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Can an Economy Learn to Live with Increasingly High Oil Prices?
Posted by Gail the Actuary on October 11, 2012 - 4:10am
Prof. James Hamilton of University of California recently wrote a post called Thresholds in the economic effects of oil prices. In it, he concludes
As U.S. retail gasoline prices once again near $4.00 a gallon, does this pose a threat to the economy and President Obama’s prospects for re-election? My answer is no.
EDIT - I originally wrote this post thinking that Prof. Hamilton was looking at a broader question: Can an economy learn to live with increasingly high oil prices? After looking again at his article again, I realize that he is talking about a narrow question: Using the figures he was looking at (average gasoline prices across all grades), prices were for the week of Sept. 17 near $4 a gallon, as they had been several times in the past, as they bounced up and down.
In that context, what he says is far closer to right than what my analysis of the broader question of whether an economy can learn to live with increasingly high oil prices, below, would suggest. There is a difference, because gasoline prices are not too closely tied to oil prices in short term fluctuations, and because the issue is likely to be as much one of consumer sentiment as anything else, as long as the issue is simply one of gasoline prices in a not-too-wide range. But I think there are some longer-term, more general issues we should be concerned about.
My Analysis of the More General Question: Can an Economy Learn to Live with Increasingly High Oil Prices?
As I see it, increasingly high oil prices weaken an economy because they reduce discretionary spending and indirectly cause people to be laid-off from work. They have many other adverse effects as well–they tend to raise food prices, with similar effect. The laid-off workers require unemployment compensation payments, and the same time they are contributing less tax revenue. All of this creates a huge imbalance between revenue collected by governments and expenditures paid out. If oil prices rise again, it will tend to make the imbalance worse.
An economy such as the United States can cover up the problems caused by high oil prices with variety of financial techniques. In my view, high consumer confidence measures the success of those cover-ups, more than it measures the actual underlying situation. One way the US government has managed to cover up how badly the economy is being hurt by high oil prices is by spending far more than the government takes in as revenue. This has happened continuously since late 2008, with outgo exceeding income by more than 50% each year, even though the country is supposedly not in recession.
Figure 1. US Government Income and Outlay, based on historical tables from the White House Office of Management and Budget (Table 1.1). Amounts include off-budget spending, such as Social Security and Medicare, in addition to on-budget spending. *2012 is estimated. Office of Management and Budget/Historical Tables.
The amount consumers have available to spend on cars and gasoline is very much affected by deficit spending. With deficit spending, government employment can remain high and transfer payments can continue, without anyone really “paying” for these costs, putting more money into the economy to spend on oil and cars.
There are other government programs as well. Interest rates on homes and new cars are being kept at record lows, leaving consumers with more money to spend on cars and gasoline. Low interest rates and low taxes also stimulate employers to hire more employees. Quantitative easing helps contribute to higher stock market prices, and makes it easier for the federal government to keep adding large amount of debt.
To me, the fact that the economy is not currently completely “in the tank” speaks more to the success of stimulus programs than having anything to do with adaptation to higher price levels. Countries such as Greece, Spain and Italy do not have the luxury of being able to hide the impacts of their high cost of oil. They are doing less well financially, but were not included in Hamilton’s analysis.
Easy to Overestimate Impact of Recent Changes in Vehicles
With vehicles, we are dealing with a mixture of vehicles of all ages. The average age of automobiles is now estimated to be 10.8 years. The average age of trucks is no doubt greater. The EIA provides a summary of average fuel economy by type of vehicle based on US Federal Highway Administration Data, summarized in Figure 2.
Figure 2. US Motor Vehicle Average Fuel Economy based on US Federal Highway Administration Data (Based on EIA Annual Energy Review, Table 2.8) SW = Short Wheelbase; LW = Long Wheelbase.
This data is only through 2010. While it shows some improvement in efficiency of light duty short wheelbase vehicles, it shows little improvement in efficiency overall. The big increases in efficiency were in the period between 1973 and 1991.
The mix of cars by type is concerning.
Figure 3. Automobiles as percentage of total registered vehicles, based on data of the Federal Highway Administration.
The percentage of automobiles has been dropping, as the number of SUV and trucks has been rising. The change between 2008 and 2010 reflects the fact that the number of “automobile” registrations dropped by 4.5% in that time-period, while the number of other (larger) vehicles rose slightly. Thus, the long-term trend to relatively more of the larger vehicles continued. Obviously, this data doesn’t show carpooling and other adaptations, but it is difficult to see any recent big trend toward efficiency.
Can the Economy Weather another Rise to $4.00 Gasoline?
The question of whether the economy can weather $4.00 gasoline, to me, depends on the issue of whether the US government can keep coming up with more manipulations to hide its financial problems.
The US economy started to run into severe headwinds about the year 2001. This is when the percentage of Americans with jobs started falling.
Figure 4. US Number Employed / Population, where US Number Employed is Total Non-Farm Workers from Current Employment Statistics of the Bureau of Labor Statistics and Population is US Resident Population from the US Census. (This includes children and others not usually in the labor force.) 2012 is a partial year estimate.
While economists don’t seem to attribute past economic growth to increasing employment percentages, it seems logical to believe they played a role in the long-term growth in the 1960 to 2000 period. The economic growth came not just from the work these employees did themselves, but from the fossil fuels they used on the job. The wages the employees obtained for doing the work allowed the workers to buy products others had made. The long-term growth in non-farm employment between 1960 and 2000 was enabled by increased productivity in the agricultural sector, which was also fueled by increasing use of fossil fuels.
The percentage of the US population with jobs started falling starting in 2001. This is very close to the time when the US started importing far more goods from China, India, and the rest of Asia. If we look at energy consumption for China, we see a sharp increase in energy consumption about 2002:
Figure 5. China’s energy consumption by source, based on BP’s Statistical Review of World Energy data.
We can also look at broader groupings of energy consumption, and see a similar pattern:
Figure 6. Energy Consumption Divided among three parts of the world: (1) The combination of the European Union-27, USA, and Japan, (2) The Former Soviet Union, and (3) The Rest of the World, based on data from BP’s 2012 Statistical Review of World Energy.
The cost of goods produced in Asia is cheaper for two reasons:
(1) They tend to use a lot of coal in their energy mix, keeping energy costs down.
(2) Wages are far lower. One reason wages can be lower is because of the warmer climate.
It seems to be an article of faith of economists today that the US economy and the European economies will return to growth. Then the stimulus can be removed, and everyone can live happily ever after. But is this really something we should be expecting? We really have two kinds of headwinds: (1) higher oil prices, and (2) cheaper competition for jobs from Asia and other developing countries.
As far back as 2001, we read about Greenspan stimulating the economy by lowering interest rates. Various other approaches were used as well, including encouraging more home ownership through subprime loans in the 2002 to 2006 period. The greater demand for homes helped create jobs in the construction industry and helped raise home prices. By refinancing their homes, consumers were able to have funds for purchases they could not otherwise afford. In recent years, we have added a whole list of new stimulus approaches.
I would ask: Aren’t we kidding ourselves if we think a small increase in miles per gallons on new cars is going to fix the problem of another upward bounce in oil prices? Aren’t there some much more basic issues “out there” that need to be fixed as well? Aren’t we fighting two kinds of downside risks to the economy with increasing stimulus, and only marginal success? If oil prices rise some more, aren’t we likely to need “more stimulus”? Where would it possibly come from?
Originally posted at Our Finite World.
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You seem to be ignoring the obvious answer, which is "YES" because those in Europe have had much higher prices for decades. Their economic problems have been caused by unmet financial fraud and bailing out banks that got caught in the US-initiated credit crunch. They haven't really been causal connected to energy - but to lack of financial regulation.
It takes adaptation time however. You can't ask a 300lbs man to run a marathon tomorrow, but if you train him over a period of years, then it's certainly possible.
The real question is: "Can the World Economy Learn to Live with Increasingly High Oil Prices? Oil prices are rising all over the world, not just in the USA. Europe is having much harder problems with high oil prices than the US seems to be having.
You could not be more wrong. World economic problems are directly related to the high price of oil. And economists all over the world are sounding the alarm.
Will high oil costs permanently ruin world’s economy?
