possible to decouple GDP Growth from Energy Growth? No it is not possible. Growth in manufacturing requires more energy. Growth in the service industry requires more energy. More people being employed means more people driving to work, more trucks on the road delivering products, More airplanes in the air carrying business travel passengers. Everything we do requires energy.
Of course we can become more efficient. And for a while better efficiency can keep growth from requiring more energy. But this process can only continue for a limited amount of time. Sooner or later growth must overtake better efficiency. And it is a big IF as to whether better can keep up with growth. That all depend on how much growth and how much fuel better efficiency saves.
But better efficiency is a two edged sword. While it does save fuel it also saves labor. New technology has always saved labor. That is what it is all about. So while better efficiency can save fuel it can also save labor and that means more people out of work.
Ron P.
But what do we do with that saved labour? If we are to sustain full employment, we need to find more things to make and do, hence consuming more resources again. If we are to work fewer hours, then we have to fill our spare time with more energy consuming leisure activities. If we are to do neither, then how are we going to stop the food riots?
We need less labour efficient work. We need to redesign production lines to be less automated. Better still, reintroduce cottage industries. Let made by hand become a sign of quality, and to be a skilled worker a badge of honour.
First you need to remove the belief that more is better. Start by decapitating the pyramid of wealth, literally if necessary.
Looking after the elderly. social care
The system will have to break and reorganize first, from the bottom up, Midi. Repost from stale Drumbeat that won't be seen otherwise:
I know a lot of nursing friends right now working in hospitals who can't get off the treadmill, can't slow down, and are leading quiet lives of desperation as things get worse and worse. More hierarchy, more bureaucracy, more authoritarian control, more conflict, more rules, more computerization. Less patient time, less caring, less breaks, less autonomy. We are now at the point of sitting with our backs to the patient while we tap a keyboard to fill in a checklist or swipe a barcode to hand out a pill. We are dancing to the drumming of the military-industrial complex, and we'll dance until the flywheel snaps. Nurses and patients are cogs in the factory assembly line. The hospital bureaucracy is the floor manager. Doctors are customers, and the insurance industry and big Pharma are the owners. Each action that we take as cogs in the corporate system sends money shooting up the pyramid to come spitting out the top, and the owners take the money and buy meaningless luxury goods in a frantic race for status. Each year brings new feedback loops that add more technology, more power, more rules, more useless hierarchy, more medication, more insurance administration, and less patient care. If you can't get off the assembly line at this point, you probably need medication. And you're probably getting meds, if the Pharma sales numbers are to be believed.
What happens when the ponzi scheme blows up, the money stops, and the status shifts? There will be a LOT of people standing around scratching their heads wondering "Who moved my cheese?"
Below, from my dissertation, what happens to the spinning flywheel over time. This is happening in every industry, but is especially rampant in government, academia, and healthcare, the last three bubbles. They're broken, and the inequities become exponential over time. Even Rockman admits it:
http://www.theoildrum.com/node/8639#comment-852085
Yeah no doubt. I think the bone of contention is/will be defining what a ground up rebuild entails. a lot of what you outline is similar to a tainteresque complexity return collapse
The way I see it everything will end up being rationed in the end anyway[even if by proxy]. So working for your allowance will have to be in areas such as social care because efficiency will actually dictate higher level of automation in traditional jobs... there will be no jobs for all.
We are all going to have to look after each other
what you're saying about the health care industry is right on, but some of the complaints, and even some of the systemic evils, like more hierarchy and bureaucracy, seem to me to be temporary symptoms of the change that's going on in HC right now:
I'm sure that is the situation, but do you really blame computerization for less patient time and caring?
I thought it was pretty well accepted that computerized systems will prove to be more efficient and infallible in the long term. The trouble is that in the short term there's tremendous competition between software vendors and contractors to position themselves in this temporary, lucrative transition period, and this means that there's not a simple standard and incremental improvements, there's huge pressure to jump into new systems as fast as possible.
There's also tremendous confusion going on in digitization and restructuring of data and responsibility around changes in distribution and access. That chaos benefits interests that have nothing to do with patient care or the vocation of nursing, but instead specialize in extracting money from the established system. There is also a lot of disruption as established administrations and hierarchies fight tooth and nail to maintain their positions, in spite of being redundant or unnecessary.
But this is a transition period. If it doesn't fall apart completely, the system will eventually settle down, and a return to vocation over automation will be inevitable. Resource limits ought to have a positive impact on vocation in general and esp health care. Institutional solutions will simply not be worth it when resources are tighter, and therefore there will be fewer corners to cut. There will simply have to be more home care, and systems will have to be standardized and made more efficient. The madness is all about profit/plunder.
I'm sure that is the situation, but do you really blame computerization for less patient time and caring?
That's a fair question, Chromic, since I lumped it all together for simplicity's sake. At the local hospital that I am most comfortable with, they have added multiple layers of bureaucracy and put all quality improvement and research initiatives on hold for 6 months while they add a new computerized health record and tried to integrate it with a new lab system. Staff nurses now have additional administration requirements, additional integration requirements, and more difficulty looking after the big picture, with the same staffing. More time is spent staring at computer screens and less time seeing the patient. Physicians have dispensed with any physical assessment or laying on of hands, and rely on tests almost exclusively. (Many of these tests are dangerous.) In recognition of the problem of dissociation, dumb terminals are placed in the patients' rooms, at which point the nurses spend more time with the computer and the patient gets to spend more time with the nurse's back. And computerized records are a guarantee of less privacy over time. Computerization is a barrier to care in many ways.
As you say, healthcare will have to be decentralized, using much less technology. Insurance is history, just like every other profiteering, self-fulfilling, hockey stick industry in the US (see my figure). In this country, we pay twice as much as everyone else in the world to get care that is ranked 40th in the world. I agree that the madness is about profit and plunder. But computerization is a piece of the problem, and it contributes lots of profit and plunder with little added value. The complexity will be unsustainable as our economy contracts. When we relocalize, centralized computerization will become much less important and may be abandoned.
, dumb terminals are placed in the patients' rooms, at which point the nurses spend more time with the computer and the patient gets to spend more time with the nurse's back.
Nursing has always spent more time on paperwork than with the patient. Isn't dealing with the chart in the patient room better than doing it at the nurse's station? At least you're in the same room with the patient...
Iaato
I agree with you. i've seen it from inside. it's inane.
For record keeping and diagnostics, and administration, computers will help immensely once the system settles down a bit though. For replacing physicians or nurses in terms of hands on care - it shouldn't be considered. The opposite should be the case: computers and automated systems should be used where they replace repetitive activity that keeps providers from patients.
As for computerized records being a guarantee of less privacy, I'm not sure I understand why that is necessarily the case, although I can see how it could be an outcome. It's a question of implementation, isn't it?
The important thing IMO is that standards and open source systems are put in place, over private, for profit systems. The "barrier to care" of computerization has to do with A. a profit being involved, and B. implementation of new, clunky systems that will improve over time.
And I agree that contraction will also help improve the health care system over the long run if simply because with less plunder to be had means less administrative overhead (provided it doesn't also cause some kind of massive collapse). Ironically in the short term belt-tightening is causing the opposite as invested interests dig in. Look for things in HC to get worse before they get better, if they ever do - just like in everything else.
It is not just healthcare. Every field of endeavor is experiencing increasing complexity on all levels of organized society. Ask anybody, it's easy to find examples. It is fueled by our abundance of wealth. Most of the complications are to make sure who gets what. Pull the plug, and life will begin to get simpler very quickly. It's not a comfortable ride, though.
I speculate this is the reason for the outlier FSU GDP and Energy data. What I think happened is the underground economy, well developed by meeting shortages under the Soviets, simply absorbed even more of the 'Real' economic activity. I think it's comparing apples and ourangutans. All the Real Money fled into crime.
We have come to expect complexity. We don't think the Doctor is really, really, trying unless we have the latest and most advanced treatments. We demand complex solutions, because they are the only thing we trust.
As a therapist who has worked with nurses, a common complaint I hear is that nurses are spending more time documenting with the advent of computerized charting because expanded data gathering becomes a fetish. Nurses are expected to chart while performing complex tasks or to complete extensive charting after a surgery with no additional time allotted for charting. This leaves little time to attend to the patients.
Yes, Sponia, that was my point for drilling down into the details of a specialty in Gail's thread. This is happening in all bubbles, and that includes the FIRE bubble, of which insurance is an illustration. Even though the insurance industry is opaque and resists analysis, the control of powerful institutions at the beginnings of the pipelines result in exponential growth of the profits, with a winnowing out of the functional social system, even as the complexity grows. The paper/digital nature of the system just potentiates the imbalances. It will be interesting to see what happens when the monetary system blows up. AIG/Buffet were certainly sweating it two years ago, and they are in a temporary lull right now, but they are debt men walking.
. . . because expanded data gathering becomes a fetish.
I'm going to remember that line, Rdberg, thanks, for the hospital I consult at (on a volunteer basis). I certainly see it, and the problem extends to other fields. I call it the Studer mentality, because in most facilities the data gathering is accompanied by authoritarian top-down control and a winnowing of empowerment. Since nurses really run hospitals, whether they have the power or not, it results in hospitals heading completely off track, because the shirts/MBAs are making the decisions with no basis. Healthcare is now about making widgets and collecting data :-{ I'm out. It's toast. Nurses who can't get out are very, very unhappy with a broken system.
"because in most facilities the data gathering is accompanied by authoritarian top-down control and a winnowing of empowerment"
this is really right on - too much information becomes a barrier. IMO this is the challenge of the information era that the open implementation of data interfaces must solve - but I still think that computers represent a form of democratization that interrupts administrative controls when they are properly implemented - and that's the problem. It isn't the computers, it's the way they tend to make administrators obsolete - the reaction to that possibility is what's causing the problem.
My case rests, Chromic, with this timely addition to previous serious violations of healthcare privacy due to computerization of records. We can assume from here on out that computerized records will eventually escape and start to wander, as knowledge wants to be free. What were they thinking, beyond the fetish of gathering data for industrial uses? What is the point of HIPAA except to excuse our bad behavior?
http://www.adn.com/2011/11/23/2186749/sitka-clinics-medical-files-show.html
What is the point of HIPAA
Health care providers won't volunteer this, but a big part of the purpose of HIPAA was and is to make access to your own medical records easier.
Interesting. I gave up working in hospitals for many of the reasons you list, and have vowed to never go back.
50% of healthcare in the U.S. is real and genuine, and about 50% is scam. But it's not as if blame can be assigned to any one area in particular. Americans think they can live forever, and if they don't live forever, their family members sue people who were working tirelessly to cure them from complex diseases and alleviate their suffering. Lawyers are all too eager to join in on the fun.
Combine this with the American love affair with technology, and you get high costs with little actual return.
Look at all the hoopla and controversy that is surrounding the fact that we are now discovering PSA's and mammograms to be all but useless. Things are slowly changing, if only for cost reasons. You can count on Americans to change when money is involved. Hospice care is growing, for example.
..."Logan's Run" as our future goal?
Ralph, you throw the "we" word around like it represents real people who can act to change policy. What do "we" do with the saved labor? Nothing, that is what growth is all about. If we have growth in the economy then those people laid off by labor saving devices will find new work. But if there is no growth then they are shi* out of luck. The fact that new technology, in industry, always strives to do more with less cost and labor. That is one of the three main reasons that we must have growth or else the economy collapses. The other two are population growth and debt service.
Strange, I did not see a smiley face after those sentences but you must be joking. What company with a CEO in his right mind is going to design his factory so that it takes more workers to do less work?
Anyway you talk like an idealist. We do not live in an ideal world. We live in a world where everyone is looking out for number one. Talking about what we need to do while knowing full well that it will never happen is just a waste of time and effort.
Ron P.
Clearly any CEO that sees the cost of running and maintaining an automated system becoming more expensive than the equivalent labour costs would be irrational not to deautomate.
We have some disincentives to job creation. Hire a worker in the USA, and that typically means the employer is responsible for at least some of the cost of health insurance. So the delta that the factory manager sees from highering one new worker, is higher than his salary. So if the wages are $50,000 per year, and it will cost him $10,000 additional for health insurance, he will purchase the $55,000/year robot instead. There is an external benefit to society, in the form of health benefits, and taxes paid by the employee, which are externalities that the employer cannot collect. So his calculus will be much more conservative than say a government employer, who knows he has to pay for healthcare anyway, and some of the wages will be returned as tax payments. So in theory a government owned corp could be quite a bit more competitive than a private corp -because the former can reap the exteranlities of paying wages (taxes paid, and other social benefits), whereas the private employer can't. I think this is why private corps are so deadset against government owned businesses -they may be grossly uncompetitive ith them.
We will probably need most everyone to do permaculture.
Yes, Curtis. Permaculture says we have to live within our ecological means. Thermodynamics dictates that we will have to shrink our energy budget over time until we are sitting on top of the natural food chain instead of turbo-boosted into global trade on the miasma of oily joy juice. Permaculture principles and ethics at the link.
http://www.theoildrum.com/node/8631#comment-851884
Change both the monetary and the incentives system so people work less while a larger number remain employed. Germany did a great job at this during the 2008 collapse. Too much economic activity is causing the problem. Less growth more sustainability.
"If we are to sustain full employment, we need to find more things to make and do, hence consuming more resources again."
We are supposed to go to a more service-based economy, according to the economists. The problem is, even if they banned home kitchens, there are only 21 meals to eat out in a week. I don't need to cut my hair all that often. Every 6 months is fine for dental visits. Even doctors don't want to see you for an annual checkup anymore.
There is a hard upper limit on how much "service" you can provide a person. I have no idea how society would get back to Victorian upper-class standards of service, where there was a house full of maids, valets, and butlers. Most of them went away with the arrival of electricity.
The "services" were meant to be more entertainment and recreation - touted as the "leisure society"back in the '70's.
But, just like your example of Victorian servants, so too the entertainment has become increasingly based on electricity, with relatively few "entertainers" (and not that entertaining, either). As for recreation, well the obesity rates tell you what happened to that.
So there is still no solution to what everyone will do - except perhaps argue about who should and shouldn't be doing what...
I went to an entertainment last Saturday night. Traditional ghost story telling. One story teller, 60 in the audience. Energy budget - light of 4 candles and one glass of brandy.
http://arctic-entries.com/about-us/
Okay, what’s the deal with our name anyway?
There’s always a place in your home where people gather and stories are born. The east coast has stoops. The south has porches. But Alaska? We’ve got arctic entries. Our Arctic Entries show features true stories born from those moments when we close the door on 8 feet of snow or the midnight sun, pull off our XtraTufs, and say, “You’ll never guess what happened…”
Here's my favorite entertainment this fall, Ralph. Storytelling is how we learn.
Where is it being held this Saturday? :)
It depends what kind of tastes you have. If you like a nice white wood siding house, then painting than it is 1 minute per square foot. If you like water colors it is 2-3 hours per square foot, and if you like those little russian hand painted matroshyka dolls then it 5 hours per square foot. More refined products that are NOT mass produced require more time, similarly.... The american way of making every food out of corn is like that house, when I'm in Paris or Geneva the food that I eat isn't all made out of corn, there are is a whole network (according to Eliot Coleman) of small farms producing food year round of great diversity and taste. As long as we want super cheap, metal/virus/bateria filled fish from China in our McDonald's fish filet then we need very few people. Having raised fish in Pennsylvania I can tell you it takes work to raise high quality trout, no one would recompense me for that work, I simply gifted 28 inch trout to people.
Tainter's latest book says that the only society that every simplified was the Byzantine one, I'll be interested to see how history judge's Cuba post 1991, having spent a bit of time in Iceland pre and post crash, it looks like it is simplifying, those great
office cubicle banking jobs are turning into fish cutting jobs (formerly sent to China), imported hay for animal bedding has turned into grinding driftwood into saw dust, etc....
There can be jobs, but everyone doesn't get a new car every 3 years, and an iphone every year
Ralph
I am not sure how serious you are with this comment but I will take it at face value.
Deliberately making systems less efficient (or reverting to past systems that were less efficient) is not the answer to our current problems. Use of a small mass produced diesel engine to undertake a particular task will be a better result for the environment than to revert to a "hand made" traction engine from a century ago. I would also maintain that the small diesel will have less impact on the environment than employing 10 people to do the equivalent task. There are a thousand other examples whereby it is clear that automated mass production makes for lower environmental impact both in terms of resource usage and waste production.
On the other side of the coin, of course mass production and therefore low cost production of "stuff" has been one of the chief facilitators of our current consumer culture. But it is just a facilitator. The cause is human and that is what needs to be addressed.
We form gangs -- idle hands, devil's playground, etc... It's what humans do with too much time on their hands, no?
NO! Not at all! Here's just one example of what some people do with extra time on their hands... It is known as: Science, Music and Art!
http://www.youtube.com/watch?v=EMwxwRA9Xr8
Cambrian Explosion
It's only when there are too many people who are physically exploited, brainwashed by propaganda and advertising to consume tons of limited resources in the form of useless crap, that they can not afford, that they end up revolting and forming gangs... with good reason, BTW!