And here is a great Article just recently published in Forbes:
The Price Of Oil Is The New Economic Spoiler
The charts here are great and they do prove that high oil prices cause recessions. But they in no way prove that QE1 and QE2 caused those high oil prices. However...
Simply because European nations have higher gasoline prices than the USA proves nothing. Europe is geared to smaller cars and mass transportation. High oil prices affect the US transportation industry dramatically because our whole transportation system is geared to cheap energy, just like the rest of our economy.
And the very obvious answer to Gail's question is NO the economy cannot learn to live with increasingly high oil prices.
Ron P.
Darwinian wrote: "Simply because European nations have higher gasoline prices than the USA proves nothing. Europe is geared to smaller cars and mass transportation."
We have smaller cars and mass transportation BECAUSE European nations have had higher gasoline prices than the USA for decades.
With high taxation of oil products the increase of crude prices do not affect the European consumer as much as their US counterpart, despite low gasoline prices J6P pays more of his income for commuting than his European counterpart and gets skrewed much more by price hikes.
The ratio of GDP/per barrel is in many European countries, even those with high industrial production much higher than in the USA.
Therfore, without the finacial crisis my bet would be that European countris can cope much better with higher oil prices, however, with the current EURO crisis the playing field is much more leveled.
That statement implies that high oil prices had little or nothing to do with the financial crisis. Nothing could be further from the truth.
Did High Oil Prices cause the Financial Crash?
This is just one of hundreds of articles on-line that explains that the high price of oil, if not the sole cause of the great recession, was most definitely the major cause.
And one thing you, and others, seem to forget. The price of oil affects the price of everything not just the price of gasoline. Food prices are higher, it cost more to ship everything, it cost more to manufacture everything, everything is higher. Other than the price of petrol, European nations was just as affected by the high price of oil as the USA.
Ron P.
The "financial crisis" is more or less a debt crisis and it started a long time ago : basically further to the dropping of Bretton Woods (wich happens to be right after US production peak)
As to who is doing better between the US and Europe, maybe we shouldn't also forget that :
1) the US is still the third oil producer in the world (and much higher than North Sea production)
2) the $ is still the reserve currency
Otherwise yes also think that what is today called "the financial ccrisis" is primarily an oil crisis (the peakoil oil shock), rendered even worse with the mountains of debts (or accelerated by the corresponding credit since many years).
Yes, but you should also not forget: :-)
1) The USA per capita consumption is twice as high as the European, even with 45% domestic production, the absolut import dependency (barrel/capita) is still larger, sorry.
2) You produce per barrel only 60% of what modern European economies get out of a barrel.
3) You substitute expensive imports with expensive domestic production, good for trade balance, but still not good if you compete with other economies on the global export market (see 2).
4) I do not see despite (1-3) that improving the US energy efficiency has a high priority in the political agenda of your presidental candidates, good luck with that. :-)
Yes fully agree with you :-)
(wrote about the same a bit below regarding what would be US oil import dependency with similar efficiency per capita as in Europe considering current US domestic prod)
But by the way I'm French, understand you're German ? :)
And clearly the fact that taxes is such a taboo in the US doesn't help, especially as I see volume based taxes on fossile fuels as very different from percentages sales taxes or taxes on work for instance, it really is a political decision on accelerating adpatation more than anything else.
I am a German from Lower Saxony in Austrian exile since 1997. However, with two perfectly Austrian kids - this s*** happened even with two German parents- my Germanness is now really in doubt, so maybe I should use in future the label "European inside" instead. :-)
Your points 1-3 are probably right, although I cannot confirm. With respect to #4, Obama has put in place light duty and heavy duty fuel economy standards. The result of those standards is that light cars and trucks need to average improved fuel economy each year until the year 2025 when those vehicles need to average 54 miles per gallon. I understand that Romney has pledged to roll back those standards.
It is strange that both discuss energy supply, not fuel or energy efficiency. I guess that Obama fears that Romney will label him as an over-regulator of the business community thus killing jobs.
All these assumptions expect that in 2025 everything will be fundamentally the same as now.
I see the present as the top of a helter-skelter of shortage on all fronts which will make all predictions meaningless.
@Retsel,
Nothing "strange" about it.
In the USofA, "energy efficiency" is a socialist code term. A lot like "gobal warming", "overpopulation", or "Peak Oil". All liberal myths created by pot smoking hippies and greedy scientists to scare us "real" Uhmerikans and trick us into into accepting their socialist One World government agenda. Not surprising such a plan came from our Indonesian socialist "President".
Over here, energy waste is a source of national PRIDE. the smoke belching out of the tail pipe of my Hummer is just the SMELL OF FREEDOM, baby! Hell, we're creating jobs just by driving around. U-S-A, U-S-A, U-S-A!!
(sorry, been watching too much Fox News lately...)
I don't see many Hummers around anymore. They sold about 152,000 H2s and 159,000 H3s according to Wiki. Most of them must be in somebody's barn waiting for the collector value to go up.
I see them fairly often , around various points in S. Cali, usually in or near beach cities.
K.
But the consistently rising energy and commodity prices were what finally broke the back of exponential growth. There has been a sort of frenzied tarantella of expansion, with surging oil production locked into consumer and industrial growth. The oil dance is now over and somebody is being eaten.
You've heard the phrase "the straw that broke the camel's back"?
Do you pick on that last straw as the cause of the camel's demise, or rather is it the other hundredweight of straw that you put on before?
Oil price rises were a widely spread, globally connected stressor on the global economy - true. But those prices were bearable, except for the other things going on.
In particular, the GFC's cause can be laid at widespread endemic fraud in the global financial marketplace, the concious design of it such that it was uncontrollable (and thus money could be made), and the failure of governments to regulate it such that it was a rational system. That's the hundredweight of straw.
Now, westernised economies CAN deal with higher oil prices (Europe shows that), if given the adaptation time. Whilst I'll accept Gail's point that tax goes back into the general economy, you can hardly say that Europe is lightly taxed elsewhere as a result! Decisions of government spend levels makes even that 60% tax level moot.
The point however, is that looking at simple prices and saying "at what level will things break" is the wrong way to look at it. Instead you need to look at price as a rationing mechanism - driving out certain usages in certain locations, in order to balance demand to the available supply. The price will rise to the level needed to do that.
So the real question is, at what level of chaotic, price mediated, rationing of fuel will the wheels start to come off the connected systems of our society?
Posed this way, things become more obvious and simple.
Our rationing, and our method of rationing are not rational. Not only is the fuel resource not apportioned relative to the need to keep the systems of society working, the rationing mechanism acts to syphon that imaginary thing called money away from those that need to use it to change, towards those who are likely to waste it (in societal terms).
What we have is poor rationing mechanism.
Now, taking that into account, we can assume that as rationing continues, the unconsidered necessities of the societal system will mean that progressively more and more key value chains will break. Although it would be nice to think that SUVs will rust in the garage due to high fuel bills; the reality is that the poor developing world farmer will be unable to get his crop to market first.
The reality is oil prices are just one possible straw. The camel still has the hundredweight of financial fraud on it's back, the straw is still being added in a variety of forms - and the splint we put across it's back is not that strong and is already bowed dangerously.
We COULD fix the rationing mechanism, which COULD buy us the time to adapt, somewhat. But we aren't and won't.
There's little doubt that oil prices peaking in the summer of 2008 helped to push the economy over the edge, but oil prices by themselves cannot totally explain the global housing bubble or exploding consumer debt levels from the early 00's on. It's silly to ignore the role of the Federal Reserve and ZIRP (zero interest rate policy), the explosion of MBSs and other derivatives, the late 1990's tech stock bubble (the bursting of which the Fed claims it was trying to mitigate), or the raft of financial deregulation that started with Reagan, and climaxed under Clinton and Bush II (pun intended).
The global housing and consumer debt bubble, largely caused Fed's ZIRP + Commodity Futures Modernization Act (2000) + Gramm-Leach-Bliley Act (repealed Glass-Steagall 1999), and the resulting explosion in MBSs and CDOs had *at least* as much to do with the so-called financial "crisis" of 2008 as the price of oil did. High oil prices were just the straw that broke the camel's back.
Sometimes here at TOD it's too easy to get tunnel-visioned about oil/energy and forget that some large-scale economic events may have other root causes.