Cheers!
Fred
I just have to dispute this one little thought. We don't 'have' to use energy on leisure activities. Strumming an acoustic guitar or walking to the park to throw a frisbee around don't consume a meaningful amount of energy, especially when compared to working.
According to usdebtclock.org, today the National gross debt to
GDP ratio just went past 100%. This ratio is what led to the rise in interest rates in Europe and earlier in Argentina. The number is $15,031,500,000,000.
argentina
Not so good! I hadn't noticed this.
A good post.
I think we are passing through a short phase in which the west is unable to compete economically because of the combined high costs of oil AND labour. For this reason the developing economies have been able to afford higher oil prices because they have such very cheap labour to compensate. The combined costs of energy and cheap labour are giving them an economic advantage, for now. However, they depend on foreign markets; us, and we are now reaching a point where we are becoming unable to borrow money economically and so are unable to afford the imported products we want, and certainly by the continually expanding degree demanded by the new economies. Running parallel with this cost model is the fact that energy supplies appear to be unable to quite meet the needs of the growing new economies and they too are finally showing signs of becoming stressed.
The post refers to oil, but most raw materials are getting more expensive and without growth we are all becoming less and less able to afford them. I see a gradual wind down in our economic activity and a serious slowdown in the new economies too, until such time as popular discontent at the failure of governments to deliver the promised growth, which is realistically impossible of course, finally takes over. How this will manifest itself I do not know, but the popular discovery that what we have now is all we will ever have, and that we will not be able to have as much next year, unless we are rich, will frighten and anger a lot of people.
Right now most economists, politicians and the money markets are blind to the reality and still talking as if we are traversing a temporary economic plateau until such time as a miracle happens and the great recovery begins. I believe it won’t, ever. I have a horrible feeling that 2011 is as good as it will get and that perhaps I ought to have a few friends around for a good meal at Christmas, just for old times’ sake.
Gail,
Are you not making an assumption that GDP is a good measure of human well being? The definition of real GDP depends on (a) the measure of economic activity (b) the measure of inflation. There are some who believe that inflation has been overstated ( I am not one of them) in which case "real" Real GDP would be much higher. Alternatively, there are those who believe that the entire economic measurement of GDP is flawed (cleaning up the BP oil spills increases GDP)in which case energy use is actually growing faster than the growth in human well being- which at the end of the day is the important consideration
I am just using the real GDP measure as calculated. I expect the real GDP measure as calculated is actually somewhat inflated, because governments like to understate inflation rates.
I agree that what real GDP calculates is somewhat flakey, but the real issue is that for most of the world, most of what real GDP measures is the cost of very basic needs--food and shelter and some basic heating for cooking. The kind of reductions we are looking at to achieve acceptable CO2 levels would bring the developed world down to this level, or lower. It is not even clear that there would be food and water sufficient for everyone. That is why making changes such as these are so scary.
It's like building successively higher and higher skyscrapers. To lift people higher and higher in the elevators takes more and more energy. Energy growth stops, higher skyscrapers stop. Energy declines and people won't even be able to reach the already constructed floors (unless they want to use the stairs. Ha!)
Exactly, BMiller. The concept is called Transformity. Here is what it is supposed to look like, a food chain pyramid with humans at the top. The second figure is what it really looks like. The table is the conversion value that indicates the quality of the different types of fuel; emergy is decreasing over time and oil is now estimated to be ~65,000 joules worth of sunlight rather than ~90,000.
http://www.onb.it/writable/editoriale/Brown_Ulgiati_5_2004_Energy%20qual...
bmiller,
I hadn't thought of that analogy. It is a good one!
What effect did the debt-binge since about 2000 have?
It seems to me that we pulled forward a lot of consumption, which must have increased GDP over what might have been considered "natural". WOuld this have had any effect?
Peter.
The debt binge is no doubt part of the problems of the last 10 years. This debt binge did not just happen in the developed world. You may have read some of the recent articles from China, saying every province of China is a little Greece, in terms of debt level.
All of this debt has allowed commodity prices to keep rising, so the world did not see a steep decline in oil production, or in the production of other commodities. We are reaching the point where all this debt needs to unwind. One fairly likely outcome is that commodity prices will fall, and because of this, production of a number of commodities, most importantly oil, will also fall. But we really don't know precisely how this will work out.
this post is related to the issue of debt. GDP-to-energy ratio can be skewed to present a misleading picture of energy efficiency by outsourcing energy use to other countries. It can also be skewed by including lots of paper wealth in the accounting of GDP, “wealth” that doesn’t correspond to production of any real goods or services.
For example, consider the run up in real estate values before the bubble finally burst in the US. The value of Joe’s house goes up by 50% over 4 years, so Joe, feeling suddenly affluent, takes out a loan against the resulting equity in his house, and registers the proceeds as digits in a savings account. Nothing gets added to US energy usage, but it certainly adds a lot of dollars to US GDP.
During the build up of the bubble there were millions of guys like Joe. The resulting increase in GDP created a misleading picture of wealth “creation.” It certainly improved the GDP-to-energy ratio for the US. But it had nothing to do with improving energy efficiency when producing any goods or services that constitute real wealth.
The same real estate bubble that allowed Joe to create new GDP out of thin air was also the basis for enormous investment instruments that multiplied the effect many times over. And instead of having lots of negative GDP when the bubble finally burst, we covered it up with bailouts and greatly increased government debt. In short, a lot of the increase in GDP was phony wealth that’s still “on the books.” How would those curves look if we were to retroactively remove the make-believe wealth out of the calculation?
Nothing gets added to US energy usage, but it certainly adds a lot of dollars to US GDP.
That's not how GDP is measured. GDP is income, not wealth. Income is only associated with real activities, like building the house, or the commission on selling it (net the expenses...).
Incomes can be hugely inflated when people who have "paper wealth" overpay for things like houses. The builder's income, in this case, is largely divorced from the materials required to build the house and is more closely correlated to the willingness of banks to lend money.
GDP is not a measure of anything physical in the world. It is a measure of the amount of money flowing through the system. Because asset inflation (stocks, bonds, real estate) is not considered as part of the Consumer Price Index, "inflation adjusted" dollars are not a solution to the problem of having 'squishy' units like dollars or euros. And monetarists don't have a complete solution either because of the difficulty of accurately measuring "money supply" which must include all forms of money and credit.
The bottom line is that prices are not physical units. And anything derived from them, like GDP, is fundamentally divorced from reality.
Whenever one encounters this sort of situation (unphysical units), ratios are more meaningful: e.g. DOW/gold, oil/gold, debt/GDP, minimum-wage/gal. milk, top 1% income/bottom 50% income, etc.
Jon
Inflation can certainly be hard to measure. Still, GDP doesn't include wealth.
And, I'd say the real estate bubble has been pretty well deflated (in fact, home sales are well below the long-term trend), so that has removed any effect that bubble had on the GDP-to-energy ratio for the US.
Inflation isn't a problem for things that are both measured in the same currency, such as debt & GDP, and wages & milk prices. Finally, gold prices as a measure of anything real or even vaguely related to the physical world?? Surely gold is the ultimate example of a price that's detached from productive value...
I'm not so sure about that. Take a look at this chart for gold and wheat;
[source]
I would say that, until the 70's, gold was very well related to wheat. What's happened since then i'm not exactly sure, but compared to the wheat price in dollars over that time, gold has been far more meaningful.
And, gold in itself has never been something of productive value - it really is quite unproductive. It's value has been as a currency, a non counterfeitable means of exchange, and a highly portable* one at that.
* An ounce of gold weighs 31g, and with gold currently at $1700/oz, this amount of one dollar bills weighs 1.7kg. You need to go to $50bills, at 34g to get close to the ounce of gold at 31g.
The old rule of thumb in the oil business was that an ounce of gold should buy 20 barrels of oil, more or less. At this point in time, an ounce of gold is about $1700 and a barrel of oil is about $100, so an ounce of gold will buy about 17 barrels of oil. It appears that the traditional relationship between the two still seems to hold.
yep, the ratio has been within a definite range for most of the century:
[source]
The highs and lows here, 140 and 30, correspond to a ratio of about 7 and 30 bbl/ounce.
Interesting that we are back to 50's and 60's levels of about 20:1
I would say that, until the 70's, gold was very well related to wheat.
That chart has a lot of variance, and I don't see a meaningful pattern.
What are you seeing?
Nick -- I am sure that many people review your commentary on this site for various reasons.
I would like to know what you think about the analysis found at the below website. I have posted a lot of that analysis previously here on TOD as comments to various articles.
http://www.zerohedge.com/news/observations-engineer
Some of the analysis there does conclude that the housing bubble still has some deflating to do, as the business model for 30 year loans is being structurally challenged. Below are a few paragraphs from that web page, but please feel free to look the whole analysis over.
Looking forward to the coming years, what are the reasonable expectations for housing and many other aspects of the world economy if oil production does at some point start to decrease as projected by the Hubbert Curve? Is the banking business model of providing 30 year home loans at risk? One might think so. There are projections that at some time we may expect oil production to decrease by anywhere from 2 to 5 percent year after year after year (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)?
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.
I am sure that many people review your commentary on this site for various reasons.
Thanks...I think...
Some of the analysis there does conclude that the housing bubble still has some deflating to do
Two thoughts.
1, I don't think anyone believes that developers are now getting any windfall profits from the sale of homes.
2, no, I don't think PO will cause a long-term decline in the economy. I think it will cause lower growth (than BAU) for the medium-term. I don't believe that in the long-term oil will continue to be a critical natural resource.
There is a puzzling assumption that oil can't be replaced, that it is somehow magically necessary for industrial/modern civilization. Oil has been cheap and convenient for the last 100 years, but the industrial revolution started without it, and modern civilization certainly will continue without it.
• 130 years ago, kerosene was needed for illumination, and then electric lighting made it obsolete. The whole oil industry was in trouble for a little while, until someone (Benz) came up the infernal combustion engine-powered horseless carriage. EVs were still better than these noisy, dirty contraptions, which were difficult and dangerous to start. Sadly, someone came up with the first step towards electrifying the ICE vehicle, the electric starter, and that managed to temporarily kill the EV.
Now, of course, oil has become more expensive than it's worth, what with it's various kinds of pollution, and it's enormous security and supply problems.
• 40 years ago oil was 20% of US electrical generation, and now it's less than .8%.
• 40 years ago many homes in the US were heated with heating oil - the number has fallen by 75% since then.
• 50% of oil consumption is for personal transportation - this could be reduced by 60% by moving from the average US vehicle to something Prius-like. It could be reduced by 90% by going to something Volt-like. It could be reduced 100% by going to something Leaf-like. These are all cost effective, scalable, and here right now.
I personally prefer bikes and electric trains. But, hybrids, EREVs and EVs are cost effective, quickly scalable, and usable by almost everyone.
Sensible people won't move to a new home to solve this problem. That would be far, far more expensive than replacing the car. It makes far more sense to buy an EV and amortize it over 20 years at a cost of less than $2k per year (about the amount they'd save on fuel), versus moving to a much higher cost environment (either higher rent or higher mortgage).
• As Alan Drake has shown, freight transportation can kick the oil-addiction habit relatively easily.
We don't need oil (or FF), and we should kick our addiction to it ASAP.
The only reason we haven't yet is the desperate resistance from the minority of workers and investors who would lose careers and investments if we made oil and other FFs obsolete.
Some might ask, what about our current debt problems?
Debt is a symbol, a marker - what matters is the underlying productive capability of our economy, which will be just fine. Could we screw up the management of our economy, and go into a depression? Sure. But it's not likely.
Don't these transitions take 50 years?
The transition from kerosen to electricity for illumination took roughly 30 years. The US transition away from oil-fired generation took very roughly 20 years. The transition away from home-heating oil was also faster than 50 years (though uneven).
The fast transition from steam to diesel locomotive engines is illustrative. There were a few diesel locomotives in use in the U.S. during World War II but steam dominated in 1945. However, the steam locomotives had been very heavily used during World War II, and they all wore out at approximately the same time the first few years after 1945. When steam locomotives wore out, they were invariably replaced by diesel in the mid 1940s. By 1949, almost all steam locomotives were gone. There were still some steam locos made in the late 40's, and they were still in service in the 50's but dwindling. The RR's also relegated the steamers to branch line and switcher use - replacing the most used lines with diesel first as you would expect. Cn rail retired its last steam engine in 1959.
Other, very slow transitions are not a good guide to the future. For instance, the transition from coal to oil could be very slow, because there was no pressure - it was a trade up, not a replacement of a scarce resource. Many transitions occurred because something new & better came along - but the older system was still available and worked just fine. Oil may become very expensive very fast and that would provide us an incentive to switch over much more quickly.
On the other hand, we can point to many energy transitions that were sideways or down. The early transition from wood to coal in the UK was a big step down: harder to find and transport, dirtier - a pain in every way. Coal's only virtue was it's abundance. The transition from EVs to ICEs took a while - only when ICEs started to electrify did they become competitive. And, of course, we hid the external costs of oil from consumers: freeways (built by "engine" Charley Wilson after he went from President of GM to Secretary of Defense), pollution, overseas wars, etc. I'd argue that ICEs were never better than EVs - they just appeared that way.
On the other hand, EVs are better right now. They have better driving performance (better acceleration, better handling), and lower total lifecycle costs.
Unfortunately, we have more than 50 years worth of things we can burn for electricity. Fortunately, it doesn't look like we will. For instance, coal consumption in the US dropped 9% last year, about half of that due to loss of market share.
The transition from heating with wood to heating with coal took a lot more than fifty years. Electrification of the U.S. from small beginnings in the late nineteenth century to finishing rural electrification during the Great Depression took at least forty years.
Sure. These involved an enormous amount of infrastructure. On the other hand, EV/EREV/HEVs are manufactured on the same assembly lines as ICE vehicles, and roughly 75% drivers in the US have access to an electrical plug where they park.
If we mobilized all our resources as we did in World War II with the single objective of getting off fossil fuels as fast as possible, wouldn't the transition still take at least twenty years, and probably longer than that?
It would be much easier than that. A transition to EVs requires only a change within the automotive industry (for most drivers).
But are we actually seeing any replacements of oil?
Consumption in the US has fallen by 10% in the last 3 years (while GDP has recovered to the point it reached when oil consumption peaked in 2007), and it continues to fall. Production has risen (both C&C and all liquids), and net imports have fallen by 25%.
Didn't past transitions occur in a environment of growth, when making new investments was a good idea, and banks would lend?
The transition from horses to rail occurred mostly during the Long Depression from 1873-1890. The move from horses to tractors and automobiles continued at a very good speed during the depression, as did general electrification. The transition away from oil for electrical generation accelerated during the 1979-1981 recession(s), and CAFE standards rose.
Thank you for that.
We stand at the cusp of a major transformation. Some industries (and the workers they employ) are currently on the wrong side of history.
Newer industries (and the workers they employ, many of them outside the OECD) stand to take over.
Yes, there are serious problems in financing this transition and there are questions about the total amount of energy available to society. But it is not preordained that society will collapse. Of course there will be some major upheaval (read default, war, etc.) at this cusp as there always are at major inflection points in history.
But there will also be continued technological advancement in the coming years and many winners in different parts of the globe. The question right now is how to position oneself and one's family to be on the right side of history through this transition.
Best Hopes for finding a prosperous and peaceful path through the coming decades.
Jon
You're welcome.
Yes, we're in interesting times. Just because one works in an industry of the future doesn't guarantee security - just look at Solyndra. And, working for a major oil company is a pretty good gig right now. Who would have expected 3 years ago that GM would be doing so well, and Toyota struggling a bit?
Interesting times...
Seconded, very good post Nick.
I absolutely agree that the main reason why things aren't changing fast (or at all) is because of the entrenched interests - which ranges from legacy industries to government bureaucrats (who don;t want to do anything risky until they retire).
We can see this in all the promo and PR stuff done by utilities, car co's and oil co's - the number of photos of wind turbines and solar panels they use is about 100x the amount of energy they get from. The idea is to do enough greenwashing to make the public think that;
1) they (the legacy industries) are actually making meaningful changes, and
2) that the consumer won't have to make any hard changes in the near future
When all this facade is stripped away we can see that there are some tough choices ahead, but they are beyond the next quarterly or annual report, or the next election. And so they do not get addressed....
Thanks!
What's the E-ROI of BP's renewable greenwashing? :)
------------------------------
The odd thing is that in many cases those choices are only painful for the legacy industries. It's very much in the self-interest of legacy industries to paint renewables as an enormous sacrifice. That's part of why I get so frustrated with the endless array of articles on TOD that suggest that renewables are expensive, or impractical, or....something. Drill, baby, drill.
Dramatically lower fuel consumption is great for consumers. Priuses are less expensive and more reliable than comparable ICE vehicles. EVs have better handling and performance.
The US is at last raising the CAFE to 56 MPG, but not until 2025..sigh.
Nick – I’m not claiming that GDP is wealth (hence the use of quotes in my post). In fact, that’s largely my point: GPD can be inflated by things that don’t correspond to creation of actual goods and services. Several times on this forum, people have pointed to declining ratios of energy-to-GDP within individual nations as proof positive that those nations are getting much more efficient in their use of energy to create real goods and services that people depend on. I’ve always been skeptical of those claims – for the very reason that GPD can be inflated by transactions that do NOT correspond to creation of actual, physical wealth.
As EOS pointed out below, Joe eventually spent his equity loan. Some fraction of those subsequent transactions, DID find their way into US GDP, even if Joe was mostly buying goods made in China. And the huge salaries, bonuses and incomes that the financial sector generated – also on the back of the real estate bubble – some fraction of those also found their way into GDP, pumping up what would otherwise have been a significantly lower number. So GDP went up, but what did that tell us about our true ability to create real goods and service in an energy efficient manner? IMO, not much. All of this is just another way of saying that GDP isn’t a great metric for wealth creation, although some people misconstrue it that way when trying to make the case that our material well-being has been significantly decoupled from energy use.
While it’s true that real estate values have come down significantly, the impact they had on GDP is still rolled up into the historical curves of energy-to-GDP ratio. Now we have a mountain of extra government debt, which – whether you buy it or not – was approved on the basis of preventing a massive economic collapse that would have sent GDP much lower.
I’m not claiming that GDP is wealth
But you're clear that GDP is not intended to measure wealth, right? It's intended to measure income, a very different thing.
the huge salaries, bonuses and incomes that the financial sector generated
I think you're saying that financial services don't have value. That's doesn't quite make sense to me, though I agree that financial incomes rose too high. I'm not sure that distortion is a big % of the overall picture.
the impact they had on GDP is still rolled up into the historical curves of energy-to-GDP ratio.
But the impact isn't included on the 2009 and 2010 points, which are the most important.
Yes, but it seems that many folks are not. Specifically, the folks who point to declining energy-to-GDP ratios as proof that energy use and material wealth have already been decoupled.
No, you missed my point. I’m saying the real estate bubble inflated GDP indirectly through the financial sector, and the resulting “improvement” in energy-to-GDP ratio has nothing whatsoever to do with efficiency improvements in the creation of actual, physical wealth. I recall reading that growth in the financial sector was actually a big component of overall economic performance during the boom years. How much of that was related to the real estate bubble I don’t claim to know. If you have any references, I’d be happy to read them.
And as Gail’s post makes clear, it is precisely these recent years when improvements in energy-to-GDP ratios start looking less rosy!
the folks who point to declining energy-to-GDP ratios as proof that energy use and material wealth have already been decoupled.
?? This post is about the ratio of energy use to GDP, not wealth.
If you have any references, I’d be happy to read them.
Good question - I looked it up a while ago, and the FIRE sector and it's changes weren't that large...but I didn't save the reference. I'll try to look.
it is precisely these recent years when improvements in energy-to-GDP ratios start looking less rosy!
That's not the case in the US, which is where the FIRE sector is in question here.
Nick – No, you’re still not getting it, so let’s try again. Improvements in energy-to-GPD ratio are most often trotted out by people in response to others expressing concerns about the possible impact of tightening per-capita energy supply on human well-being . Used in that context, they are enlisted as proof that energy supply is not a big concern for our future well-being. The implied message is: “Don’t worry about it. We’re getting a lot better at providing for peoples’ well-being with less energy, and look here at these improvements in energy-to- GDP ratio if you don’t believe it.” So GDP is being used as a proxy for material well-being by implication, even though it isn’t. And it is precisely **because** changes in national GDP are **not** a proxy for changes in material well-being (wealth) that use of GDP in this context is invalid.
Eyeballing data for the US in figure 10b, it certainly appears that the rate of decrease in US energy-to-GDP ratio is less in 2008-2010 than it was in years past. So the improvements are less in that time period than they were in years past, as I stated. Maybe you have some different data as the basis of your comment above?
GDP is being used as a proxy for material well-being by implication
I'd disagree. I'd say that GDP is a proxy for human ability to "take care of business". IOW, our ability to produce the things we need on a daily basis. I'd say that the way the Original Post is using it makes sense.
That comes awfully close to saying GDP is being used as a proxy for human material well-being. And such use constitutes a misuse, IMO. While GDP is roughly related to material well-being, it includes the effects of activities that have very little relationship to material well-being. So changes in one direction or the other are not directly proportional to changes in material well-being, even though they are often misconstrued as such. US GDP in 2010 looks pretty darn good compared to 2004. With double-digit unemployment, staggering numbers of people surviving off welfare and food stamps and an explosion of debt that in other countries is now threatening to wreck their national economies, the improvement in GDP does not seem to be telling us much about human well-being.
I think Gayle’s evaluation energy-to-GDP as a metric is great in this case. Because improvements in that metric are flattening out, in spite of all the influences that have inflated GDP relative to the material wealth that matters to humanity. So while the metric shows an important change in trend that is troubling, reality is probably worse. So either way, we aren’t improving our use of energy as much as we need to do.
There is much low-hanging fruit that could enormously improve our efficiency at using energy to create material wealth. But there’s a big difference between what we COULD do and what we ARE doing, and the rate of progress has been far, far less than it should have been if technology were the only limiting factor. But technology is not the limiting factor, and the rate of progress is likely to continue to be less than the limit imposed by technology alone.
That comes awfully close to saying GDP is being used as a proxy for human material well-being. And such use constitutes a misuse, IMO.
Except that's not how I'm using GDP. It's just not. We can misuse our productive capabilities, or we can use them optimally. The argument here is over the argument that PO or Peak Energy will sharply limit our productive capabilities.
energy-to-GDP...are flattening out
Not at all.
1) China is just growing fast, that's all. China has a very high E:GDP ratio, and as they become larger they affect the overall average.
2) E:GDP hasn't been a national priority. It just hasn't. China in particular has concentrated much more on overall energy output, and less on efficiency. That's changing pretty fast, as coal and oil become more expensive, but that's pretty recent.
I agree that we could and should do much more. We don't because of resistance from people in legacy industries that stand to lose their investments and employment.
It may not be how you’re using GDP, but it certainly has been misconstrued as such by others who keep trotting it out in response to energy concerns in relation to physical well-being. And while I don’t doubt there is scope for big improvements in energy efficiency when creating actual, material wealth, I remain unconvinced that small improvements in E/GDP ratio tell us if that’s really happening.
You must be looking at some graphs other than the ones in this post, or just not paying attention. Figure 11 shows that global E/GDP ratio has done WORSE than flatten out during the past 3-4 years.
All of your points above are just your opinion about WHY E/GDP has done poorly of late, not proof that it HASN'T.
There are lots of reasons why energy-saving technologies don’t get deployed even remotely as fast as they theoretically could. The reason you cite above is only one, and not even the most important, IMO.
It may not be how you’re using GDP, but it certainly has been misconstrued as such by others who keep trotting it out in response to energy concerns in relation to physical well-being.
Well, I don't think we need to worry about them. After, energy is just a resource for doing things. Gail's post is related to the basic question of whether energy shortages will hinder our ability to "get things done". The wisdom of our choices of "things" is another question.
You must be looking at some graphs other than the ones in this post, or just not paying attention.
Don't get impatient. We'll get there.
"Figure 11 shows that global E/GDP ratio has done WORSE than flatten out during the past 3-4 years."
Well, the chart is a little too high level to tell us much. If it compared annual changes in GDP vs changes in energy consumption that would be more useful. Nevertheless, it does suggest that the decline in E:GDP has flattened out recently.
All of your points above are just your opinion
Well, no. 1st, my analysis of the increasing weight of China's contribution is just arithmetic. And, if you spend some time reading about US and Chinese coal consumption, I think you'll quickly agree with me.
.The reason you cite above is only one, and not even the most important, IMO.
"Poor Exxon. They used to be the oil company that everybody loved to hate. This spawn of the Standard Oil breakup had it all: Obscene profits, the Exxon Valdez, a mean CEO who sneered at clean energy, blatant funding for climate deniers.
But now, the new ExxonMobil is just not that special anymore.
It turns out that all the big oil companies are buying elections, paying front-groups to spread lies about climate change and dumping their tiny investments in clean energy while continuing to put out soft-focus ads touting how green and socially responsible they are. And they just don’t seem to care that much about preventing oil spills either.
In these days of peak greed, you have to drill pretty deep in the oil patch to find the worst of the worst.
A real gusher
Well, after coming up with a bunch of dry holes, the environmental and government-reform movements seem to have found the activist equivalent of Old Spindletop: Charles and David Koch."
See http://transitionvoice.com/2011/02/more-reasons-to-hate-the-koch-brothers/
I think we do. As long as people keep trotting it out as a counterpoint to energy concerns and mis-using it as a proxy for what really matters to humanity, then rebuttals are in order.
Glad we finally cleared that up.
I’ve read many articles here on TOD and elsewhere about coal consumption; it’s not a new concept. But more to the point - I’ve never argued that improvements in energy efficiency weren’t possible, just that they’re not happening at a rate even remotely close to what the optimists would have us believe. In this case, flattening out of E/GDP just bears out that truth, regardless of the reasons why, and in spite of the problems inherent in that metric.
As someone who has spent a good portion of my career commercializing new technologies, some of which relate to industrial energy efficiency, I find it more than a little naïve to believe a big boogeyman is the only thing - or even the main thing - impeding the adoption of new energy saving technologies. The truth is that there’s a very long list of impediments to the adoption of any new technology. It’s well beyond the scope of a comment here to treat this topic with any justice.
I saved the above comment for last, because we may have some common ground here. If NET, PER-CAPITA energy declines by X% per year, then the real question I care about is this: “Will we improve the energy efficiency of providing for human needs by a rate that offsets the X% decline in energy?” Note that the KEY question is “Will we?”, not “Can we?” My answer to the 2nd question is “Probably, yes.” The answer to the 1st remains to be seen, and I’m skeptical that E/GDP will tell us one way or the other.
Ah. Well, I think we're in substantial agreement. ok, a few details:
As long as people keep trotting it out as a counterpoint to energy concerns and mis-using it as a proxy for what really matters to humanity
I think we agree that GDP is definitely not a direct measure of happiness. But, I don't think anyone was saying that in the comments to this post.
improvements in energy efficiency weren’t...happening at a rate even remotely close to what the optimists would have us believe.
I don't think there are any optimists making that argument - everyone is unhappily aware of China's fast growth in energy consumption.
I find it more than a little naïve to believe a big boogeyman is the only thing - or even the main thing - impeding the adoption of new energy saving technologies.
I'm not saying the Koch brothers are alone. I'm saying that the car, oil & gas and coal industries are blocking change.
What's by far the most important single solution to PO? Increased vehicle oil consumption efficiency: more efficient ICEs, hybrids, PHEVs, EVs. The car (and oil) industry blocked that politically.
What's by far the most important single solution to Climate Change? Reduction in coal consumption, which the coal industry (with allies in electricity consuming industries) has blocked.
What's the most important solution to both? Fuel and carbon taxes, which the right wing, with very important help from people like the Koch brothers, has managed to turn into a political 3rd rail.
I’m skeptical that E/GDP will tell us one way or the other.
I agree - in this case, history is just prologue.
Will we improve the energy efficiency of providing for human needs by a rate that offsets the X% decline in energy?
That assumes that total net energy will decline. I think that's unlikely. Oil will decline slowly, and there's an awful lot of coal and gas out there. Renewables and nuclear will be ramped up. http://www.bloomberg.com/news/2011-11-25/fossil-fuels-beaten-by-renewabl...
If it does, then I think the adjustment will be somewhat painful, but we'll certainly muddle through. People will carpool, and drive much smaller cars if they must.
Make no mistake: I think our addiction to FF is extremely harmful, and I don't think we're switching nearly fast enough. I just think TEOTWAWKI is unlikely.
No, they’ve been using it to tell an untrue tale about efficient use of energy and what that means for supplying human needs.
Glad you agree that E/GDP isn’t a good news story
Good, because that would have been silly. Setting aside the enormous hurdles any new technology faces, at the most fundamental level, the biggest problem here is too many people and aspirations for too much consumption per person.
Glad we agree on this point
No, you didn’t read what I wrote. I wrote “If, NET, PER-CAPITA energy declines by X% per year…” First, there’s an “If” in there, and second, it’s not total energy that matters at the individual level. It’s net energy , and net, per-capita energy that matters in the big scheme. Total energy could increase while both of these other measures decline.
No argument there.
I actually agree with this too. People aren’t going to crawl into a hole and die. But for the generation that still remembers the good times, being forced to live with less will be a rude adjustment.
Setting aside the enormous hurdles any new technology faces
It's worth saying that EVs (especially EREVs and PHEVs) aren't rocket science - they're really pretty straightforward. It's really mostly a matter of ramping them up.
at the most fundamental level, the biggest problem here is too many people and aspirations for too much consumption per person.
It would certainly help a great deal to have a smaller population. But...energy limits won't necessarily limit people's ability to get around and enjoy life. More specifically, I see no reason why electric solutions (EVs, heat pumps, electric rail, etc) won't work just as well as FF solutions.
being forced to live with less will be a rude adjustment.
I don't see any reason why the hard times have to be permanent. Or, really, all that hard. Carpooling...the horror.
I’m well aware of technology trends in that sector. If the only hurdles were technological, the ramp up would be much faster. Alas, technological limits are rarely the pacing factor to adoption of any new technology, so I expect progress to be slower than the limits of technology alone.
It will come down to the rate at which efficiency is improved vs. the rate at which net, per-capita energy supplies decrease.
If you think carpooling is the worst possible hardship of declining net, per-capita energy supplies, then you aren’t considering the full range of possible outcomes. There is a whole spectrum of possible outcomes, and things like carpooling and cutting back a bit here and there are just one point within that spectrum.
I expect progress to be slower than the limits of technology alone.
I agree. I'd like things to be moving much faster. Oil importing countries are bleeding income and wealth, fighting oil wars and risking dealing with possible major supply disruptions.
you aren’t considering the full range of possible outcomes.
I have. I think the adjustment will be somewhat painful, but we're very likely to muddle through. People will carpool, and drive much smaller cars if they must.
I just don't think we face energy declines likely to be that difficult to deal with. Oil will decline slowly, and there's an awful lot of coal and gas out there. Renewables and nuclear will be ramped up. http://www.bloomberg.com/news/2011-11-25/fossil-fuels-beaten-by-renewabl...
Make no mistake: I think our addiction to FF is extremely harmful, and I don't think we're switching nearly fast enough. I just think TEOTWAWKI is unlikely.
Glad we agree
A “somewhat painful” adjustment is one possibility, but by no means the only one, and unfortunately not the worst possibility. Time will tell. No matter how bad it turns out to be, “Muddling through” has never been in question to me.
The thrust of the commentary on a decoupling of GDP from energy growth has been considering a decoupling where the GDP curve can beneficially decouple from energy growth in a scenario where we get increasing bang for our buck, and better ROI from our energy flows, and that would seem to suggest an increasing level of efficiency. Interestingly, I saw the below article yesterday that seems to be considering a scenario where the decoupling might occur to the detrimental side, where there is less GDP output expected from the energy flow inputs from previous trends. The article didn't comment on any expected change in energy flows, so for the sake of argument, let's assume little or no change for the energy flow. One of the comments of the article posits a possible reduction in GDP by up to half. Wouldn't that appear to be a decoupling that implies a decrease in efficiency? Below is a quote from that article. There are some other interesting quotes to look over there too.
http://www.telegraph.co.uk/news/politics/8917077/Prepare-for-riots-in-eu...
Yes, collapse of the Euro won't help anyone operate in their most efficient way, and you'll likely reverse economies of scale if GDP falls.
Still, the bottom line is that energy consumption will also drop sharply. After all, if people can't access their accounts because their bank has failed, I don't think they'll be able to buy much fuel.
This is, of course, an advertisement for efficiency and energy supply diversity: If you own a Passivhaus, you don't have to buy energy to run it, and you're much better off in an emergency. If you drive a Prius, you need 40% as much fuel as the average US vehicle. If you have a EREV like a Volt, you can run off either gas or electricity, whichever is available.
Sounds like you are describing a pretty serious "declining net, per-capita energy supplies" situation. Careful ! Careful !
Yes, but as effect not as cause.
It's debatable as to which is the chicken and which is the egg.
True. The PIIGS generally have higher than average energy imports - that doesn't help.
Still, Greece has been defaulting regularly every 25 years for the last two centuries...
Michael – Thanks for the link. We are definitely living in interesting times. Any kind of big economic upheaval will likely disrupt the system in ways that won’t be good for efficient running of industry, and therefore E will decrease, GDP will decrease, and overall I would expect E/GDP to suffer. Most industries just don’t operate very efficiently in a chaotic and unpredictable environment.
Correct - the technical term is Simpson's Paradox:
"In probability and statistics, Simpson's paradox (or the Yule–Simpson effect) is a paradox in which a correlation present in different groups is reversed when the groups are combined."