Totally agree. One other thing, all those fraudulent financial trends you identified were done to keep the system going a bit longer. If ZIRP, QE, etc. hadn't been instituted then the financial system would have collapsed well over a decade ago. In fact, these manipulations have been going on for a loonngg time. Suppression of gold and silver has been going on for well over half a century now. Suppression of oil prices is now firmly entrenched. Suppression of gold, silver, and oil is the same thing as inflating US dollars, which is what the center of the world's financial system revolves around. This is simply the modern version of what an empire does to keep itself going. It's no different than the Roman Empire or any of the other empires you learned about in history. We are servants serving that empire. The US dollar is the center of that. The trade deficit enables goods to enter the US and dollars to leave. The US military is what keeps that flow happening, by forcing countries to accept dollars in return for their trade surpluses. As all empires invariably overxtend themselves and collapse, this is what we are now witnessing. 70% of US government debt now comes from the Fed printing the money into thin air -- it's monetized. The rest of the world doesn't have enough trade surplus to fund US debt anymore.
The brainless economists think that the world can continue to resume growth once the "recovery" happens, and then interest rates can return into positive real territory and then they can continue pummelling gold and silver and oil. Of course, growth will not continue and their plans will not materialize.
Now, when the financial system collapses it will be catastrophic. And China is busy accumulating the gold which used to be at Ft. Knox, which has been sold at firesale prices over the last decade by the criminals leading the US financial system as they try to suppress the market and prop up the dollar. When the financial system finally collapses only gold and other hard assets will remain as stores of wealth, and China will likely have most of it. Then China may emerge as the new economic superpower for a while, since they will then likely have the new reserve currency since they have the gold. Of course they don't have the resources, which makes this a bit different than the path the US enjoyed, but they may be able to fake that for a while using trade deficits. But on the other hand, since the world is rapidly running out of oil, this centralized control by empires may not materialize to the extent that the US has forced itself upon the world. Militaries can't "police" the word if they don't have the energy to do it.
"When the financial system finally collapses only gold and other hard assets will remain as stores of wealth..."
Just a small point to make here...but just as one cannot eat paper dollars, one cannot eat or heat one's home with gold. Why it continues to captivate people's imagination is beyond me.
"Then China may emerge as the new economic superpower for a while...they don't have the resources, which makes this a bit different than the path the US enjoyed..."
I give China a bit more credit than that - they must have studied the way the US has manipulated the world for the past century. The US doesn't really have the resources either, but we've manipulated the rest of the world into giving them to us at fire-sale prices. The big problem is that China could take everything the US has...and it would bring their citizens 27% of what it does in the US. 1,300 million people vs. 350 million.
To get what the United states has, China has to "eat the lunch" of the United States (350 million), Canada (35m) ,U.K. (62m), Germany (82m), France (65m), Australia (23m), Sweden (10m), Denmark (6m), Norway (5m), Switzerland (8m), New Zealand (5)... and that's only 651 million - HALF.
And then there's India...!
But going from a lean-to to a small house with running water represents a much greater quality of life jump and lower energy transition than going from a 3,000 square foot house to 6,000 sq.ft. and increasing your SUV count. But China and India have been sold the image of Beverly Hills. Gangnam style or bust.
The world requires a medium of exchange. While you can't eat gold, you do eat food, and until everyone goes back to the farm and grows their own food (impossible) then you have to pay for it using something. At the level of sophistication we have achieved, the world cannot function on a barter system. If and when at some point paper can no longer hold value then what are the alternatives as a medium of exchange and store of value? When you think about it there are very few, and precious metals are basically the only things. Therefore, currencies will eventually be backed by PM's and possibly also commodities, although PM's are easier to institute. The amount of physical PM's available is tiny in comparison to the amount of perceived wealth out there, and the central banks have levered he PM markets 100:1 paper:actual metal. When the transition happens it will be an elephant going through a wormhole.
Who is going to issue the new currency backed by precious metals? If some entity starts to issue paper currency backed by a precious metal, are you going to trade your cache of precious metal for that paper currency? And at what discount? (And, if you have not been prudent enough to take physical possession of your precious metal before things get bad, you probably will not get anything for it.) If civilization has deteriorated to the point that existing paper currencies are no longer accepted, it will take time to establish a new system. Survivors may well have to rely on barter for a while. So, how much of a krugerrand would you trade for a dozen eggs?
The survivalists in the US seem to be banking on pre-1965 US silver coins. They are easily recognized, 90% silver and hard to counterfeit.
If (when) the fiat money system falls apart, I don't think it will take long for people to settle on how many silver cents a dozen eggs is. The gold coins and ounce silver bars will see use for large purchases.
"The survivalists in the US seem to be banking on pre-1965 US silver coins."
In principle it would work. The 'yabut' is that there are not enough of them. How many units of currency would you need to keep even a crashed economy working at all?
And if you say deflation will make a silver dime worth $10 fiat, now I need to subdivide the dime. Stuck there too.
"How many units of currency would you need to keep even a crashed economy working at all?"
That may depend on how many survivors there are to circulate the coins. And on how easily you can get people to agree on what they are worth. I suspect that until a currency becomes legal tender for taxes and debts, every transaction will involve haggling and a lot of bartering will continue.
I think some time around 2015-2017 our current financial system will collapse. At that point we will probably get a massive dollar devaluation that will restore confidence back in the (now diluted) paper currencies. To get some indication of the future price of gold, divide the external liabilities of the US with the gold reserves of the US. Today the number is around $11,000/oz (it was around $800/oz in 1980). The Fed could announce that they will buy all available gold at $11,000/oz. Paying massive debt with devalued dollars, euros, and rupees is not a big deal. Ofcourse this will impoverish people without hard assets. Why people with savings are not buying hard assets today is beyond my understanding.
Bottom line is that you will always pay with dollars, not krugerrands, for a dozen eggs. However, you will pay a lot more dollars in the future compared to today.
There's another reason for that. Europe has historically had very little oil of its own outside of the recent North Sea / Norwegian finds. Had Europe been like the United States with a Texas-like source of oil to begin with, it'd have been a lot different - more like the United States. It isn't because of higher prices therefore, necessarily, it's because the Europeans had never a chance otherwise.
There will be much suffering as the Russian and Eastern Bloc sources begin with withdraw their veins that feed the over-dependent Europeans. In contrast, the United States could persevere (physically, but not economically) with its own oil production, perhaps with some purloined Canadian too.
OK, there we have an issue. The decision to highly tax oil products is a purly political one, a problem many US citizens do not get :-)!
You have in Norway (exporter) a very high taxation and you may find countries without a domestic production with relatively low taxation, it is simply an approach to curb the consumption of strategically important stuff that is imported or may deplete at home in near future, so the USA may simply lagg behind since 1971. :-)
With the political will the US could, just as from 1942-1954, cut oil usage by 20% and STILL
maintain transit mobility by simply running existing Green public transit and ceasing to subsidize Auto Addiction. As I have pointed out before the US actually has more Green public transit available than most people realize. Brookings 2 year study of Census data, jobs and transit stops found in May, 2011 that in 100 US Metro areas without laying a single Rail that 70% of working age Americans lived only 3/4ths mile from a Transit stop!
http://www.brookings.edu/research/reports/2011/05/12-jobs-and-transit
The problem is that given the horrible frequency of Green public transit, lack of local/express service, poor connections and lack of the last mile only 30% could reach a job on Green Transit in less than 90 minutes. This is easy and cheap to fix - simply restore all the Transit cuts in 150 cities since 2008 to begin with. Then run all trains every 20-30 minutes 7 days per week. Add shuttles for the last mile, build very cheap bike paths. Then restore strategic parts of the US existing 233,000 miles of Rail to passenger service. Many of these tracks are already running periodic freight and periodic leaf peeper tourist trains and could run frequent passenger service. Finally begin building key Rail lines down Interstate Medians as they were designed to do like I87/287 in New York/ New Jersey which could connect 10 different running Rail lines.
From 1942-1945 intercity trains, buses, trolleys and commuter rail ridership quadrupled in just 3 years to deal with WW II. We could do the same right now.