Looking at the data per-region shows that energy per GDP is declining in almost all cases, showing clearly that the apparent lack of decline at the global level is a statistical effect of aggregating dissimilar data.
Consider a simplified example:
1990:
* USA: 10 GDP for 100 energy = 10 E/GDP
* China: 1 GDP for 30 energy = 30 E/GDP
Total: 11 GDP for 130 energy = ~12 E/GDP
2010:
* USA: 20 GDP for 160 energy = 8 E/GDP
* China: 10 GDP for 200 energy = 20 E/GDP
Total: 30 GDP for 360 energy = ~12 E/GDP
Despite 25-30% E/GDP declines in each region, combined E/GDP did not change. That is the essence of Simpson's Paradox.
Thanks.
Jeppen and I noticed a similar thing with GINI: it's generally declining intra-country, but it's improving for the whole world - again, due to China's weight and fast growth.
Pitt – One of the observations of Gail’s data is that E/GDP trend lines have flattened out or turned positive during the very recent past, even on an intra-country basis. This is not an artifact of shifting a higher proportion of GDP to China; it’s an honest-to-goodness flattening out of E/GDP in several different regions of the world. The effect you describe is certainly there in a comparison of 1990 GDP to 2010, but that effect is not what’s flattening out E/GDP trend lines for individual countries during the past 3-4 years.
Hi Nick,
I am far more pessimistic than you in most respects, but I do appreciate your pov and your reasoning.
In certain respects,I seem to be one of only a few people here who agree with you in certain respects-one of them being the future utility of the suburbs.
My guess is that gasoline will become extremely expensive, and might be strictly rationed, well before electric vehicles are actually available in really large numbers.
But that doesn't mean the ice automobile can't be made to run at close to one hundred mpg efficiency.
And it will , too, when the public demands that such cars be built.They will be MUCH smaller, much slower, and far lighter, and far less luxurious, but they WILL get us to work and to the supermarket.
The typical owner of a suburban Mc Mansion with a yard for bbqing and his kids will gladly carpool AND drive such a car before he moves into a cramped apartment closer to work-an apartment where the rent will likely be so high that his overall expenses are still likely to be lower making his ordinary commute.
Most of us tend to forget the positive feedback loops greated by downsizing and slowing down cars-a car that cannot exceed say forty five mph does not need as strong a passenger compartment, or brakes as good as a car often driven at seventy of faster.
Every single component from the engine to the wheels can be made smaller, lighter, and often better streamlined due to the engine and power train being more compact.
When the fuel economy REALLY becomes the overriding issue, carpets, electric windows, spare tires, passenger seats, and numerous other features can be either eliminated or made optional and easily removable.
Engine designers will be free again to build the most efficient engines possible without much attention being paid to exhaust pollution-it will decrease anyway even with relatively dirty engines since the cars will use so much less fuel.
A car will will probably be as safe without an air bag system, or safer, at forty five, as it is with air bags at sixty or seventy.
Oversized pickups and suvs used as commuter vehicles will simply be taxed out of existence, or outlawed , at some point-this country has a strong populist streak that is emerging now, and will only get stronger as the middle class merges with the lower class.
Truck drivers will be found at fault only once when involved in an accident with a passenger car;they will lose their cdl.
Diesel for an over the road truck already costs from two to three times as much per hour as the driver;trucks will drive thirty five or forty to conserve fuel.
A good many power robbing accessories can be eliminated, especially power steering and power brakes.
Could work out that way - not the worst thing. OTOH, the US (and the rest of the world - Ontario has more car production than Michigan) has a lot of untapped production capacity. I think we can ramp up 100MPG hybrids just as fast. For instance, there's a plant in the US just sitting there waiting for additional Prius production. Leaf and Volt production can be ramped up pretty quickly - despite the low production numbers for their first year, they've been developed and put out there very quickly for new cars, even without all the new tech.
But, some REAL economic activity is stimulated by this ficticious wealth. Joe takes out an equity loan, some of the stuff he buys is actual real economy goods, such as say a granit countertop. That means a stonecutter gets hired to quarry the granite. Generally bubbles to generate both the real economy, as well as the false economy. Bubbles popping, do the opposite.
beam_me_up,
I agree with you, but there is no good way of getting the debt bubble out. GDP is always a gross measure.
In fact, when we look at US non-governmental debt, it has been growing faster than GDP since at least 1945.
This graph is from The United States' 65-year Debt Bubble.
Gail – I always appreciate your posts, and I agree there is probably no way to remove the impact of debt from GDP. The fact that this ratio of energy-to-GDP is flattening out, even with GDP being pumped out by things that do not correspond to any real increase in physical wealth says a whole lot about our true ability to decouple material wealth from energy use
We haven't yet seen how the decrease in debt will play out. It may be that GDP falls fairly quickly--it is too soon to tell. The government has been doing its best to pump up governmental debt, to offset the decline outside the government (which is what the graph shows). The government got into the bad shape it is today, by pumping up its debt.
We have to be careful with the concept of pulling consumption forward from the future. Those future workers don't exist yet, whatever we consumed had to be created in the present or near past. Of course this applies to goods created with labor, if we are consuming non renewable resources, than any present consumption is taken from the future. Accumulating debt isn't stealing from the future, it is creating obligations from some future people towards other future people. Now, these obligations may become a problem, for instance kids growing up in Greece and Ireland, may refuse to take ownership of debts passed onto them by previous generations, and that could lead to conflict between future debtors and creditors.
I agree. The one thing that debt does do is raise current demand--that is, the amount people are willing to pay for goods and services. If I have a car loan, I am able to buy a car that I might otherwise not be able to buy. If I have refinanced my house and taken $50,000 out, I have $50,000 in my bank account I am willing to spend on something else.
But, it can't create goods and services out of nothing.
If an economy is suffering from a lack of demand, because people are afraid, then increasing credit will help. But, it can't make an economy perform without resources.
That's why I don't get this idea that credit somehow rescued the economy from Peak Oil in 2008.
Most of the time there is spare capcity to soak up an increase in demand. The general increase in debt was caused by this. left to its own ends, economic growth would have been insufficient top meet social and political goals. So we ratcheted up debt in order to keep the economy closer to full employment. Of course if an economy is near full capacity, then increasing money supply (either via printing or debt buildup), will lead to inflation. We may be entering a new era, where capacity is -at least in part capped by natural resources. I say in part, because some excess demand may be taken up by nonphysical parts of the economy.
Lack of credit caused oil, natural gas, coal, and uranium prices to drop to unsustainably low price levels in late 2008. Prices rose again, once the availability of credit was better. All of the government "stimulus" (funded by government debt) also got a little more money into the economy, and helped get the business portion of the economy rolling. But it never got unemployment off very low levels, and we still have the problem of the 1% getting far too much of the total.
Sure - if you're problem is a lack of credit, then more credit is the solution.
But again - there appears to be an argument that somehow credit substituted for oil - I don't understand this.
It wasn't my argument.
If high oil prices are a drag on the general economy, then creating more money, may be able to keep the economy humming along at the previous rate. Note, I said economy, obviously credit (or money supply) doesn't create oil, so the new economy doesn't get any more oilbased stuff, but it does get more nonoil based stuff. Whether or not the artificial monetary stimulation is sustainable is another matter. But, money is just a means of facilitation for economic activity, so engineering its movement is a legitimate way to try to facilitate activity in the physical economy.
But more debt can lead to higher prices for oil, and at a higher price, it makes sense to extract oil from sources that would otherwise not be economic. So I think there is a real impact, in terms of more debt leading to more oil supply.
Once the debt is cut back, prices drop, and more expensive suppliers drop out.
To the extent that more debt translates into a larger money supply, that pushes economic activity (and potentially prices) upwards, so a somewhat higher oil price could result, i.e. there is a bit of a receding horizon effect. The theory on the breakdown between more economic activity versus higher prices, is that at full employment, you get no more economic activity (from a bump in money supply), that it all goes to inflation. An low employment, like today, it should go almost entirely into more economic activity. In the opposite direction decreasing the money supply via austerity, leads to less economic activity. And this creates a receding horizon effect on attempts to balance budgets via austerity. In a case of a smallish localized economy (like Canada in the 90's) most of the austerity induced contraction happens outside of the countries borders, and the receding horizon effect is small enough to not hurt much.
Energy is not defined in this article. Energy is an abstract noun that includes all its forms. Some forms deplete, some do not. Some forms are renewable, some not.
No conclusions can be reached when different forms of energy are mixed as in this analysis. It may be that economies can grow if finite forms of energy are supplemented/replaced by renewable forms.
This piece resurrects the old reification fallacy that is so often used in energy analysis. Things that are different can not be compared, added, subtracted etc..
Ignoring the reification fallacy solves nothing and leads to bad conclusions.
http://en.wikipedia.org/wiki/Reification
This link is broken but it explains the concept better:
http://en.wikipedia.org/wiki/Reification_(fallacy)
Energy here is Barrel of Oil Equivalents, as calculated by BP. That seems to be the measure others are using as well. It includes renewables that have been converted to electricity in the calculation as well as other sources.
Potential energy sources for society have that have not been tapped are not included.
Excellent work, Gail, thank you. I wonder about the FSU economic growth, what is the scale of contribution of oil exports?
I am afraid I haven't looked at that except to observe that if it weren't for the FSU collapse in the early 1990s, we would be post-peak now. Without the collapse, their use of resources would have been much greater, earlier on. It wasn't until oil prices rose later on that production rose. This is a post I wrote that has not been on The Oil Drum.
Fall of the Soviet Union: Implications for Today
Don't forget that a lot of Saudi (and a few others) oil has been used to "kill" the FSU(or put the final blow) (oil glut starting in 85, mainly through a deal between Reagan and the Saudis, cutting FSU $ revenus by 2/3 or something)
So this point not so obvious at all.
And we are post peak anyway, in net liquids clear it's a done deal.
The only valid policy to manage any single chance of transition still being the same : volume based taxes.
The US went through its peak in 1970.
Quite a bit was done to cover the whole thing up (political shock, Arab embargo, etc, when the OPEC quota policy was PUSHED by US diplomacy, necessary to start Alaska, GOM, North Sea)
Bretton woods was fully put away in 71 and the credit buble started
More or less the result now
Volume based taxes tend to move oil to other economies without volume-based taxes. It doesn't save oil for a future period, that I can see, because supply is maxed out, and simply goes elsewhere, at a slightly lower price. A volume based tax does reduce usage in the economy with taxes (and thus help its balance of payments), but probably increases the oil usage in some countries without taxes--we are at a zero sum game now.
Yes, so what, it is nonetheless the only sensible measure to accelerate transformation, if there is a slightest chance to manage a transition, it remains the only sensible policy.
And it works, clearly Europe would be in a much bigger mess now if it didn't put the volume based taxes placed after the first oil shock.
But I understand your point, in fact the current gas tax of the US is simply its defense budget, and this thing will just end up simply in a war.
And by the way, it's not even a yes, all the net importer countries are in the same mess.
Saying zero zum game or not doesn't change anything from a pure selfish self interest point of view of a country to push its infrastructure in general towards less reliance on fossile.
Of course if your point is to make sure that the US keeps on burning much more than the others meanwhile making sure its economic suicide will happen sooner it is fine.
Take countries A and B at year n
Let's suppose they are equivalent in terms of GDP and geographical configuration as well as oil reserves both net importer, starting with the same energy efficiency.
A puts a high fossile tax.
B doesn't
At year n+5 or 10, whatever the market oil price, A has a higher energy efficiency, so generates more GDP per unit of oil than B, in other words most probably has a higher GDP than B, and for sure a higher "comfort functionality" per oil unit, considering a relatively growing oil price in whatever more or less constant exchange unit you want to consider.
Maybe so; maybe not. It might be that Country A is less adaptable, starting from a lower base, at the time the next crisis hits. Europe is not providing a great example right now of its resilience. Japan started from a lower energy intensity than Europe, and has had difficulty for quite a while.
Come on, the US is still the third top world oil "producer" as far as I know, don't forget that little fact also..
Japan has nothing
Same for Europe, except UK Norway and Italy a bit
And the reasoning about country B having still more possible gains is false, the gains are mainly though CAPEX for infrastucture, insulation (or vehicle fleet change), and way of life, so A is still ahead anyway when the crisis hits mainly A&B's OPEX, and gets less hit by it.
(but for sure no way to "prove" that in anyway, doesn't mean anything, more or less, typically if A is also an exporting country, and is hit by the crisis through loosing customers)
Well, things start to make more sense if one stops looking through the world through an assumption that oil/energy explains everything.
Which means ? By the way could very well be the case that energy( in the true physical definition) indeed explains everything.
And in fact for instance, if we were truly computing the energy used by humans, human society, or biosphere in general, solar energy would still be our primary source of energy and by far!(body heat, photosynthesis, lighting etc).
But of course saying so doesn't change much to current problems.
It means that, for instance, Japan's problems with low growth since 1992 might be better explained by things other than energy. Maturing of a high growth economy, tough competition from low-wage competitors, cultural and financial inflexibility, etc.
I have a question that applys to the graph for the former Soviet Union. It is one graph that doesn't quite "fit". (and my question in no way changes the overall narative)
How does one account for the vast change in the countries? Obviously, if we count only Russia today, that leaves out millions of people in the countries that are now seperate.(Ukraine,Latvia,Kazakstan,Turkmenistan..etc,etc.) I suspect trying to include the numbers from all the former Soviet Republics would lead to a mess of different reporting criteria/methods.Also, I assume it is an impossibility to seperate the data prior to the collapse to reflect only Russia.
In short..how does one get data for only Russia prior to 1991, or conversly, that includes all the different countries today that made up the former USSR?
As a child grows, is it possible to decouple the child's bodily growth from growth in food energy input? (cue wild mocking laughter from audience)
...i.e. Modern economics is a ridiculous (albeit successful) sham designed to speed the death of the living earth.
Dan, poor example. The population growth of the world cannot be compared to growth of the human body and neither can any of the ever changing economies of the nations of the world.
The population is always growing and likely will continue to grow until the collapse causes it to go in the other direction. Also new industrial technology is designed to save money, primarily by saving labor. If you don't have growth then like the Luddites who were put out of work by the invention of the flying shuttle, people will be out of work.
Modern technology basically evolved and as far as it was designed, it was designed to deliver better products with less labor and less waste of raw material. True modern economics and modern technology is speeding up the death of the earth, but no one really designed it to do that.
Suffering unintended consequences is the story of civilization. And the sad part is very few people really understand what those unintended consequences really are. They will find out soon.
Ron P.
...Huh? technology is not equal to energy
If you say my organism example is wrong, explain precisely how energy input for any complex system (organisms, economies, hurricanes, etc, etc) can be decoupled from growth of that complex entity.
If you can, congratulations! -- You're an economist! (but sadly not someone worth listening to in the context of actual complexity in the real world)
...but maybe I'm misunderstanding you
Technology is a tool to maximize eMpower. More tech = more energy use.
not relevant...but pretty colors
Iaato,
Do you have a link to where this is from?
Edit: Found it--From David Korowicz: Things fall apart
Eh, sorry. I didn't post a link because I failed to note it when I bookmarked it, since it included citations to the primary sources. I really like the explanation of energy and complexity in Korowicz's discussion below. He used many secondary references in his discussion, however. The reason there's a clamor for a fourth law of thermodynamics is that the second law only tells half the story--the depressing, sad part. How come we left the explanation for self-organization and complexity in all systems in energy terms out of the thermodynamic laws? Is it because we would then have to face the fact that our civilization is not based on man's superior abilities? We're just clever monkeys who found several pots of black gold? Maximum eMpower explains how and why.
http://fleeingvesuvius.org/2011/10/08/on-the-cusp-of-collapse-complexity...
Thanks for mentioning this. I think David Korowicz' does a very good job of describing our current situation. The piece you linked to at the bottom of your post is very good.
I think your example is actually fairly close. Admittedly there are "services" that use less energy, but when energy is in short supply, we will go back to basics, like food and shelter, and they are closely tied to energy consumption.
Gail
the penny dropped for me when you posted the Reinhart and Rogoff comment about countries with high debt who did not default: In all cases it is a story of extraordinary growth.
Looking forward to 2012, when you combine the US, Europe and Japan govts only, the borrowing needs are $5.5Trillion. They are going deeper
The oil megaprojects database indicates a supply deficit of approx 4MBD, so no help is on the way.
BTW, if you want to read a great analysis of energy crisis' through history, read The Great Wave.
I think the book you are talking about is The Great Wave: Price Revolutions and the Rhythm of History by David Hackett Fischer. It is about very long price waves of 80 to 180 years. I am afraid I haven't read it--will need to add it to my list.
Gail
You ask: Why does world energy intensity remain flat, while energy intensity for many individual countries has been decreasing?
The explosion of Chinese GDP over the past 10 years, combined with the tripling of their coal consumption, and their highly inefficient industrial plants, explains some of the anomalous trends in the data.
Declines in energy intensity are one of the most durable trends in energy history. Indeed, one can argue that such declines are one of the main drivers of growth.
It's not so obvious from the graphs, but one key idea is that Japan and the EU get much more GDP from a barrel of oil equivalent than does the U.S., and that the U.S. in turn harvests much more than does the FSU or China.
Looking ahead, I'm sure the technocrats in China understand that efficiency improvements are perhaps the only way their economic miracle can be extended.
I think one of the issues is that it is quite possible to create GDP without any use of energy, at least as we measure it today. That is where countries started from, before we helped them modernize by using more fossil fuels.
I am not convinced the problem in China is the low efficiency. It is the shift to all of the concrete buildings, instead of wood buildings, and now to fossil fuel powered vehicles and the use of modern infrastructure, built in great quantity.
As long as we segment society into pieces, we can always make some look good, while others that are tiny to begin with will look bad.
rudall
Be carefull about preconceptions concerning chinese manufacturing. I have been to china on numerous occasions reviewing the production of power generation equipment. In virtually all cases the manufacturing plants for this equipment were higher quality, more automated and more efficient than any of the equivalent plants in Europe, Japan or the US.
Gail,
I am afraid that the graphs showing national or even regional ratios between energy consumption and GDP may lead to flawed conclusions.
The speed at which countries may change their production profile in this globalized world is tremendous.
And if a developed country (the riches) outsources its most energy intensive (and usually the more polluting) industries for the production of goods or to render services to developing countries (the poor) that finally go to in a good part to be consumed or used by developed countries (the riches) and most of the benefits in terms of revenues fall also in the developed countries, it may appear that the developed (rich) countries appear in the picture clean, smart, efficient and energy saving minded. And the developing countries (i.e. China, but many others) appear to be dirtier, more polluting, less efficient and careless about saving energy.
Another possible reason for this differential may reside in the fact that developed countries tend to control and use the best quality energy flows, much more than the developing countries.
I suggest that the picture in a globalized world is taken for the world.
In this sense, we need to pay attention to the following:
This is the picture of the world, according to the IEA WEO 2009 (page 59), from 1971 (Bretton Woods) to 2007. And it show a dramatic green line for the world, with a certain pitch.
If we look to the OECD countries (the riches, in general), we may observe that they have a less inclined slope (Blue color). One could easily conclude that they are more efficient (can generate more GDP per each Toe) than the Non OECD (the poorer, in general), whose pitch (red color) is more steep (less GDP per each Toe.
However, the three lines are almost straight lines, showing that if we want to increase the GDP, we have to increase the use of primary energy in general. These are thermodynamic realities. If energy is the capacity of doing work and the work is the essence of the economic activity, then whatever we do to increase our economic activity will demand more energy. This is not ideology. It is not even university knowledge; it is secondary school physics, at least in Spain.
Last but not least, may I refresh the “2010 chart of the year” in The Oil Drum that I sent last year.![]()
http://www.theoildrum.com/files/33k8ves.gif
If we pay a look we may observe also in per capita basis, the direct relation between primary energy consumption and GDP. The relation is also almost straight.
The two singularities appeared in there were Russia and Middle East (High primary energy consumption and low GDP). The reason to explain this is that both Russia and the Middel East are accounted for a lot of primary energy domestic consumption that in reality it goes to grease the export machinery of primary energy falling in other countries for final consumption.
Conclusion: The GDP pollutes and the increase of GDP increases pollution (CO2 emissions per capita also mirror the primary energy consumption per capita). Power Down is not any longer an option. It is a must, either we do it voluntarily or wait until Nature place us in the proper level of sustainability. Wars for resources are only going to worsen and speed up the exhaustion and pollution.
Pedro,
My point was that we need to look at the total, not to individual countries, so I think we are saying pretty much the same thing. The countries showing the "best" results are simply countries that can outsource their dirtiest manufacturing to someone else.
But, if it's "dirty", that means that China would be gaining manufacturing that requires unusually large amounts of energy. How can China be reducing it's energy intensity?
Unusual by US standards can be usual by Chinese standards. The US energy intensity of GDP in 2010 is 175. The Chinese energy intensity of GDP in 2010 is 651. If some part of the US economy which is generating an energy intensity of 600 is transferred to China, it will improve both the US and China's published energy intensities.
Nick
See the post above. The factory that is built in China to produce widgets, is newer, more technically advanced and more efficient than the equivalent plant that gets decommissioned in the US.
That's encouraging.
It makes sense: turnover of capital equipment will set the state for efficiency.
The limiting factor is the amount of capital available for building new capital equipment.
At some point, capital runs short, especially if it is loaned into existence. Capital isn't just needed for new capital equipment; it is also needed for repairing the huge amount of infrastructure that has been built over the years (roads, bridges pipelines, electric transmission lines, dams, etc.) It is also needed for new projects to replace oil, natural gas, and coal production which is declining.
The limiting factor is the amount of capital
Do you mean financial or physical? Financial capital, being intangible, is infinite. Of course, physical capital is the limiter - create too much financial capital and you get inflation.
Maintenance and repair isn't hard - you just have to reduce consumption slightly.
New projects to replace oil, NG and coal don't cost significantly more than oil, NG and coal projects would.
Actually, both.
You need physical stuff to build all of these things--so certainly the physical part is needed.
Financial has capital has limits as well. How much is Greece going to be able to borrow, after it defaults on its debt? How about other European countries that default as well? We have been living in a time of long-term growth. If this disappears, it will become much harder to borrow. Capital will have to come from profits from prior investments and from personal savings--so will be in much shorter supply. It is not clear that it would be enough to pay for replacement oil, NG, and coal projects, or for upkeep on current infrastructure--road repairs; repairs to electric transmission lines; bridges; etc.
How much is Greece going to be able to borrow, after it defaults on its debt?
Surprising, quite a bit. 1st, entities right out of "restructuring" are considered quite eligible for credit. 2nd, creditors forget quickly - Greece has defaulted on it's debts regularly every 25 years for the last 200 years.
More later...
Consider my earlier comment about how the business model for 30 year home loans might possibly be structurally challenged in a contracting economy.
Now consider if the same type of reasoning might also indicate that bailout loans, and even deficits in a contracting economy may not be very attractive to an entity putting up the funds and expecting any type of return on investment. ROI may be very hard to get, and losses might even occur instead.
Well, what did you think of my response to your earlier comment?
Nick -- Your arguments are well thought out, and there is courtesy and civility in the way you present your opinions. You do seem to have a lot of optimistic opinions on most topics.
Consider this empirical statement from http://www.zerohedge.com/news/observations-engineer
The empirical evidence of how things are in the world today compared to where they were in recent decades is of much concern to many. There does seem to be a trend towards higher levels of unemployment and debt loads that are so big that they may be structurally too large to pay off in any conventional sense. If things were going to be rosy with strong economies, rising standards of living, low unemployment, etc. the empirical evidence often in the news suggests otherwise. For many people, things seem to be getting worse instead of getting better. Contagion is a concern to many economists, and if that is a valid concern for them then there must be some logical reasons for it. One might search the internet for contagion, to see that there is a lot of concern about it as reported in the major news sources such as the WSJ, Reuters, etc. A contraction in the world economy forced by resource depletions would appear to be similar to a contagion affect. There would be a downturn in the economy in either a contagion or a contraction scenario.
As a society where we end up in the coming decades depends on many things. We all hope for the best possible outcome for ourselves, and collectively for each other too. A good understanding of the driving forces at work might help us to collectively make the best of the situation, and to take the more cautious and stable path.
I think it would help to get a larger perspective by looking at long-term economic trends, discussions of the problems of developing countries, etc.
A very good place to start:
"This Time Is Different: Eight Centuries of Financial Folly " ISBN-10: 0691152640
"Throughout history, rich and poor countries alike have been lending, borrowing, crashing--and recovering--their way through an extraordinary range of financial crises. Each time, the experts have chimed, "this time is different"--claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. With this breakthrough study, leading economists Carmen Reinhart and Kenneth Rogoff definitively prove them wrong. Covering sixty-six countries across five continents, This Time Is Different presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes--from medieval currency debasements to today's subprime catastrophe. Carmen Reinhart and Kenneth Rogoff, leading economists whose work has been influential in the policy debate concerning the current financial crisis, provocatively argue that financial combustions are universal rites of passage for emerging and established market nations. The authors draw important lessons from history to show us how much--or how little--we have learned."
I would assert that the analysis being done by many in the Peak Oil and Resource depletion sciences are not trying to change any rules of valuation in any way. They have used the Scientific Method, the physical laws of nature, mathematics, and engineering analysis to make logical conclusions about where we have been, where we are, and where we may be going, with respect to energy driven processes.
Engineering sciences and math are universally true everywhere, and every-when too. From an electrical engineering standpoint, lets consider a typical energy driven process. Lets say that you build an electrical circuit with a sinusoidal alternating current as the input, and add some resistive/capacitive/inductive network that it connects to that uses that energy to make outputs (heat, or light, or kinetic (otherwise known as work)). The science and math are so well universally understood that one doesn't even have to build the circuit to determine exactly what the outputs will be. A SPICE computer program can compute exactly how much work will be output from the different parts of the circuit at any given point in time. If the circuit is actually built and operated per specification at any location (north pole, equator, etc) or at any time (1776 or 2011) the same outputs will occur. Now if you increase the input energy source over time, it can be shown that the energy outputs will be increasing as well, which is very akin to growth. But if you decrease the energy input source over time, then the energy outputs will then decrease, which is akin to contraction.
The math and science of energy flows is very well understood, and the physical laws that govern them are constant and not dependent on any old rules of valuation. The total amount of physical work that can be done as the result of an energy flow can be easily and accurately calculated. How that interplays into the economy depends on the actions of many. Unemployment could be high or low at any given time even with the same exact amount of physical work getting done as the result of our current energy flows from FF, Nuclear, and Renewables. Different distributions of standards of living are also possible for any given set amount of physical work getting done.
A change in the physical inputs that implies less useful work will occur in the future is a serious thing. If the change is unexpected and unplanned for then it can affect the individual and group psychology along with affecting the individual and group economics. Trending and perception are important along with the actual reality of the current system state. The economic system is likely more productive when there is the least amount of difference between trending, perception, and reality.
I would assert that the analysis being done by many in the Peak Oil and Resource depletion sciences are not trying to change any rules of valuation in any way.
As far as I could tell, you were talking about current economic conditions. Economic history is extremely relevant to understanding that.
They have used the Scientific Method, the physical laws of nature, mathematics, and engineering analysis to make logical conclusions about where we have been, where we are, and where we may be going, with respect to energy driven processes.
If only that were true. Unfortunately, as webhubbletelescope will tell you, most of the "peak" analysis has been, at best preliminary. We don't have good data, our forecasting methods and models have been heuristic, and we certainly don't have good ways to do replicable experiments.
Engineering sciences and math are universally true everywhere, and every-when too.....
I pretty much agree with the rest of what you say.
If energy flows that drive the economy are well understood, then upper limits can be ascertained, irregardless of the history, based on only the current state (the initial conditions) If we consider the electrical circuit analogy again, the exact outputs can be calculated irregardless of the history of the circuit. For instance, consider a circuit that is charging a bank of capacitors. It does not matter how many times the input source has been energized and shut down in the past, or even if some of the capacitors still have charge on them that hasn't drained away. As long as the initial condition is known for the voltage still on the capacitors, and what the characteristics are of the input energy source are (increasing, decreasing, steady state, or no input) the exact outputs can still be calculated, even if the energy is just draining out of the system.
Another example is draining a water tank from a valve or hole in the tank. It doesn't matter how many times the tank has been filled in the past. All that matters is how much water is still in the tank, and whether any water is being added to the tank, and at what level the drain is located and the size of the drain. When those things are known, the history of water levels in the tank don't matter anymore. Exact solutions can be obtained for the water level at any given time.
Hubbert did accurately predict the USA peak, and the world peak has recently been reached and confirmed. That can hardly be characterized as preliminary and it seems more like a confirmation to me. We do have very good data. All of the data on flow rates from wells that have been drilled over the years are available for analysis to someone, even if some of the data is being held close by oil companies or governments. And each well that has ever been drilled is an experiment in itself. The trend for all wells is max production when first drilled, then declining production.
If energy flows that drive the economy are well understood, then upper limits can be ascertained
True. The problem: those energy flows and limits are very complex. There are a number of different types of energy, each with different behavior; the response of individuals, households, corporations, and governments are determined by their history, geography, etc.
So, the energy flows are not very well understood. OTOH, it's clear that the upper limits that can be identified are very "soft", with the beginnings of a limit caused by oil through price inflation. If there is a hard upper bound it is far above our current level of economic activity.
Here's an example: you might assume high fuel prices reduce international trade proportionately. But, water shipping can reduce it's fuel consumption per mile by 50% just by reducing speed by 20%. And most freight is worth enough that oil prices have to be higher than they are now for fuel savings to be worth the extra carrying costs of even that small delay. That means that shippers will just pay the extra cost. OTOH, at the same price shoppers will start buying online instead of driving to the mall, and vacation a little closer to home. In effect, water freight is outbidding personal transportation.
Hubbert did accurately predict the USA peak
Sure. He freely admitted that his prediction was a heuristic, a rule of thumb based on his observations of oil field behavior. Further, he predicted a sharp peak of NG production for around 1980 followed by "falling off a cliff", which was completely wrong.
the world peak has recently been reached and confirmed.
That's unrealistic. We've seen a plateau of crude production, and total liquids are still growing. As has been said many times, we won't know peak until it's well behind us.
We do have very good data. All of the data on flow rates from wells that have been drilled over the years are available for analysis to someone, even if some of the data is being held close by oil companies or governments.
That's an enormous caveat: what is important is what's available here, to us.
The trend for all wells is max production when first drilled, then declining production.
Depletion is a powerful force, no question. OTOH, have you looked at N. Dakota's production profile? Or the US's recent rise in production? Things aren't quite that simple.
So....can we predict world oil production? Maybe. Aleklett's prediction of a 11% decline in all liquids from 2010 to 2030 seemed reasonable to me, though new shale oil might reduce that decline. Even -11% leaves plenty of room for the world economy to function and grow. Can we predict coal consumption? There's enormous amounts in the ground, though China may be running into limits. Natural gas is a wildcard - shale gas may be huge.
Greece and Euro nations are somewhat special, since the ECB has said it won't print money to fix their problems. The US Fed seems to have a different take.
Growth or no growth - it will be possible for central banks to adjust the money supply so that we can utilize the productive resources we have. So no, capital does not have to come from the sources you mention. Money is just symbols - what matters in the end is resources and production capacity.
This will hinge on our physical capabilites, not on the amount/availability of symbols we use to represent them.
the ECB has said it won't print money to fix their problems. The US Fed seems to have a different take.
The ECB seems to be hindered in part by Germany's experience with hyperinflation, and in part by the poor structuring of the EC, which limits the ECB.
"It seems to me that at least part of the issue is declining energy return on energy invested (EROI)–we are using an increasing share of energy consumption just to extract and process the energy we use–for example, in “fracking” and in deep water drilling. This higher energy cost is acting to offset efficiency gains."
Gail, I agree with this statement. But I think the total list of factors could include:
1. Reduction in the value and accessibility of all non-renewable resources (it's costing more energy, technology and effort to extract everything and the stuff we get, for the most part isn't as high-quality as the stuff we used to get). EROEI is certainly a big part of this. But what about extracting new copper? How much more energy intensive is that now than in 1980?
2. The world is going through a very inefficient growth and exploitation spurt. I'd posit that China's GDP/Energy numbers positivity are based almost entirely on what has, so far, been a very successful campaign to access resources in other countries. The Chinese businesses are acting in a very neocolonial fashion, gobbling up labor and resources in shameless ways that would make even the old, European paradigm blush. We tend to be a bit myopic when it comes to the Western World, whose prospects look like decline at the moment. But in comparison with the west, the rest of the world is still growing, albeit more slowly http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_...
China, on the other hand, has barely stumbled http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_...
3. I think what remained of the sustainability policies of the 1970s and early eighties fell apart worldwide. The result was only fits and starts in sustainable areas like renewable energy. At the same time, the world made a massive shift to coal, which, though still comparatively energy dense, requires huge imputs to transport.
4. As with resource extraction, the efficiency low hanging fruit tends to get picked first.
5. For the US, a return to the 55mph speed limit would help...
One comment--
The way renewable energy is counted in calculations such as these, I am doubtful that it has positive impact. What is compared is what is spent each year, and what is produced each year. In the case of renewable energy, each year the cost is the cost of all of the wind turbines and solar panels built, and all maintenance on wind turbines and solar panels. The benefit each year is whatever electricity is produced. Until growth rate drops way down, outgo can be expected to be greater than income.
That would be true for the first year, but large modern wind turbines have a payback of about 6 months, so they'll start contributing very quickly.