I don't think it proves anything. There are a couple of important things to note:
1. The supposedly high oil prices really represent a tax that is charged on certain types of oil consumption in Europe. The fact that more is charged on oil means that less is charged on other goods. It is really the total that is relevant. This approach is intended to get people to buy smaller cars.
2. It is not clear that these taxes really save Europe from the impact of higher oil prices. There are a number of countries close to "in the tank" from high oil prices in Europe (The PIIGS: Portugal, Italy, Ireland, Greece, and Spain). These have been countries with the highest proportion of imported oil in their energy mix.
From Why are high oil prices no affecting Europe more than the US?
The taxes affect some oil use, but not all. But when prices rise, there is still a problem with higher unemployment and rising government deficits in countries with high oil usage.
"1. The supposedly high oil prices really represent a tax that is charged on certain types of oil consumption in Europe. The fact that more is charged on oil means that less is charged on other goods. It is really the total that is relevant. This approach is intended to get people to buy smaller cars."
Yes for sure, at a country level the price is the same for everybody, but again : European countries have almost no oil besides UK and Norway (and a bit Italy), and never had any, so comparing with the US which is still the third producer, and was the first up to beginning 70ies (when exactly ?), first exporter up to the 50ies I think, is a bit difficult.
"U.S. fields accounted for slightly more than 70 percent of world oil production in 1925, around 63 percent in 1941, and over 50 percent in 1950."
http://www.americanforeignrelations.com/O-W/Oil-Oil-and-world-power.html
What should be compared is European countries as now and as if the volume based taxes had not been put. Obviously tough to do, but would bet the mess would be more serious (and for instance the cars or trains less competitive on export market).
For me the major difference between today and the seventies is that we are not even able anymore to name the problem (a gigantic oil shock), which can be understood if for most people, even if not saying it, the deal is done anyway (crash coming).
IMO, most oil importing OECD countries are pretty much in the same situation. So far at least, since 2005, we have been forced to make do with a declining share of a declining volume of Global Net Exports of oil (GNE*) as the developing countries, led by China, consumed an increasing share of a declining volume of GNE.
At the 2005 to 2011 rate of decline in the ratio of GNE to Chindia's Net Imports (CNI), the GNE/CNI ratio would approach 1.0 around the year 2030, 18 years from now, when China and India alone would theoretically consume 100% of GNE. While I don't think that will actually happen (and we have seen signs of slowing demand in the Chindia region), the fact remains that rate of decline in the GNE/CNI has accelerated in recent years, hitting an almost double digit rate from 2008 to 2011 (falling at 9.5%/year).
*Top 33 net oil exporters in 2005, BP + Minor EIA data
To me provided every country pays the same price on the market (which might not be the case in the future through specific bilateral contracts already being set up) the ratio of consumption between China+India and OECD doesn't appear as a major parameter. More important is to decrease oil dependency (or oil per unit of GDP) which can also mean producing more "oil scarcity adapted products".
And still, the "oil bill" of the US is very much lowered by US domestic production.
In fact if you consider that European per capita consume around half the oil as Americans (around the case I think), with a consumption similar to Europeans, the US would be around 0 import for oil today.
I estimate that there are about 157 net oil importing countries in the world, and at the current rate of decline in the ratio of Global Net Exports oil to Chindia's Net Imports, in about 18 years the volume of Global Net Exports available to about 155 net oil importing countries would be zero.
OK, that was the answer to the question I did not want to ask. 18 years = zero.
Then what we currently see and what we argue about with regard to the economy is meaningless or will be shortly, followed by another meaningless "we have adjusted" conversation at the next plateau.
Likely we will not have the fuel to wage another global war, sans missiles, but we have enough nuclear power plants that will not cool their own waste to poison the whole f-ing planet.
Brilliant@Q
There is easily enough fuel to wage multiple global wars during the 21st century.
18 years to available net exports reaching zero assumes that current trends remain constant. China and India will not continue blazing forward with double digit growth rates acquiring all of the exported crude oil while the rest of the world does without imported crude oil. Oil exporting countries will have to cut their subsidies for domestic fuel before their exports reach zero which will dampen or end domestic growth. If Westexas would model phase 2 of ELM more realistically, the date would be pushed farther into the future.
I can't see how we can predict with accuracy any outcome.
However, if one assumes everyone will try to maintain BAU, and they will, then 18 years is what we have, as best we can determine. Call this our first choice. I agree it will likely be a longer time frame, likely due to economic problems, but the recent past is all we have to form a guesstimate. All our other societal energy transitions were to higher quality fuels, now we get to do the reverse with a lot more people.
In a longer time frame you must include all the variables, with war being the first option of the second level. How well do we really believe we can wage global war and keep our economy in any semblance of order? I think we might try but I have severe doubts. We have many weapons that are much more accurate, surviving infrastructure will be much less than in the past. Oil will be a target, right alongside offensive weaponry. We are not a rational species, just educated with opposing thumbs.
Of course, I don't think that China & India will actually be consuming 100% of GNE in only 18 years, but on the other hand, the rate of increase in oil consumption in developing countries is one heck of a freight train.
In any case, the endgame, in terms of depletion, is far less important that the depletion we are seeing right now. A rough rule of thumb is that about one-half of post-peak Cumulative Net Exports (CNE) tend to be shipped about one-third of the way into a net export decline period. So, as a rule of thumb, for every three years that we extend the point in time that a country hits zero net oil exports, the 50% post-peak CNE depletion point is only extended by one year.
For example, combined production from the IUKE + VAM Six Country Model* virtually stopped increasing in 1995. They hit zero net oil exports in 2007. One third of the way into the net export decline period, at the end of 1999, they had shipped 54% of post-1995 CNE. Note that 1999 production was slightly higher (at 7.0 mbpd) than 1995 production (6.9 mbpd), and net exports were only down slightly (2.7 mbpd in 1999, versus 2.8 mbpd in 1995), yet the post-1995 "Net Export Fuel Tank" was more than half empty at the end of 1999.
Also, an extrapolation of the 1995 to 2001 decline in the Six Country ECI ratio (ratio of production to consumption), if extrapolated, suggested that they would hit zero net oil exports in 2015, 20 years after production virtually stopped increasing in 1995. They actually hit zero net oil exports in 2007. In other words, An extrapolation of the six year rate of decline in the ECI ratio was too optimistic:
http://i1095.photobucket.com/albums/i475/westexas/NewECIFiles.jpg
The GNE to CNI ratio is very much analogous to the ECI ratio, and an extrapolation of the six year 2005 to 2011 rate of decline in the GNE/CNI ratio suggests that it would hit 1.0, when China & India would theoretically consume 100% of GNE, in 18 years, around 2030. As noted above, a rule of thumb is that for every three years that we extend the theoretical point in time that the GNE/CNI ratio hits 1.0, we only extend the post-2005 Available CNE 50% depletion point by one year.
What has happened is clear. We have seen an epic collapse in the ratio of Global Net Exports of oil to Chindia's Net Imports, falling by more than half in only 9 years, from 11.0 in 2002 to 5.3 in 2011, and the rate of decline in the ratio accelerated to almost 10% per year, from 2008 to 2011, versus the 7%/year rate of decline that we saw from 2002 to 2005.
*Indonesia, UK, Egypt, Vietnam, Argentina, Malaysia
Indonesia, UK, Egypt, Vietnam, Argentina and Malaysia are not representative of the world because you picked them because their productions peaked during the same time frame. Your selection bias accelerates the decline of the group. When considering the world during the next 20 years, there will be countries whose productions will be increasing or roughly constant, such as Canada, Venezuela, Iraq and USA, which will moderate the decline of GNE. These 6 countries were not as economically dependent on the oil revenue as Saudi Arabia which may alter their behavior in phase 2 of ELM. These 6 countries had consumption comparable in magnitude to exports which places the export decline in the region of the inflection point on the falling edge of their production curves. This is where the greatest rate of decline in production lies. The peak production of 4 of them was less than 1 Mb/d. Being nearly 3 Mb/d and comprising about 40% of the total group, the behavior of the UK might be dominating the outcome of the group. No country currently produces 40% of world crude oil production making your extrapolation to world production dubious. UK's production is offshore which has a different production profile (judging from the graphs, declines faster?) than onshore wells.