Depends upon the delay between the expenditure of the energy, and when they start producing. If say a WT has an energy payback time of six months, but the materials sit on loading docks and trucks and staging yards for an additional six months, the growth rate for current breakeven can be lowered. Maybe WTs are now positive, because growth rates are pretty modest, maybe 10-30%. PV has had a growth rate more like 40%, and a slighly longer payback period, so it is probably curently near breakeven. I do expect payback times for PV will continue to drop, and the growth rate probably will decrease too, so they should soon begin to produce net energy.
Energy expenditures going into the energy intensity of GDP calculations are broader than what would be used in energy payback calculations. Energy intensity of GDP calculations will include energy expenditures made by workers receiving salaries from putting up turbines as well, for example. A person has to follow the whole chain through the economy, to figure out (sort of) what the energy impacts of wind turbines throughout the economy really are.
A person has to follow the whole chain through the economy, to figure out (sort of) what the energy impacts of wind turbines throughout the economy really are.
Quite so. Given that is the case, can we not use the $ cost, and the average energy intensity per $ of GDP, as a proxy? After all, something with a high labour, but low material content (e.g. software) is using a lot of people, each of which is using energy in their own ways.
For the wind turbines, the direct manufacturing energy payback may be just six months, but the $ payback is years, indicating high indirect energy costs. Gas turbines, for comparison, are physically much smaller and have lower costs, by a factor of about five, indicating low direct and indirect energy costs - though there is the energy cost to operate them, of course.
I haven't studied the subject to know what is best. I think some are using $ cost with average energy intensity of GDP, but then doing some adjustment to reflect higher or lower energy usage, particularly for high energy industries. But a corresponding adjustment is then needed for lower energy usage.
the $ payback is years, indicating high indirect energy costs
Knowledge work can't substituted for electricity in any simple way. Further, if all of the costs are included wind power is much cheaper than coal generated power, and easily competitive with NG.
Energy expenditures going into the energy intensity of GDP calculations are broader than what would be used in energy payback calculations.
No. Energy payback includes the marginal expenditures made by workers - extra transportation, etc. That's basic to a good quality E-ROI calculation.
On the other hand, it's not appropriate to include the energy required for daily living by those who work in the industry - that energy is used to live. The workers are an end in themselves, and are not an input to the industry in which they're working.
No. Energy payback includes the marginal expenditures made by workers - extra transportation, etc. That's basic to a good quality E-ROI calculation. On the other hand, it's not appropriate to include the energy required for daily living by those who work in the industry - that energy is used to live. The workers are an end in themselves, and are not an input to the industry in which they're working.
And that is why the concept of net energy fails to address the real embodied energy of the processes. From the inventor of net energy regarding PV:
http://groups.yahoo.com/group/energyresources/message/7209
Net emergy includes these very high requirements and gets no net emergy for solar technology.
Whether or not that makes sense, it doesn't apply here: we're talking about wind power for the moment.
The way the energy intensity of GDP calculation works out, everything is included even when we are talking about wind power, so the energy products the worker buys with his wages are included, and the extra energy expenditures the government makes with the taxes it collects on his wages (and on the profits of selling the wind turbines) are included. EROI calculations are narrower.
I agree. But, I have the sense that maybe you're thinking that tells us something about the viability of wind power...which I'm thinking it doesn't, really.
Unless the alternative to building the WT, is to kill of the wouldabeen workers and their dependents!
The alternative would have been to be unemployed. With the high wages, the worker might be able to afford a long distance vacation, for example. It makes a difference.
Gail – I agree with you, and I’ll take it one step further. Not only do the wind turbine workers consume more energy by virtue of their income from building turbines; their incremental energy consumption corresponds to business transactions with a 2nd tier of people who in turn receive incremental income and themselves gain the ability to consume incremental energy. And the 2nd tier does business with a 3rd tier, etc. So there is a multiplier effect as these incremental wages flow through the economy, and most of it ends up impacting energy use.
That’s why I disagree with people who try to argue that the EROEI for energy source X is great, because it only requires A pounds of steel for B watts of output and a lifespan of C years. The scope of such computations is almost always too narrow to come evenly remotely close to establishing a true EROEI value. When extra money flows into peoples’ pockets, in general they do extra stuff with it. And extra “stuff” generally uses extra energy.
I agree. There is a multiplier effect that doesn't get considered.
A typical factor that is used in an analysis of the impact of energy jobs is four new jobs for every direct job. I am not sure that that would work for wind turbines though, because they produce relatively less energy per worker.
Yes, there could be a difference in lifestyle and energy consumption.
On the other hand, all of the energy that went into raising that person, and most of the training, can't be counted as an input.
While I understand debating the amount of oil, or even fossil fuels, available to power economic expansion, the instant the word "energy" is used there exists another problem, mainly the sheer size of what "energy" is available to mankind. So what if the use of energy moves in lockstep, or not, with economic growth? If we want more, we have the ability to use more (energy). Until someone turns off the sun, it strikes me as a moot point.
Not really. All we get from nature is what photosynthesis provides. This is not sufficient to support the current high population occupying the world.
Most energy is not "available" to mankind.
We don't have to depend on nature.
Wind power is high E-ROI, scalable, very affordable, etc. Solar is adequately high E-ROI, scalable, adequately affordable, etc. Nuclear is high E-ROI, scalable (though not as quickly), adequately affordable, etc.
Without fossil fuels, all of these will go away very quickly.
Fortunately, we have plenty of fossil fuels.
In the very short run. Not in the long run: wind turbines are manufactured almost entirely with electricity (which turbines generate) and can be transported and installed by electrically powered equipment.
Nick
This is not so. A typical wind turbine installation will require around 50 tonnes of steel per MW of generation capacity. This steel will in turn require 50 tonnes of coal in it's production.
As per your posts above. Has the energy cost of the steel production been included in the 6 months energy payback calculation ?
Steel can be reduced/smelted with electricity instead of coal.
Yes, the energy cost of the steel production has definitely been included in the 6 months energy payback calculation.
"Steel can be reduced/smelted with electricity instead of coal."
But it isn't.
As far as I know there is no large scale smelting of iron ore into steel. And to build an industry around a new process like this would take at least 20 years before you achieved a substantial proportion of production.
there is no large scale smelting of iron ore into steel. And to build an industry around a new process like this would take at least 20 years before you achieved a substantial proportion of production.
That would be an interesting thing to research. Don't forget electric recycling of scrap steel.
OTOH, for better or worse we have enormous amounts of coal.
True. Google up "Dyson Sphere" as a good way to make most energy available to mankind. In the meantime, if we are wasting it causing sunburns, we can certainly NOT waste it and do some useful work with it instead.
It would be helpful to show the math used here, as well as some of the raw numbers used, especially the BP numbers.
On a pure and simple basis of arithmetic, it's hard to see how world energy intensity can stay constant while intensity falls for all of the major countries, especially China. If world energy intensity is flat, and many countries show a decline, then surely many other countries will have to show an increase? Who, if not China (which it is suggested is receiving very energy-intense offshoring)?
To put a finer point on it: if the OECD is offshoring disproportionately energy-intense activities, how can Chinese energy intensity be falling? That doesn't seem to make mathematical sense.
I don't think such an argument can be made successfully without showing the math.
Sit down and look at it yourself. The barrel of oil equivalents are from the "historical data" download choice on this webpage. Within that spreadsheet, the tab you want is Primary Energy - Consumption. The real GDP data is from the first dataset listed on this webpage.
Part of the problem is that different countries are very far apart in the ratios. If a country that is at a 200 energy intensity, transfers a portion of its GDP that is at a 300 energy intensity to another country with an energy intensity of 500, the transfer will help the reported energy intensity of both countries, but won't improve the world's energy intensity. Both the numerators and denominators of the ratios change, making the comparison harder to follow.
Chinese energy intensity has been falling from 1873 in 1980 to 651 in 2010. A level of 651 is still stratospheric. Almost anyone in the world could transfer energy intense activities to China, and have their own level fall. The United States' energy intensity in 2010 is 175. That of Japan is 115. That of Spain is 126.
Ah - I would have guessed that was the source, but I didn't want to invest time until I was sure.
I'll take a look - the question at hand: is there room in what was (in 2000) a smaller Chinese energy budget to accommodate the missing US energy?
There are a lot of other countries we are outsourcing too. India has an energy intensity of 538 in 2000, and of 462 in 2010 for example. If a person buys clothes in a department store, they come from Viet Nam, Bangladesh, and a number of other countries.
On the one hand, I think I see the problem: countries with high energy intensity are growing faster, so their share of the world economy is growing. That means that overall energy efficiency can stall even while every country still becomes more efficient over time.
On the other hand, I find the out-sourcing explanation unsatisfying.
It appears to be not correct, at least in absolute terms. 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.
As a percentage of what we buy, manufacturing has declined. It is hard to buy clothes or shoes or toys or electronic equipment made in the US.
The increase in US productivity results to a significant extent from substituting mechanized processes relying on energy for human energy. So increased "productivity" represents a transfer to using electricity or petroleum for part of a process.
I glanced through one of the reports linked, and can see that "manufacturing" is defined to include a lot of things that we don't normally think of as manufactured--food products, and products made from crude oil, for example. It would be interesting to see what the change is when looking at what we think of as "normal" consumer products.
Some of the manufacturing done now is counterproductive. For example, food companies can manufacture a box of corn flakes out of 4 cents worth of corn--to no one's benefit, except those selling the box of corn flakes.
It is hard to buy clothes or shoes or toys or electronic equipment made in the US.
True. Yet, Boeing, Caterpillar, GM and Toyota still make a lot of stuff in the US, much of it exported.
The increase in US productivity results to a significant extent from substituting mechanized processes relying on energy for human energy.
Do you have evidence for that? From what I've seen, optimization of manufacturing often increases both labor and energy productivity. When it doesn't, it's because reducing consumption of cheap energy isn't the priority - if it were, it would happen.
It would be interesting to see what the change is when looking at what we think of as "normal" consumer products.
Page 7 of the USGS steel report below says that in 2000 US imports were 34.4M. In 2008 they were 14.7M, or less than 50% as large. Clearly off-shoring of US steel production is not the cause of declining US energy intensity. http://minerals.usgs.gov/ds/2005/140/ironsteel.pdf
food companies can manufacture a box of corn flakes out of 4 cents worth of corn--to no one's benefit
Hey! I like corn flakes...
Regarding efficiency improvements, it really has to do with the whole network of improvements, including things such as internet connections. These costs are shared over a wide base of other users as well. Read David Korowicz's paper, On the cusp of collapse: complexity, energy, and the globalized economy.
Nick,
What exactly defines manufacturing?
http://www.cbsnews.com/stories/2004/02/20/politics/main601336.shtml
"Manufacturing is defined by the Census Bureau as work involving employees who are "engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products."
But, the president's report notes, even the Census Bureau has acknowledged that its definition "can be somewhat blurry," with bakeries, candy stores, custom tailors and tire retreading services considered manufacturing."
You need to be more careful when you quote statistics.
Its pretty clear from even a cursory glance the US makes only a fraction of the steel it once did.
http://minerals.usgs.gov/ds/2005/140/ironsteel.pdf
Yet our steel imports are much higher. That's a lot of energy off shored.
One steel worker Job does not equal one custom tailor.
Its pretty clear from even a cursory glance the US makes only a fraction of the steel it once did.
Page 7 of the USGS steel report says that in 2000 US raw steel production was 102M tons. In 2008 it was 91.9M. 90% reduction doesn't seem like a "fraction".
Yet our steel imports are much higher.
In 2000 US imports were 34.4M. In 2008 they were 14.7M, or less than 50% as large.
Clearly off-shoring of US steel production is not the cause of declining US energy intensity.
Thanks for finding that - it's illuminating.
I was referring to the figures from 1978 to today. Just like you referenced above.
"Clearly off-shoring of US steel production is not the cause of declining US energy intensity."
Clearly it is if you don't cherry pick the numbers.
You really need to be more careful when quoting stats.
What are you talking about? The statistics clearly shows Nick to be right. The US steel production and imports hasn't moved much since the 70-ies at all.
Read more closely, steel and iron production dropped quite a bit and imports increased a substantial amount.
But this is really getting away from my original point that the face of manufacturing in the US has changed. We are not a nation of factories and foundries anymore. Our manufacturing is something completely different. Its manufacturing burgers and final assembly of parts made in China.
Nick says the US manufactures 50% more now then it did in 1978. But we aren't importing or manufacturing anymore steel then we did in 1978. In fact its less.
Care to look at our imports of finished or semi-finished products? Care to guess where that energy came from?
Edit:
I think I was careless when I wrote the US only makes a fraction of the steel it once did.
I was thinking in terms of the world. China et all only produced a tiny bit of steel in 1978 and a huge amount now.
I was too hasty. Sorry
steel and iron production dropped quite a bit and imports increased a substantial amount.
All of which says that off-shoring of raw steel production is not the cause of declining energy intensity, right?
Its manufacturing burgers
A careful reading of that article will tell you that burgers are not included in manufacturing.
Care to look at our imports of finished or semi-finished products? Care to guess where that energy came from?
That's an interesting question, but not relevant to this discussion. If US manufacturing volume is higher now than it was in 1978, than off-shoring of manufacturing did not reduce US energy consumption, and is not likely to be a major factor in a US energy intensity.
"All of which says that off-shoring of raw steel production is not the cause of declining energy intensity, right?"
No
"A careful reading of that article will tell you that burgers are not included in manufacturing."
Ok, tailors and candy shops then.
"If US manufacturing volume is higher now than it was in 1978, than off-shoring of manufacturing did not reduce US energy consumption, and is not likely to be a major factor in a US energy intensity."
Do you have a reading comprehension problem? It certainly is a major factor if you consider what manufacturing was off-shored and what manufacturing it was replaced with.
tailors and candy shops then
They seem unlikely candidates for large contributions to the national energy budget.
what manufacturing was off-shored and what manufacturing it was replaced with.
Ah - and what was that and how large are they?
"They seem unlikely candidates for large contributions to the national energy budget."
By George I think you've got it!
uhmmm...got what? That including them isn't a problem for this analysis?
Its been fun...
Nick. We certainly didn't increase our manufacturing proportionately to out GDP. Offshoring was instrumental in changing that ratio. If we had kept all the manufacturing at home (i.e. we'd be doing a lot more today than we do -or did), that would have pumped up our energy demand.
Not really.
Look at steel production, which is flat. Look at car production, which is flat. Look at washer/dryer production, home building, all of which are pretty much flat over the last 30 years.
The fact is that heavy manufacturing peaked some decades ago in teh US because consumption of those things plateaued.
Just as will happen with China, India, etc.
So, what you're saying is that even though the value added in manufacturing is 50% higher now than in 1978, it consists of burgers and final assembly of Chinese goods?
US GDP is $15T. Imports are 13% and exports are 9% of GDP. The difference is 4% of GDP and the composition of imports/exports don't differ much. If you want to claim that the energy profile of the US is changed a lot by this relatively small volume of trade, I'd like to see some hard numbers to back that up.
The table shows:
Imports Exports Net-imports
1978 20M 2.97M = 17M
2009 14.7M 8.42M = 6.3M
So, net steel imports dropped by 63% from 1978 to 2009.
Again, thanks for the useful info.
But, again those efficiency measures may have serious uncertainties built into them. Purchasing power parity often differs substantially from exchange rates. The later reflects the fact that lessor developed economies have a lot of activity not measured by GDP.
There is an additional complication. If we take a process that consumes 600(energy intensity) in the US and transfer it to China, what is the energy intensity of the new Chinese plant? If it were operated in an identical manner it would be 600. If because it is brand new, it is lower than 600, the transfer increases the world averaged efficiency. If the Chinese plant is less efficient (say because with cheap local energy, they trade off power consumption for some other saving), then world efficiency goes down.
My guess is that because the plant is brand new, the energy intensity of the new plant in China is less. But China takes whatever share of the profit it gets, and invests in new roads and new concrete houses, and this keeps energy intensity up, even if the new plant is better.
It seems to me that it is difficult to evaluate energy intensity within countries. Just looking at the US, you have offshoring, an increasing service sector, and especially an increasing financial sector.
The financialization of the economy is an interesting issue. Clearly, creating complex financial instruments generates a lot of GDP, but not all that much of real value.
I wonder what the intensity profile looks like if you were to remove the FIRE components from GDP and then graph them separately. This is probably not practical because I'm not sure how you assign energy use to industry (does EIA or somebody aggregate by industry?). I have a gut feeling that you would see very little downward trend from the rest of the economy, but a strong downward trend for FIRE.
I wonder what the intensity profile looks like if you were to remove the FIRE components from GDP and then graph them separately.
It wouldn't change that much - the FIRE sector still isn't large enough to have that kind of impact.
I have thought about that, but haven't figured it out. I am not quite sure I could do it correctly.
Animals consume energy all the time, to stay alive. The energy available comes from the sun mainly, with some from fission,and geothermal. Coal,oil, and wood are derived from sunlight. The huge population increase over the last couple of centuries, comes from the utilizaton of this accumulated energy. Once it is all consumed, there will be a mass die-off until the population matches the energy available again. Tough.
All that accumulated solar energy in fossil fuels probably doesn't add up to more than a few weeks of the Earth's solar income. We can live on our 100,000TW income quite nicely.
Wind power, solar, wave, nuclear....
Nick,
You may want to check out Tom Murphy's The Energy Trap if you have not already seen it. While converting to renewables is technically possible, it requires major sacrifices in current living standards to allow the use of resources that would otherwise support higher living standards so they can be used to create a renewable replacement for fossil fuels. The last time we in the US did anything like what is needed was during WW2.
You may want to check out Tom Murphy's The Energy Trap
I saw that, though I didn't have time to commment on it. In fact, it's unrealistic: we have an enormous surplus of oil in the form of marginally valuable consumption: replacing a single passenger commute in an SUV with just two people carpooling in a Corolla reduces their fuel consumption by at least 75%.
Yes, that's a reduction in living standards, but not what I would call a major sacrifice. YMMV.
And, of course, we could increase production of other fossil fuels like coal, though of course it would be better if we didn't.
Probably what will happen is that one person will be made redundant and the other person carries on using their SUV. Fuel reduction of 50%. We can get the SUV down to 25% by making a third person redundant.
Why would he be made redundant?
Hi Nick
re: "Yes, that's a reduction in living standards, but not what I would call a major sacrifice."
It's a matter of getting the basic needs of people met.
If you don't do it via a salary/wage system, how do you do it?
Just askin'...
Couldn't you have a salary/wage system even though you carpool and drive Corollas?
I see a serious flaw in this analysis. I think all governments under-report inflation to get a better GDP. The US surely does this, see shadowstats.com.
"Since 2005, the relationship between GDP growth and energy growth has been closer." - a sign of declining EROEI, or is it getting harder to lie about inflation?
The problem is that the results are worse when you take that into effect. Real GDP has been growing by less than what countries report, because they have been underestimating inflation. When you compare energy consumption to real GDP that has been rising by a smaller amount, you find that recently energy consumption has been rising faster than real GDP growth.
I find it hard to believe it is getting harder to lie about inflation. I think countries were more honest in the 1970s than now, but the data I use is from 1980 onward.
I believe carbon tariffs may eventually prove necessary both on job saving and emissions grounds. The idea is that a country that has lax standards gets slapped with a customs duty based on embodied carbon when its manufactured goods arrive in port. Since this hurts both buyer and seller it shares the pain. For example if a power tool made in China cost $50 free-on-board and the carbon tariff was $10 the wholesale price jumps to $60 before retail distribution costs and margins. Western buyers think twice so China emits less.
The problem with this approach is maybe of developed countries only Iceland is low carbon enough to dictate standards on others. Certainly not the US or Australia though in the US both Paul Krugman and Steven Chu have spoken in favour of it. Secondly it is hard to estimate embodied CO2; did the electricity used in manufacturing come from coal, gas, nuclear or hydro? The tariff would have to be arbitrary like 20%.
Then there's virtual exports like tourism. The carbon tariff could easily be misused, to protect the steel industry for example. On the other hand we've got to do something about offshored emissions. To escape the carbon tariff the high emitting country will have to implement reasonably tough carbon taxes or cap and trade. Those countries can trade freely between themselves. The high emitting country joins the free trade club when they fall into line.
If all this seems too hard what's the alternative?
I agree.
I would think that the only way to do something about another country's emissions is to do something that involves physical inspections of their manufacturing, etc., or get them to agree to create their own carbon taxes.
Maybe just slap a flat tax on anyone who doesn't have a carbon tax (maybe adjusted by general category of import), to be lowered as the other country implements a carbon tax.
I think we have been down this road before.
To be truly effective, the carbon tax has to be applied by/to all countries. If they don;t then indeed a carbon import tariff is required.
To do a "global" carbon tax what is need is an agreed global rate, and then this is levied on all carbon fuels as they come out of the ground, in all countries.
That cost is then embedded in the cost of any products that use it. Problem is, with say electricity, that the tax must be high enough to encourage renewables - but the renewable generators can price their electricity at just below the level of the carbon taxed electricity. Profitable for the renewable operator, but for the customer it just makes all electricity more expensive, whether low carbon or not.
Unfortunately, a worldwide carbon tax would require an unprecedented level of co-operation, which we aren;t going to see.
Carbon tariffs imposed by country X will run the risk of international trade sanctions and so on, but we may yet see them. The details of how to calculate that tariff would be very interesting - one can imagine the lobbying/lawsuits along the way!
the renewable generators can price their electricity at just below the level of the carbon taxed electricity.
Utilities are the customers here, and they're very sensitive to small differences in price. They'll buy the cheaper renewable energy.
Only if the competition for them is FF based energy. Eventually, there should be enough renewables, that renewables must be competitive with other renewables. One could impose regulations to try to bridge the gap.
Without a carbon tariff to go with a carbon tax, it seems to me that a carbon tax mostly ships jobs overseas, with little CO2 benefit.
Gail
That is what we have done in Australia. The introduction of a $23 /T carbon tax here will destroy the local manufacturing industry, exporting jobs and exposing us to the worst of the coming world depression.
Claims that these jobs will be replaced by work in the renewables industry are simply misleading. Replacing existing functional assets with alternative assets does nothing to increase economic functionality (wealth). It's like claiming that smashing windows down the street is somehow good for the economy because it has a positive effect on GDP.
So, you can't simulate a foreign carbon tax via tarrifs. That is an issue.
I suppose in theory you could. But in australia the government has elected not to do so. I guess that the prospect of justifying such trade barriers in the WTO would have been a significant discouragement.
And in any case our government believes that we really don't need manufacturing as we have ample work available at the moment in digging up coal, gas and other commodities for export to China. Typical politicians, irony impaired.
IIRC, the carbon tax doesn't apply to coal exports.
Hurting non-extractive industries and stimulating extractive exports. Doesn't seem like the best idea.
Quite. Isn't this mostly due to a Chinese coal glut and their enormous hunger regarding construction, infrastructure and so on? (An export of energy intensive manufacturing doesn't explain why efficiency improvements have stopped giving us lower energy intensity.)
Also, this is all energy. If we look at oil intensity, i.e. oil consumption per GDP dollar, it has fallen like a rock.
An extremely small part, if any. Most coal, oil and NG is still produced in a very high-EROEI process and any changes from, say 1:50 to 1:30 doesn't matter.
Not really. The US could halve fuel use for personal transport by just buying more efficient, smaller cars. And China's nuclear power ambitions are quite extreme. It's a matter of choice, and the choice will be made between substitution and continued fossil use, not between continued fossil use and killing production.
I am not sure I understand your comments.
Yes, oil intensity of GDP is dropping, and has been for a long time. Oil is the most expensive form of energy, so any kind of energy than can be transferred from oil to something else is being transferred that way, and has been for many years.
Even if we decided to use smaller cars, we would still have to pay for building new smaller ones. This would make the changeover slow and expensive.
Sure, but an expensive changeover would hardly hurt GDP per se. It's a matter of whether the energy for that changeover would have to be taken from something else, as you and I would believe.
I think jeppen is coming from a point of view of believing that free market economics will take care of everything through substitution. He is saying that the energy for the changeover(s) can be found without killing other production. At least that's what I hear. He can tell us if that represents his views accurately enough.
In my part of the woods, smaller cars are typically cheaper, and we are in no greater rush than we can let this happen as old cars get junked and fresh ones bought. This means the changeover would actually save us resources not just by fuel economy, but by lower capital expenditures as well. If things need to be rushed a bit, people can just shift the large cars to low-mileage drivers.
jaggedben: That is a fair representation of my view, especially for cars but also for most other products too. The changeovers need not be forced and so would not impact the normal energy requirements. Also, there is enough cushioning inherent in the wasteful energy use of today to enable us to keep investing energy in new, more energy-efficient appliances and so on, once an energy crunch sets in (something that might not even happen, overall, if nuclear, for instance, is scaled).
Even if we decided to use smaller cars, we would still have to pay for building new smaller ones. This would make the changeover slow and expensive.
Not if we just do it by attrition. 50% of travel comes from vehicles less than 6-6.5 years old, so that would work reasonably fast.
Robert Ayres and Ben Warr discuss this subject at length in The Economic Growth Engine: How Energy and Work Drive Material Prosperity. It's been several months since I've read it, but my takeaway points were 1) exergy is an extremely useful "Second Law variable" for examining the economy 1a) energy quality is important and should not be ignored when analyzing energy use and the economy 2) exergy efficiency, or extracting more useful work per unit energy, is an important driver of growth. On that last point, Ayres has said in several interviews that the U.S. economy, based on his exergy efficiency analyses, is ~13% efficient, below the Eurozone and Japan.
On Gail's blog, someone posted a link to Dr. Tim Garrett's lecture on de-carbonizing the economy/the relationship between energy and money. He jokes that GDP figures usually have an absurd number of sig-figs, which got me thinking: what are the error bars on GDP figures? Even ignoring the issue about what to factor into GDP (exclude FIRE?), the entire thing seems like a black-box to me. My skepticism has only increased after learning about Shadowstats.
I am aware of Robert Ayers and Benjamin Warr's work, and have written at least a little about it. The question isn't whether the US economy is 13% efficient, it is whether we can/will do anything practically about the situation.
I agree that GDP is a big black box. I expect that declaring and fighting a war increases GDP. It certainly increases employment.
I agree that GDP is a big black box.
It's not that black. Just talk to manufacturing engineers and energy managers if you want to know about energy consumption by industry. Or, look at the stats maintained for transportation.
I didn't say energy use is a black box. What is uncertain is what the government counts as GDP.
That's not uncertain at all.
We may not think that the definitions make sense, but the definitions and the numbers are quite clear. All of the adjustments (for quality, or substitution) are published.
Maybe I should say what is uncertain is how external changes, like changes in levels of debt, affect GDP. If housing prices are rising, people refinance their homes and spend the money on various things--new cars or adding a swimming pool, which adds to GDP. This expenditure in turn helps provide jobs and income for others who buy additional goods and services.
If housing prices go down, or stock prices go down, you get a reverse effect. People pay back loans, and save more.
GDP is also affected by governments spending more than they take in. After a rise in GDP, what you may have left is governments that have borrowed more than they can afford, and because of this, cannot continue the spending pattern people have come to depend on.
Have you had a chance to read ""This time is different" Eight centuries of financial folly"??
The boom-bust cycles you mention are small deviations around a trend line. These cycles would be smaller if central banks would keep money supply growing at a more controlled rate. Whether the cumulative debt is high or not does not matter that much to long-term GDP - we could have a similar GDP level with much lower debt, if we had used another way to expand money supply.
Do I need to point it out?
The exam question at the top is CAN, as in is it possible to arrange things such that GDP is decoupled from energy?
The article then goes on to talk about WAS, lots of history and graphs from a suspiciously recent time period.
The second doesn't answer the first. Showing what HAS happened doesn't show what WILL happen, let alone what COULD happen. Indeed, it you start from the understanding that the future needs to look different to the status quo, then all you've done is reiterate the implicit question (you wouldn't be asking the original question if you already had the empirical answer).
So let's cut back through it and look at the original question, which is framed as 'GDP growth'. Now, personally, I'd start by questioning if this is actually the question we are interested in. GDP is very much an economists' number, and economics is a combination of lying with financial numbers, with a healthy dose of b*llsh*t posturing.
Instead, I'd suggest what we're interested in is our standard of living. Can we continue to have a nice-to-live-in civilisation, maybe even getting better, with decreased energy usage? GDP might bear some relationship to this, but as the 'occupy' movement has pointed out - if 1% of the population have got their greedy mits on most of the GDP, it's not really that proportional or correlated, is it?
So let's look at personal energy usage in the round - how much energy do you use across home and work to give you the life you have? Is your life usage of energy correlated to how good it is? In some respects yes, flying off on holiday to foreign climes multiple times per year, benefiting from gadgets, global business reach - all take energy. However the exam question is then reformed as: if we cut or change this, what's the effect?
I'd suggest that in very real senses we COULD lose quite a lot of the energy usage we currently have and have a BETTER standard of living. Do most people like jetting around the world on business? Cut that and most people would say things were better, and most of it is NOT needed. A finance centred view of the world would say things had got worse, but not standard of living of most people.
So, I'd suggest that focusing on the reformulated exam questions, we CAN see a way to reducing energy usage whilst improving growth, just not in narrow finance metrics terms. Takes foresight, planning and a strategy that is much less blinkered - but that's the difference between CAN and WILL.
Our main problem is not the possibility of change, but the lack of will and the obstacles placed in the way by those who have done pretty well out of the status quo. It's a human problem, not an energy or money one.
To finish, I'd agree that I don't think we as a society are capable of acting intelligently enough to address the energy<>societal quality linkage - but that's a different question as to if it's possible at all.
Very much agreed.
They haven't. The 1% have perhaps 20% of the income, and the total wage is just part of GDP, and they don't consume in proportion to that either. GDP is very, very correlated and proportional to standard of living. Beliving anything else is deluding oneself for reasons of ideology.
Most people don't know enough to settle this objectively. Scale provides efficiency, and business travel is part of that. If a trip saves a lot of work by synergies or finding some smarter way of working, that trip can give a thousandfold return, easily. Sure, most trips doesn't give anything back, but it isn't that easy to pinpoint those trips beforehand, and if you cut, you'll cut some of those that saves a lot of work as well. Rely on companies to be smart here and not waste money. Those who do waste money will find their market dominance diminish, so this is self regulating.
Introduce a hefty carbon tax, and the market will do it efficiently. Beaurocratic "foresight" and "planning" will not.
http://en.wikipedia.org/wiki/Occupy_Wall_Street#We_are_the_99.25
The point I was making was that GDP and personal standard of living are poorly correlated. With that level of inequality you could drop the GDP and improve the average standard of living at the same time - if you changed the balance. Therefore it really matters that you focus on the growth you care about, not just a financial metric.
I have to say, I think that's wrong. Evidence seems to suggest that the attempt to introduce a carbon tax will result in those with the money perverting the attempt to cost the externalities such that nothing really changes. Faith in the market is faith in the system that's got us into this mess and the same one that does tie GDP and energy growth - the thing we're trying to get away from. The aim is you have to find a different approach - which includes a more mature viewpoint on what the market can and can't do. The market is a reactive, survival-of-the-fittest, evolutionary approach, which generally finds its way around the intent, rather than finding good ways of implementing it.
"We can't solve problems by using the same kind of thinking we used when we created them.” - Einstein
Even though I'm a raging lefty, I see no practical alternative to relying on the market to do the bulk of the work. The problem with capitalism, is not so much that is based upon unbridled greed, but that it tends to give more and more power to those with the mostest. They then tend to remove the control rods from the system, which then heads towards meltdown mode. So its needs some overriding regulation. Stuff like taxes, and tarrifs, and regulations, in order to operate in a manner that helps the bulk of the people, and to quide it away from future eating activity. But that can be done without destroying the market, as a means of individual choice, and of darwinian selection among business organizations. Let the decisions be totally made by government, and there is no incentive for efficiency. Let none of the decision be made by government, and you get a tyranny by those with the mostest. The key is to recognize that somewhere in the middle works best.
Yep, that's exactly my point: Right tool at the right time for the right purpose.
The market can be useful for exploring niches in an evolutionary manner. Greed can be a powerful motivator (as can recognition, etc.) However they are all only tools at the service of society - a point that's got lost over time till we have the current situation where many say society should be serving the market...
Remember, patents used to be a way to protect your hard R&D work so you could exploit it AND mainly, as a way to communicate how you had done it so that others could build upon it. Compare that to now, where patent trolls extract a toll from developments and patents are used to close off areas of obvious ideas to competitors and drive them from business.
The government system enacted to support society got perverted by money into a weapon for short term gain from obvious 'inventions' - whilst real R&D spend falls away.
In 2008 Darwinian selection should have ensured the end of a whole lot of banks and bankers. But it didn't. They were instead put in a zoo and protected from their fate at the expense of the general public. Stop that type of action by governments and maybe capitalism can assist in the efficient transition to a low carbon future.
Each individual bank needs to be limited to maybe 1% of market share, to prevent too-big-to-fail.
But it isn't.
No, not the average standard of living. Perhaps the median standard of living, but likely not even that - if you "change the balance", again, you likely lower GDP in the process and very few gain. And again, wealth and income stats are wildly exaggerating the consumption gap. There simply isn't as much you can rob the rich of as you believe there is.
No, evidence does not suggest that. Energy taxes give profound changes. Read the study!
The mature viewpoint is that the market excels in optimizing production and resource use within the frame that energy taxes and such give it. Nothing can hold a candle to the market in that regard.
You need a reasonably efficient, non-corrupt IRS and a carbon tax law that includes all carbon. Then the market will adjust, as the bulk of it really do follow laws. You may want to claim this is impossible in the US, but as an outside viewer, I think not.