From the Energy Export Databrowser:
I am not attacking your model, westexas, and intend my post to be constructive criticism. You introduced me to the concept of ELM, and I think it has merit. Exports will decrease faster than production. However, choosing unrealistically pessimistic scenarios will ultimately harm ELM when they are shown to be incorrect. Crude oil will likely continue to be exported in 2030 causing the majority of people to casually dismiss ELM as incorrect and you as a crackpot. That would be a shame considering the brilliance of and effort you have invested in ELM.
"However, choosing unrealistically pessimistic scenarios ..."
Pessimism has an unusual way of becoming reality these days.
One of those graphs caught my eye...Egypt was on a steep net-export crash leading up to "Arab Spring." I tried to look up Syria, Libya, Tunisia, and Yemen but they don't have the net import/export data. It would be interesting to see the data from those places to note if their exports had been demolished as badly as those of Egypt leading up to their revolutions.
It's interesting also to look at the PIIGS nations...Portugal - all imports, drastic increase just before 2000 and maintaining that through 2006ish with a sharp drop-off afterwards. Ireland - all imports, increased through 2008 with drop-off afterward. Italy - mostly all imports, flat since the 90's with accelerating decrease starting around 2000. Greece - all imports, increasing usage until 2006ish, then steep decrease. Spain - all imports, increasing usage until 2007, then steep decrease.
The UK still has a lot of domestic production but is quickly getting itself into a pickle and transitioned to net importer around 2006 in particularly rapid fashion. Still their consumption had been flat since the mid-80's.
France is an interesting case, another one with all imports, but they've had steady consumption since essentially the mid 80's. As they're one of the "stable" EU countries I think it can be assumed they've been working on efficiency and non-oil based strategies of increasing their economy.
Germany, the other "stable" EU country, another all-importer but again steady oil consumption since the mid-80's and starting in 2000 was declining in oil use.
The countries that seem to have gotten themselves into the biggest trouble are the ones that were rapidly increasing their oil usage just before the crash. All except Italy showed that trend of the PIIGS countries - and indeed Italy was the last to catch the "contagion" and has one of the smaller deficits of that group (though one of the highest public sector debts). Germany and France have obviously been growing their economy on efficiency and/or something other than oil.
Actually, I picked them because they were, as of 2011 (BP data base), all members of AFPEC (Association of Former Petroleum Exporting Countries). Also, they are geographically diverse, with differing taxation policies regarding energy consumption, e.g., UK heavily taxes energy consumption, while Indonesia subsidizes energy consumption. Incidentally, Indonesia is struggling to curtail petroleum consumption subsidies, even after they slipped into net importer status.
Also, after their combined production virtually stopped growing in 1995, they showed an "Undulating Plateau," with combined production ranging from 6.9 to 7.0 mbpd from 1995 to 1999 inclusive. In 2001, their combined production was only down to 6.5 mbpd, a simple percentage decline of only 6% from 1995, a six year rate of change of -1%/year. The following sketch shows normalized combined Six Country production and remaining post-1995 CNE (Cumulative Net Exports) by year, with 1995 = 100%:
The above sketch shows how an "Undulating Plateau" in production hid a catastrophic post-1995 CNE depletion rate. Production fell at 1%/year from 1995 to 2001, while the volume of post-1995 CNE fell at 23%/year over the same time frame.
Since production from the top 33 net exporters in 2005 virtually stopped increasing in 2005, I thought that these countries would serve as a useful real world model for GNE (Global Net Exports). In other words, I suspect that Global Net Exports were to 2005 as the Six Country Model was to 1995. And of course, the Six Country Real World Model confirms what the mathematical Export Land Model predicted we would see.
The Six Country data base covers 26 years, from 1986 to 2011, inclusive. If there are any other major net exporters (100,000 bpd or more of net exports) that you are aware of that slipped into net importer status in this time frame, I would be happy to look at including them in the model.
I suppose we could include China in the model, but that would truly distort the model, since China, like the US, slipped into net importer status even as their production continued to increase. As such, the US and China are not representative of the pattern that we expect to see as more and more countries join AFPEC.
But my primary point continues to be that the largest volumetric CNE depletion rate per year is occurring right now. In my opinion, we are only maintaining something resembling BAU because of a sky-high rate of depletion in post-2005 Global CNE and in Available CNE. Whether Saudi Arabia is able to maintain a one mbpd or so of net exports after 2030 doesn't alter the fact that the 2005 to 2011 Saudi data suggest that they may have already shipped, in only six years, more than one-third of their post-2005 CNE.
As noted above, an extrapolation of the six year 1995 to 2001 Six Country data produced an estimated 1995 to 2001 post-1995 CNE depletion rate of 15%/year. The actual 1995 to 2001 post-1995 CNE depletion rate turned out to be 23%/year.
An extrapolation of the rate of decline in the six year 2005 to 2011 GNE to CNI (Chindia's Net Imports) ratio suggests that we may be currently consuming the remaining volume of the total post-2005 supply of net exported oil that will be available to importers other than China and India at the rate of almost 1% per month.
Our data base shows that ANE (Available Net Exports) were 12.8 Gb in 2011. At this rate of consumption, an extrapolation of the 2005 to 2011 data suggest that the remaining supply of post-2005 Available CNE, the cumulative volume of net exported oil that will be available to about 155 net importing countries, would be depleted in about seven years.
As you can see, the seven years from 2030 to 2037 concern me a lot less than the seven years from 2011 to 2018.
The continuing irony of this situation is that the oil importing OECD countries are implementing measures to maintain and encourage consumption, through massive deficit spending, financed by a combination of real creditors and helpful central banks.
"... 1% per month."
Did everyone catch that?
Over a six year time period (1995 to 2001) in which the combined production from the Six Country Model* declined at only 1%/year, the Six Countries were depleting their combined post-1995 CNE (Cumulative Net Exports) at the rate of almost 2% per month.
*Indonesia, UK, Egypt, Vietnam, Argentina, Malaysia
I understand the "export land model", but think these tendancial projections, if good to raise attention to this key aspect, aren't very meaningfull, especially for middle east producing countries : they need to eat as well and buy things (extraction technology being one of them), and haven't much besides oil to pay for imports. Russia would be different in that respect.
But also think we will get into some kind of "discontinuity".
As Westtexas states, ELM is the most relevant issue today. Something has to give, and it isn't going to be the Chinese and their billion plus people - the sheer inertia will smother many if not most of the 156 other oil consumers, that includes the US. I do not believe the US could win an all-out war against China unless nukes were employed and that wouldn't be winning either.
Countdown to zero began yesterday - and 18 years is probably generous.
Sometimes real numbers instead of % give a much clearer picture:
The per capita import of crude is due to the high consumption higher in the USA than in Europe. In addition, energy efficiency (GDP/barrel oil) is much lower.
Of course taxes do not save Europe, however, these taxes have led to an infrastructure in the past that allows to a certain extend the substitution of oil. Working class Europeans pay on avarage less than their US couterparts for commuting, despite/because of these taxes, i.e. many people in Europe do not have to use a car.
Another POV would be economic competitiveness: Do you see any positive correlation between competitiveness and low energy prices? I do not. Or could it in fact be that economies with traditionally high energy prices do better in the current situation? Why?
Do you see any positive correlation between competitiveness and low energy prices? I do not.
Yes, well, I also don't see any positive correlation between "competitiveness" and ultra-low wages on labor, long hours and nonexistent benefits (unless you're a financier who personally benefits from the race to the bottom). Nonetheless, this is the Ayn Rand trickle-down cr*p the American public has swallowed and accepted as gospel for the last 30+ years.
I also don't see any positive correlation between "competitiveness" and ultra-HIGH wages for the financial elites --or for that matter, a positive correlation between "job creators" and actual jobs (at least not jobs for working class Americans anyway).
I also don't see any positive correlation between our voting public and reality, facts, ability to think, or a clue. which of course explains our leaders and what passes for "policy debate" these days.
Unfortunately, public perception in large part determines "reality", or at least what constitutes socially acceptable subject matter and options for policy debate. Over here the Overton Window is simply too small and too far to the right to include Peak Oil, conservation or alternative energy.
I think it is far less complicated than people try to make it.
It all comes down to how much net energy is available to the people.