To my mind, the market has been used too little. Pigovian taxes have been known to be the way of getting markets globally optimal since what, the 1940-ies at least? If we would have had 60 years of internalization of fossil costs, we'd have a whole different ball-game today. Instead, polticians have been meddling back and forth for ages with subsidies, tax breaks and so on and they have accomplished very little.
I think you are coming from a political standpoint, probably an american one?
On a macro scale 'happiness' is semi-correlated with GDP (although with significant outliers) until a minimum level is reached - after which it flatlines. When that translates into unequal societies (Gini index) that then means that you can have two societies, one where GDP is higher, but so is the Gini index - resulting in poverty for many, a poor standard of living, and thus unhappiness. Another might have a lower GDP, a lower Gini index, and few in poverty, and thus less unhappiness. The practical example of this is the comparison between the US and Sweden:
US
GDP per Capita: $46,860
Gini Index: 41%
Happiness: 7.4
Sweden
GDP per Capita: $38,204
Gini Index: 25%
Happiness: 7.8
The US has many living in poverty and suffering as a result. Although rich, it is unequal and the standard of living for the poor, living amongst affluence, is debilitating. In contrast, Sweden has a significant social safety net, thus less suffering through poverty and a generally happier society - even with a lower GDP.
It also, as a result, has a more cohesive social structure, and therefore more scope to make the necessary transition to a post-peak world 'all together'. Inequality breeds those 'with nothing left to lose'.
Oh, and as far as carbon taxes are concerned, the evidence is that money does pervert the setup of the tax (and will probably pervert the implementation) such that the behavioural change effect is reduced to virtually zero. The price signals have been muted by giving back in undirected payouts the money that's taken in carbon taxation. As a result, there is little incentive to change.
Now you could, as I'm sure you will, blame the government for implementing the tax this way. Personally I'd say it was more a function of the perverting grip that big business has over political policy that forces out any real change and warps it to do the bidding of the money markets.
That's because from a market perspective it's easier to change the laws before they are written, than it is to change your behaviour. One of the reasons why unrestricted market driven approaches don't work - they always take the easiest route, and the most short term. To change that you'd have to take the foot of the market off the throat of democratic government - which means more and stronger government, not the reverse.
I think everybody comes from political standpoints, even those who think they don't. Also, I'm a Swede.
This is a complete myth, which I showed here. There is no flatlining.
Compare the graph I gave in the link with a plot with happiness vs GINI. You'll find little to no correlation. Also, read this: "But taken as a whole, the happiness gap (the gap between the least and the most satisfied) seems to have a weak relationship with income inequality, as measured by the Gini coefficient. That is odd, since many people automatically assume that inequality leads to misery."
That's cherry-picking. Also, as a Swede, I don't really agree with charactarisation of Sweden. The "significant social safety net" coupled with minimum wage agreements keeps large swathes of the population off the labor market, especially immigrants and young people. This give rise to significant problems, of which some of them are locally concentrated enough to cause riots and car burning sprees. But we are definitely quite well-governed in a sense, and in many aspects, we are more economically free than the US (and in many others, of course, we are less free).
As I said, gas taxes are a form of limited carbon taxes, and the European example shows that it can be done and have profound effects on consumption patterns. There are other internalizations that work, for instance tobacco taxes, congestion fees and so on.
Wouldn't that defeat the purpose? The optimum is "less and stronger", not "more and stronger". And this is quite doable. Regulation needs to be smart and stable. It needs to provide a light-weight but firm framework in which the market can be vibrant and dynamic. And no, the market doesn't take most short term route. That's a myth as well.
A quibble: I think it's not really fair to blame the politicians for being powerless to resist the special interests which have blocked pigovian taxes.
I'm not really sure how to strengthen US democracy, to resist such pressures. Certainly campaign reform would help, but how to legislate campaign reform in a powerless congress?
All I can think of is making our own contributions, and speaking out.
Thanks for this.
At least for Americans, happiness would almost certainly go up if people adopted the following energy-saving habits:
Best Hopes for a simpler, better life.
Jon
In other words, a complete unwinding of typical suburban American life!
Unfortunately, many people and businesses are heavily (totally?) invested in said life and will/are fiercely resisting such change.
It's actually a return to a different kind of American Suburb - the Streetcar Suburbs that existed in the US prior to the post-war freeway-building frenzy. People tend to forget that suburbs existed long before automobiles became ubiquitous.
Back then Americans:
1. Didn't have many TVs
2. Got out of the house and talked to their neighbors
3. Volunteered locally
4. Gardened a lot and had smaller lawns
5. Biked and walked more and drove less
6. Danced more and shopped less
And they were much slimmer than they are now because they got lots of exercise.
Here's a pretty cool link on "Retrofitting the Suburbs for Sustainability", RMG. Scroll down at Holmgren's link to access the PDF. I've been digging into the permaculture literature lately, and I went to a cohousing talk last week where a Portland architect was drumming up business to build new cohousing units from scratch. Too bad that's not the answer. The answer is retrofit, and Holmgren gives suggestions on how to do it.
http://www.holmgren.com.au/
A few problems with trying to turn back the clock. For one, folks are now accustomed to "world class" stimulation of every sort - electronically mediated entertainment, hyper-engineered goods, etc. Keep the clock turned back for longer than a brief tour of Colonial Williamsburg, and they'll be bored out of their skulls. For another, there are far more older and frailer ones than there used to be; one size won't fit them at all. And for yet another, plenty of literature from the early 20th century and before hints strongly at just how thoroughly nasty life often was, back when there was nothing much to do except to toil or else engage in cliquish "neighborly" backbiting and gossip (a bit like, say, being condemned to spend one's entire life in high school.)
Hi PaulS
Since its a holiday eve, I'll indulge in some positive thinking.
re: "Keep the clock turned back for longer than a brief tour of Colonial Williamsburg, and they'll be bored out of their skulls.'
I believe studies (but too lazy to research - it is a holiday eve) show the single thing the under-18 crowd most wishes for is more time (let's assume it's quality time) with their parents.
There's a lot to do and "we" know a lot more about how to do it: here's one for talk and listen and there's also "story corps."
People love to be creative, when they have the materials. Toil: craft? art?
http://storycorps.org/
Talking and listening solves a lot of problems...it keeps them from happening in the first place.
Taken at face value, this statement sounds like a general attack on the validity of empirical observation, and science itself.
Granted, a better title for Gail's piece might have been "IS Energy Use Decoupling from Economic Growth?", since the thrust of her argument is that, despite what some have claimed, it is not really happening. And it's true that looking at statistics from the twentieth century may not be relevant to the situation in the 21st; it's too bad we don't have precise enough statistics for energy use and GDP (or whatever you'd like to look at) from during the collapse of previous civilizations (Romans, Maya, etc.).
Still, if we are to have any notion whatsoever of what is realistic to expect in the world, we have nothing to go on except observations of what has happened in the past.
Finally, while I agree about looking at standard of living instead of GDP, I have no reason (or not) to believe that those numbers would present a less foreboding outlook. Business trips are too small a portion of total energy usage to be definitive.
Fundamental issue: when we tip over into oil decline, we change one of the basic drivers of the system. That ripples through all the systems such that the post peak world, for better or ill, looks and acts very differently to the one we are in.
The assumption is certainly that GDP & standard of living will get much worse, but you can't prove that that HAS to be the case by looking at historical data. The possibility that decoupling can and will happen is there and viable.
I think the arguments you've made in this subthread are adequate for asserting that the possibility is 'there'. I think it requires much more evidence to reasonably assert that the possibility is 'viable'. As I said before, it's unfortunate we don't have better data from past examples of energy source depletion. That would allow us to get a more realistic picture of what is likely to happen. I tend to think that what will happen to energy intensity in the coming century is anyone's wild guess.
Taken at face value
But, of course, you shouldn't take it at face value. Trends in energy consumption that occurred during low-price conditions aren't helpful for predicting performance under high-price conditions.
Some things are no doubt going to fundamentally change in an era of energy decline, but it's hard to say exactly what they are or how they will change. Other things will not change at all; the laws of thermodynamics for example. Simply asserting that because somethings will be fundamentally different, therefore everything else [i]could[/i] be different, is not a valid argument.
I think it's worth repeating what I said above: If we are to have any notion whatsoever of what is realistic to expect in the world, we have nothing to go on except observations of what has happened in the past.
Since we don't have particularly good data from past occurrences of energy resource decline on civilization scales, we really don't have that much to go on. Or at the very least, such data are not present at all in the discussion we are having here. I think most of the assertions about the future of energy intensity trends in a post peak-oil world- in this thread and elsewhere - are over-certain and highly speculative.
Happy Thanksgiving.
Gail, this report is also very germane to the discussion.
Thanks! I remember looking at that report when it was linked to in this post.
If maybe there could be a place where some GDP could be generated more or less independently of energy, that would be for knowledge and cultural goods (that is basically digital files or licence access to them or sites), but it is also there where somekind of "everything should be free" dogma has taken shape (more or less), the prime economic model being to have revenus based on commercial for what is considered as "real goods".
In any case quality information in the current mess is of great value, and puting it together is also work.
Excellent analysis Gail.
In a way the whole question of economic value versus energy use is a bit slippery and circular.
Right now the things we value require energy use -- lots of energy use. If the GDP is to increase, the amount of things of value (goods) that we produce has to increase. If by definition, the goods require lots of energy, then the prediction I would make is that it is pretty near to impossible to increase the GDP and decrease energy use. You analysis seems to confirm this prediction.
Unless, the values change I would expect little progress on this issue. I've seen little evidence that values are changing so that we value goods that use less energy.
I have seen a lot of decision making made based on self-serving fantasy.
Given political paralysis in many OECD countries that are running deficits, e.g. Greece and the US, I suspect that most OECD countries that are borrowing money in order to maintain government spending will only curtail their borrowing when they can no longer afford to borrow.
Given the ongoing (2005 to 2010) decline* in the supply of exported oil available to importers other than China & India (AKA Available Net Exports, or ANE) and given our outlook for a continued, and probably accelerating, decline in ANE, I suspect that most debts, especially government debts, won't be repaid, or they won't be repaid with currencies of constant value.
As David Korowicz, in his essay, "In the world, at the limits to growth," put it, we are facing default or inflation on a global scale. See link below:
http://www.energybulletin.net/stories/2011-06-13/world-limits-growth
*ANE fell from 40 mbpd in 2005 to 35 mbpd in 2010 (total petroleum liquids, BP + Minor EIA data), an average volumetric decline of one mbpd per year
But a graph is missing here, which is the set of "country points" with GDP per capita on vertical axis, and energy use per capita horizontal, or the reverse, like in David MacKay book for instance, page 105 below :
http://www.inference.phy.cam.ac.uk/sustainable/book/tex/sewtha.pdf
(ok this one is power only, the equivalent for all energy, I think in the book also)
Or this one :
http://notable.wordpress.com/2007/04/07/us-energy-usage-trends/
(that is energy intensity countries distribution)
Or this one :
Or this one :
Showing the evolution from 1970 to 2007 (so already declining in all countries in fact) from :
http://stochastictrend.blogspot.com/2011/11/5-energy-intensity-declines-...
Or this one :
http://www.oleocene.org/phpBB3/viewtopic.php?f=7&t=9264
Or :
http://schuman4environment.wikispaces.com/Last+5+years+energy+intensity
And clearly the countries aren't on a straight line, so that indeed you can have two countries with same Energy per capita one of them with higher GDP. The difference coming mostly from the products efficiency they use (products in a very general sense, building and transport infrastucture included for instance), and also from the countries "geographical configurations".
And how to move the products efficiency ? Clearly though volume based taxes on fossile fuels or energy in general (taxes that doesn't change a country GDP "everything considered equal" as the classical economic saying goes.)
As indeed in general increased efficiency means spending CAPEX in order to decrease future OPEX cost (and especially energy opex cost), so that these taxes shorten the ROI duration (typical example insulation), but they also influence products choice in general, like for cars for instance.
And then there is also the question of GDP being a proper measure or not with respect to "quality of life".
Edit : sorry for one of the pic being huge
Gail: I fixed it. Add width="70%" inside the img src expression.
Is there any point in talking about GDP when you've got shenanigans like this going on? Does money have meaning anymore? When our metrics go off the rail, how do we measure transactions?
As noted up the thread, we are facing default or inflation on a global scale.
Something that Figure 9 may represent is something I would call "Basal Energy" that is the amount of energy simply required to maintain an economy, regardless of lowering GDP. I would suspect many economies have a fairly high Basal Energy point, and going below that point would cause harm to the economy and peoples lives(as they see them). So some economies may go into recession but regardless will meet a floor where they still use this Basal Energy amount to simply keep things going.
There are certainly a lot of people living on $2 or less per day. I am not sure about whole economies.
Darwinian said:
No it is not possible to decouple GDP Growth from Energy Growth. All economic activity requires energy to be performed. As a matter of fact, any activity requires energy to be performed. You can not even think about the problem without using energy; your brain uses 20% of the body's energy budget.
You can use energy more efficiently, but to continually improve your efficiency you will need to (at some point) begin scrapping your old economy to continue the progression. The Second Law guarantees that you will hit a point of diminishing return - and there is no way around the Second Law.
But the real question that needs to be asked is: can our present economic system grow? Again, the answer is no! The power modern civilization relies upon is derived from fossil fuels; most (83%) of its energy needs comes from a tripodal of fuels: coal, natural gas and oil. When depletion puts the energy contribution of any of these into decline, the entire economic system retracts. One fuel can not replace the other without a huge investment to replacement the infrastructure that the declining fuel used - and to do so requires even more energy.
Oil has gone into decline. This occurred between the fourth quarter of 2006 and the first quarter of 2008. It occurred when the extraction, processing and distribution of oil began to require more than one-half of the potential energy that was available from the oil. The oil producing sector of the economy began using more and more of its own energy, while the non-oil producing sector received less and less. This will continue until the non-oil producing sector no longer receives enough energy to support the process.
The energy loss to the non-oil producing sector of the economy is now enormous. It is equal to 1.1 quad BTU per year. A quantity equal to about 33 times the output of all the solar cells in the world, or the annual output of 37 1000 MW power plants. Within a decade, without a replacement source, and with conventional crude production in a slow decline, the impact will become crippling.
Since it is now apparent that no government agency is going to address the problem (perhaps because they have no solution to offer) the responsibility to adjust must fall to the individual. The depletion profile of conventional world crude reserves informs us that the formation and retention of capital will become a very critical and very difficult challenge for the future!
Taken in part from the report "A depletion profile of world crude oil reserves"
Could you provide a link for where this is from. I searched and could not find the report you mentioned.
Gail the Actuary,
They haven't posted their announcement yet (it is being supplied to their client list only) but if you send me a mailing address I'll get them to send you a copy, (it comes on CD) and is about 50 pages in length. The overview is not out yet so you'll have to wade through the math and graphs. This is not a scientific study, it is an engineering report, written by engineers for engineers.
Have a happy turkey day.
Send me an e-mail at GailTverberg at comcast dot net, and I will send you my address.
Even without considering the net energy component, we have a problem with global net oil exports. Peak Oil Versus Peak Exports:
http://www.energybulletin.net/stories/2010-10-18/peak-oil-versus-peak-ex...
Prior to the last ASPO-USA conference, several of us made the rounds of congressional offices and briefed staffers on our predicament. I outlined the numbers illustrating the five year decline in Global Net Exports and in Available Net Exports to one staff member, and he replied that the policy of the US government had been that Americans should have access to cheap energy, and he thought that this should be the policy going forward.
and he replied that the policy of the US government had been that Americans should have access to cheap energy,
Well, sure, what government wouldn't want that?
But just saying so doesn;t mean it will be so. Given the rise in energy (oil) prices in the last decade, how well is that policy working?
Or do they regard today's prices as being cheap (i.e. acceptable to them), and a decade ago was "super cheap"?
The government might just as well say everyone should have good weather, all the time - they have the same amount of control over that as they do long term energy prices.
It sounds like a standard talking point non-answer.
Hard to know what they really think.
I wonder what their definition of "supporting the process" is.
Do the engineering authors offer any type of mitigation strategy? Would worldwide drive 55 or even 45 be helpful, along with other drastic to some but possibly necessary changes like limiting heating and cooling deltas for residences and businesses? Voluntary/Mandatory measures in the near term might be a better solution than waiting for the market to decide what should be done. As we have seen, the market already has it's hands very full and is "breaking some eggs", and it didn't see coming what should have been seen coming, and it's generally in denial too, with many claiming that no one could have seen it coming. The current macro market processes are very bogged down in debt, bailout, and bankruptcy issues. Only a few market players have come to the realization that the end of growth may have played a significant role in getting to that undesirable macro state, and that the implications from the end of growth for the coming decades will also be affecting the macro state.
One fuel can not replace the other without a huge investment to replacement the infrastructure that the declining fuel used - and to do so requires even more energy.
Not really. Wind power and EVs can be built over time, and replace coal plants and ICEs through attrition. No huge investment that wouldn't be made anyway.