If we look at the minimum amount of net energy needed for survival we can look at various economies around the world that are just hovering above total collapse. Let us look at North Korea.
Their society is still intact but their people are suffering malnutrition and on the edge calamity.
If we compare that to a modern society we don't have to go far - South Korea. If you look at the extra amount of energy available for economic activities you can estimate around 6 times as much / person.
North Korea - 795 kg of oil equivalent / capita / year
South Korea - 4,990 kg of oil equivalent / capita / year
In reality, humans have a tremendous amount of net energy due to being at the peak of the fossil fuel era and 33 billion barrels of oil per year allows massive economic activity, just not for everyone.
Economies will deal with the net energy decline by moving their people closer to work, dictating the use of smaller cars, then forcing everyone to go back to bicycles and then to horses (actually, they don't have to do anything, this will happen naturally). World population levels will decline according to their ability, or inability to get a good share of these now even more valuable resources.
Resource wars around the globe will be almost continuous for the next 150 years or so until energy balance with nature is reached.
Rich and powerful countries like the US and friends will have the lion's share of these resources due to their powerful militaries. The rich in America and Europe will still have great and luxurious lives while the poor will continue to suffer and die off. It will be a very cut-throat world and we will lose most of our civility in the process, as our history clearly shows.
In summary, prepare yourself not only for a career change to farming but to be able to protect yourselves from groups that didn't prepare.
Good land with great defensive geography. That is what those that wish to prosper should be thinking about.
I disagree. So far at least, the US and most other oil importing OECD countries are being gradually priced out of the market for exported oil, as the developing countries, led by China, consume an increasing share of a declining volume of Global Net Exports of oil (GNE).
We can try to seize foreign oil fields, but transporting that oil to our shores, without a lot of tankers being sunk or damaged is a different matter.
Not yet updated for 2011, but no material change:
It isn't necessarily about "seizing oil fields", today it is a lot about : doing the police job (with allies) along oil routes and producing regions, having oil traded in $, $ as reserve currency, ability to sell treasury bonds. But Iraq and Lybia were clearly primarily about oil (and keeping it in the $ market sphere)
And today if the US wanted to cut oil to China for instance they could.
Then there is the market.
And if China wanted to attack oil tankers bound for the US, they could easily do so, using a variety of methods.
Only because we are still being nice. What do you think will happen when "nice" goes out the window? If our people are starving it will be easy for the next Hitler to come alone and promise to bring us back to glory. That will happen by stealing resources. It is going to get very ugly and those with the biggest, baddest and most bombs are going to win. Do you really think the US Military Industrial Complex is going to just stand by when there is so much to gain? No way. That is like expecting the biggest bully in the schoolyard to not get someone's lunch money when that bully is extremely hungry.
Now, if you can show some historical events that show otherwise, I would like to hear about them.
YvesT and Tankingthinker, the idea that the US would, with their military, just seize foreign oil is absurd. We don't live in that kind of world anymore. Islamic oil nations, or more likely terrorist in Islamic oil nations, could just blow up the oil fields like Saddam did to the Kuwaiti fields. A single terrorist bomb could close any oil terminal.
And what currency oil is traded in has nothing to do with it. I don't know why that old saw keeps coming up. Oil can just as easily be traded in any currency the two trading nations agree upon. They could just agree to swap oil for goats and it would work just fine.
Russia could very easily stop oil even from coming to the ports and sell it, via pipeline to China and other former FSU or Baltic countries.
Any effort by the US to shift oil flow to the US from Africa would only add to the conflict in that continent.
We cannot and will not have the whole world as our enemy despite the wishes of many on this list who seem to believe it is already the case.
Never said it would happen soon, said Iraq and Lybian wars were primarily about oil, that is all.
As to "And what currency oil is traded in has nothing to do with it. I don't know why that old saw keeps coming up. "
What can be said ? "lol" maybe ;)
You really think if the $ wasn't the main trading currency it would be a reserve currency ?
Also chapter 8 and 9 below quite good regarding the basic historical background :
http://books.google.fr/books/about/The_Age_of_Oil.html?id=JWmx5uKA6gIC&r...
Simply stating the name of a book is not any kind of argument, especially if the author of that book is Leonardo Maugeri.
Ron P.
I said for the historical background aspects (not for the "don't beleive in peak oil" aspects)
But if you don't get that the police role the US is playing around oil has as a major consequence or condition, oil traded in $, $ as the reserve currency, what can I say.
You might remember Saddam saying he would trade in Euro or Gadhaffi in yuan or something.
To think that humanity, importing countries or whoever is beyond using violence is not an argument but an opinion.
Using violence or not to secure resources is probably just a matter of cost. Costs obviously come in a number of forms, dollars, lives, political (in) stability, goodwill etc.
Rgds
WeekendPeak
Saddam Hussein switched the trading currency for Iraqi oil to Euros. One of the first things the US did after occupying Iraq was to change the currency back to dollars.
Ron,
If there is anyone more delusional than the Cornucopians, I think it is the people who think the US can use force to bring oil to our shores that we cannot afford to buy in the open marketplace. As you know oil tankers are highly vulnerable to everything from submarines to sabotage, not to mention the inherent vulnerabilities in the entire pipeline and refining infrastructure in the US. Forcing oil to our shores, away from the high bidders in the open marketplace, would be an act of aggression against other oil importing countries, which I don't think would go unanswered.
How many torpedoes are needed to sink an oil tanker?
During the tanker war of the 1980's, oil tankers proved resilient to air-to-ship missiles. Missiles designed to penetrate steel hulls and explode inside the ship did little damage exploding inside a filled compartment of oil because there was no oxygen. There is not much fire and oil leaks out into the ocean. Being underwater a torpedo would make the oil leak out and water rush in, but being compartmentalized, the oil tanker would not sink.
A single missile or torpedo is more effective against a container ship or warship. I am not aware of a laden LNG tanker being struck by a missile or torpedo.
Modern torpedoes are designed to explode under the ship and thus break its back rather than blowing a hole. There are plenty of nice videos on YouTube that show the process in action.
NAOM
Thank-you. I learn something new about torpedoes. The Russian Type 65 (also used by China) is designed to sink large ships, such as aircraft carriers and supertankers.
You are just not thinking nasty enough. I'm talking old school wars. WWI and WWII style wars where almost anything was in play, like firebombing most of the cities in Japan, women and children included.
Firstly, there will likely be a WWII-like alliance that will work together to make sure the resources can be secured. If you don't think the US Military with full use of force, not a police action we have seen, can secure some oil resources then you don't understand what it possible with the military technology that is available. Full force and effort like used in WWII where thousands died every day, not a few thousand died in 10 years. People just forget the scale of what is possible and what humans will resort to when things get bad enough.
When we start down that fossil fuel bell curve there is going to be panic at first then there will be plans made up to secure resources. Countries will group in such a way as to ensure they can keep their people from starving. I guess many still don't understand just how dependent the West is on fossil fuels or don't get just how over populated we are. We can't just give up our industries and go back to the farms. We have a population that is around seven times to big for that!
No, I stand firm on my argument that those with power will steal what is needed and the Middle Eastern countries and their pre-WWII military technology and strength are not going to stand in the way. You talk about sabotage? Well, many armies throughout history had a solution to that - kill everyone. In fact, that was the norm for most of the time man has been at war. Kill the men and take the women and resources. Simple and clean.
You are thinking that people will keep the same amount of civility they had when they had all their luxuries and pampered lives. Did you read The Road? That makes more sense on how people revert back to primal survival instincts. Those that don't will be killed by those that do, just like throughout most of our history.
Oh, we can't get the tankers through to keep our people from starving because Iran has insurgents that keep blowing up the port? General: Clear it completely out for 200 miles and don't leave even an ant alive. Done. Submarines? The Middle East is going to provide a challenge to the US navy? lol. Now that is delusional!
Of course Europe is going to side with the US, as will Canada, Australia, South Korea and Japan. Most likely Russia will as well. China would be committing suicide not to side up. I just don't see why people don't think this could happen easily. The strategy is not only obvious but follows our history and human nature.
Nice is a short-term concept when things are going well.
Food for thought - Earth's population will be less than 1 billion in 150 years. If you think that is going to happen smoothly you really are a optimist. We will burn everything, everywhere and kill everything, just to survive. That is our basic coding and evolution would take thousands of years to change that reality.
You are somewhat delusional about WWII and WWII. In both wars the fighting had been going on for years before the US joined in, and the US only joined because the enemy foolishly started sinking its ships. The main effect was to tilt the balance heavily in favor of the Allied forces. The US could not have defeated the Axis powers without allies - they had already fought the enemy to a standstill even before the US joined.
You are also delusional to think the US would automatically have allies in anything it does. Every country has its own agenda, and that may not be compatible with the US agenda. How many allies did the US have in Iraq? Not even Canada was on side. Britain lined up, but it eventually cost the Prime Minister his job.
WWI was stalemated when the US joined the fight, but WWII is a different story. Germany was advancing into Russia and Japan was advancing into China when Japan attacked Pearl Harbor. Japan made major advances after the US entered the war: Indochina, Philippines, Malaya, Dutch East Indies, Burma. Germany would likely have gotten bogged down in Russia (how soon without US aid to Russia is an open question), but they had a very firm grip on Europe. Japan would also likely have eventually gotten bogged down in China, but that would not have defeated them. Britain was barely hanging on, but if Germany had managed to take or block the Suez and/or Japan had taken much of India, Britain's future would have been grim. It did take the total resources of the Allies to defeat the Axis, but the Axis had not been brought to a standstill before the US became an active participant in the war.
About wwI and II we can also remember the huge importance that oil already played in these wars, for instance Hitler having Baku (after Romania) as his main target :
http://www.youtube.com/watch?v=rGzEs3K66hA
And also the fact that the US have been selling oil(and other things) to both sides quite long during the two wars..
As to a possible new "world war" around the middle east, to me in any case, it would clearly not be "middle east countries against the rest", more some alliances fighting over the middle east (and fight between middle east countries part of one or another alliance), as more or less already the case.
But not so sure that will happen, a kind of "generalized civil war" could also be the outcome.
"You are somewhat delusional about WWII and WWII"
Actually, those wars are well documented. You can spend a lifetime just reading about them.
Many still think the US was an innocent bystander when Japan attacked. Not true. The US put up a blockade that was putting the brakes on Japan's war efforts. Yes, they were being squeezed by reduced oil supply. Huh, that black gold is amazing.
Hitler also needed Russian oil fields to power their war machine.
You are comparing global resource wars over Bush's Iraq war? lol. Then you call me delusional? lol. Excellent!
No, the coming resource wars are going to be far more serious than a huge power fighting against a tiny one. It will probably start off as such and then grow as countries take sides. Again, history shows that going against the US in a full out war is a losing proposition.
Don't even bring up cold wars like Korea or Vietnam. These were simple cold war battles and both sides decided to back off before WWIII started. I am talking about WWIII driven by the actual survival of countries.
Mixing full out efforts like WWI and WWII and comparing them to Korea, Vietnam and Iraq show a lack of understanding of what humans will do when they put into a corner, when things get desperate and nasty.
Things are going to get nasty. It is like putting a group of men in a locked stadium and putting in a set amount of food. Once they understand that they have to kill to survive, they will. The strong will team up and take from the weaker groups and individuals. Once the deaths start to rack up, all hell breaks loose with eventually one last man standing.
This is the situation as we enter the second half of the fossil fuel era. This is not about political or religious ideology but about survival. Earth can only hold less than about 1 billion people (much less if they want to live very comfortably). It is not just about energy but about all the other supporting resources like ocean fisheries, forests, clean air, clean fresh water, metals, minerals, etc.
Balance will be achieved, sooner or later.
In 1939, in the biggest battle you never heard of, the Battle of Khalkhin Gol, the Russian Siberian division wiped out the Japanese Manchurian division on the Mongolian border.
Although the Japanese were surrounded, they refused to surrender, so the Russians just killed them all. There are no good estimates of casualties since both sides lied, but most likely 17,000 Russians and 50,000 Japanese were killed. It was the biggest tank battle in history to that time - the Russians fielded about 500 tanks and they were far superior to the Japanese tanks.
It scared the wits out of the Japanese - they never attacked the Russians again -, so they switched from Plan A, conquer Mongolia and Siberia, to Plan B, conquer the South Pacific. This brought them into conflict with the US, and apparently they had learned nothing from fighting the Russians, so they attacked the US, at which point your story begins.
The Russians had learned a lot, however, so when the Germans invaded them, they brought their Siberian division West and threw them at the Germans in Battle of Moscow, forcing the German troops to retreat and killing many of them. The Germans turned out to be slow learners, too, so the Russians used their Mongolian techniques against them at the Battle of Stalingrad and destroyed the entire German Sixth Army. In all, 80% of German casualties occurred on the Eastern Front.
In between, Britain sank 50% of the German destroyer fleet in the Battle of Narvik, and crippled the Luftwafte during the Battle of Britain, ending the German capability for invading Britain. Hitler, too, switched to his Plan B, invade Russia, which was no more well thought out than the Japanese Plan B.
So, at this point, the US was attacked by Japan and entered the war. However, from the Russian and British perspective the war was half over by this time - they had already brought the Axis invasions of their countries to a halt, but they lacked the capability to bring the war to an end by invading Germany and Japan - which problem the US solved.
Note that I am not looking at this from the American perspective. My father was in the Canadian Army repairing damaged tanks England, my uncle was in the Royal Canadian Air Force bombing Germans everywhere there were Germans to bomb, and my wife's father was in the RAF flying secret supplies to the French Resistance fighters. Many of their friends were in the Canadian or British Navy, running escort duty for convoys of Canadian supplies heading to England. They all felt the U S was very late getting into the war.
I hear this "strategic" nonsence about why Germany or Japan lost WW II on and on. The ratio of casualties of the German Wehrmacht regarding the Red Armie was about 1 to 2-4. Germany lost about 3 million soldiers on the Eastfront while the Soviet Union lost about 7 million. Even in Stalingrad the casualties ratio was about 1 to 1 (1 million each including allies for the whole operation). When their was a strategic deficit of the Wehrmacht, than it was their considerably higher weather-related problems because of the russian winter, including both soldiers (e.g. clothes) and technic vehicles.
But the main reason Germany - after their initial moment of inertia - was defeadet by the Russians was of demografic nature. Germany attacked when Russia had their democrapic all-time high. The relevant birth cohorts in russia of the 1920's reached 4 million per year, whereas the German yearly birth cohorts where only a a little over a million.
Stalin had more than 20 million soldiers at his hand. He sacrified millions because he could afford that casualties. Germany could not. The longer the war went on, the more this demograpic superioty came into action. The western front did not help this. At the high time Germany had nearly 5 million soldiers on the east front, the Soviet Union more than 10 million. The Soviet Union lost nerlay 20 million people in "The Great Fatherland War" of which 13 million where civilians. Germany lost about 6 million of which 3.5 million where soldiers. By the way - the US of A lost about half a million in WW II and 60.000 in Vietnam. At the end of WW II the US of A build fregates faster than the Japanese built torpedos. No mystic strategic "Vodoo", just industrial and demographic superiorty!
In nearly every historic discussion demograpic reality is ignored or vastly underestimated, see Antic Rom, Greece, ...
I wonder about timing. The US still has a LOT of coal so they aren't going to be starving anytime soon, especially since it's the world's breadbasket. I wonder if they'll just put their efforts into CTL instead. I can't see how it would take more than 10 years to ramp that up to something that could allow the country to continue functioning at a rudimentary level. All they need is the right motivation, and losing the right to import oil would certainly provide that. For Americans' sakes, I sure hope the financial system collapses soon rather than later, while they are still the #3 oil producer, so they'll at least have some domestic oil left to power the transition to coal. And by the time the US runs out of coal, the Middle East's oil will likely be long gone.
"I wonder if they'll just put their efforts into CTL instead."
I wonder about this as well. Doesn't appear to be too much activity ..... yet.
Perhaps, but based on the evolutionary history of our planet there is no guarantee that Homo idioticus will be a part of that new and improved balanced ecosystem.
http://i289.photobucket.com/albums/ll225/Fmagyar/coping.jpg
"After a week of hard fighting, Coalition forces took Mombasa and began to advance up the main highway toward Nairobi, while the battered US divisions and their Kenyan allies retreated before them. The Kenyan president fled to Kisumu, in the far west of the country, with his mistress and his cabinet. Jets still screamed south from US bases in the Persian Gulf to tangle with Chinese fighters based in half a dozen African countries, and land-based cruise missiles and B-52s from Diego Garcia pounded anything that looked vaguely like a military target, but it was hard for anyone to miss the fact that the US was losing the war."
http://thearchdruidreport.blogspot.com/2012/10/how-it-could-happen-part-...
You imply that N. Korea is functioning at near minimal net energy need. How much 'energy' do you think it might gain if it did not have a military. I am not arguing if this is a realistic assumption, but many countries in this world spend an inordinate amount of energy on their military forces.
Don
I guess I picked a good time to finally begin reading "Collapse" by Jared Diamond then.
I don't know the right answer but the obvious answer seems to lack some context.
The European prices are due to higher taxes. These taxes buy public goods in these same countries.
A significant share of the new, higher prices are exported to oil producers
I like your work - some use of statistics seems a little naive:
For example the graph you show of 'employment' is this FT or all, in the UK only 25% of the working age population has a FT job, the recent drop in US unemployment U3 was not reflected in U6...
In the US you have had wage deflation plus aggressive outsourcing for at least a decade longer than in Europe so I imagine the structural employment problems are worse.
As I'm sure you know the real unemployment rate is ~23% and that is in a country with no universal means tested cash benefits - unlike the UK and much of Europe.
We are in an economic war with our masters and they control the media for example according to the UK's mass media we are in an age of austerity BUT the government borrowed >20% more than last year, of course this may in part have something to do with the also >20% decrease in North Sea revenues over the same period.
Rice Farmer has just posted up 'Special Issue "New Studies in EROI (Energy Return on Investment)"'
http://www.mdpi.com/journal/sustainability/special_issues/New_Studies_EROI
Looks good reading if you have any interest in EROEI or EROI ;-)
My blog:
http://slightlypreoccupied.blogspot.co.uk/
This looks a bit afterthought-ed in. There are plenty of places in the US/Mexico and other non-Asia places where you could make that argument. A more plausible reason is a "long-age of expectations" clash. In the US we expect to have an environment that isn't completely toxic from straight-piped industrial waste and we expect to have reasonable and safe working conditions. Beyond that the US expects to live in rather large houses with climate control, electricity, and running water and most also expect to have personal automotive transportation. There are other things Americans expect, obviously, but those are biggies. So I'd say the cost of goods produced in Asia is not climate driven, but due to starting from a lower point with different expectations.
This comment is really too short, but I was trying to write a post of 1,000 or so words, and didn't have room for a good explanation.
I had talked about this a little bit more in The Close Tie Between Energy Consumption, Employment and Recession (which is not on TOD).
There are really a number of issues, and what you describe is part of them. Starting with a colder climate, Northern Europe and later America stumbled into using fossil fuels early on, because trying to heat our homes was leading to deforestation and not enough fuel for everyone. As we learned to use fossil fuels, we built up a whole culture around them. We made big sturdy cars, too, rather than bicycles, partly justifying this based on the fact that in some places, it is too cold for bicycles in winter. The early use of fossil fuels also made us rich enough to build big sturdy houses, which people needed high salaries to pay for.
The globally warmer countries generally did not ramp up their fossil fuel use as much. Part of this may have been the fact that they did not have as much of a need for supplemental energy to keep their homes warm. Homes could also be built in a much less sturdy fashion.
About fossile fuels usage yes maybe you could say so, first major use of fossile fuel is peat in Holland I think, then coal in England and very soon after in continental Europe.
As to houses, would say that houses tended to be more "sturdy" in southern europe than northern one (and also the case compared to current American ones in fact), for instance in France, southern old houses are always plain stones and sometimes really thick (also true in Spain, Italy or even Libanon for instance) whereas in Normandy it was more "wood structure with mud and straw", and with coal, bricks became also very common. Scandinavian traditional houses are also more wood I think.
But also a lot of cultural aspects, in many Chinese regions the climate is also very harsh, also true in Japan, but wood always has been a major part in construction (not only).
But for sure the case compared to tropical climates.
When I visited China, it was clear to me that the part of China to the East (where most of the manufacturing is) is much more moderate than the US. Temperatures in Beijing (in the north) are not that different than Atlanta, at least at some times of year. Tokyo also has a climate similar to Atlanta. (Atlanta is one of the areas in the US with more moderate temperatures.) Certainly there are parts of these countries that are cold, but not the heavily populated areas.
Perhaps it is just the lower standard of living that is important. But if it is warm outside, building a home so it can be heated becomes less important. This reduces both the cost of building the home and the cost of heating the home.
Beijing has much colder winters than Atlanta, and Tokyo as well (even if less)
http://en.wikipedia.org/wiki/Beijing#Climate
http://en.wikipedia.org/wiki/Atlanta#Climate
http://en.wikipedia.org/wiki/Guangzhou#Climate
As a general observation I see Guangzhou pop up a lot as the location of many manufacturers and the climate there does appear quite mild.
So you were trying to approach it from more of a historical origins perspective rather than a "how it is now" and "going forward." I think those two items are rather important because in the US we've painted ourselves into a corner - built long-lasting infrastructure that requires a lot of energy to use. SUV's sold today have the potential to last 10+ years and someone that just spent $25k-35k on a new one isn't going to turn around a couple of years later and buy a Chevy Volt (or Fiat500 TwinAir). Large numbers of huge houses houses have been (and continue to be) built that cost a fortune to heat and are populated with electronics with a lot of phantom loads and other wasteful things (like a light switch turning on a minimum of 3 lights).
McMansions and SUV's are things that don't actually have to exist for a good life but they've become part of the US culture so we're stuck with wasteful durable goods *and* a need to change the culture (aka "stop digging") before we can move a long ways towards adapting to a different energy and balance of power profile (declining world relevance) and also keep up quality-of-life.
Yes but no :-)
You can live with no heating until the weather patterns change - as is happening in China.
I have a relative who works in China and rents an unheated flat, they had to return home during a recent winter.
The locals with no choice suffer increased respiratory illness as the temp. drops below 18C.
All the models predict China will suffer horribly from accelerating climate change these are the same models that are perpetually behind cf. the models past predictions for Arctic sea ice cover with reality.
That EROEI link Rice Farmer posted up was a beauty.
From my travels in China during the mid 80's, one of the biggest legacies that Mao Zedong left behind was, "it is good to be cold". Whether this was a preconceived idea or not, but the country saved a heap of fuel and kept the population happy while their leader swam freezing rivers in the middle of winter.
We stayed at mainly local accommodation and none of it was heated and the outside temp was below freezing, and it was bloody cold.
I suspect those austere teachings have been lost to time, hence the massive growth in coal use for heating and cooling via electricity.
The air in towns at that time was not very good just from coal being directly used for cooking, I can't imagine what the air would be like if everybody was burning coal to keep warm.
I don't understand why good sleeping bags and clothes won't keep people warm. We are becoming a bunch of wimps.
The actual need for residential heating is the minimum necessary to keep the indoor plumbing from freezing. Some heat is also needed for bathing, e.g. the weekly communal sauna.
What is the most healthful indoor winter temperature?
Living in Sweden I can confirm this.
I am interested in lowering the Minimum Operation Level of my own life. It is however very hard, beacues of the cold. For 9 months of the year I need access to a warmed living area. I need heat in my house. Thus I need a well built house with various cables and pipes conected to it. There are building costs that I pay for via the rent, and subscription costs for the utilities. Then to serve all this we need an industry,lots of workers and all that. The economy must be efficient to make this all go round.
If the climate up here was just warmer we could live in simple cheap houses, but no, sois not the case. Let me also add that I have been aware of this for much longer than I had a clue on Peak Oil.
At this point in time the problem should probably be set a bit differently, that is : collapse or adaptation.
In any case one could say that the "economy" will learn to live with higher oil prices (in whatever terms this has to be considered, or let's say with less barrels per day or year).
If focusing on the adaptation branch (even though most probably the least probable), the question is accelerating the decrease of fossile fuel usage through "overall technical infrastructure modification" : change in vehicules and transport modes, change in urbanism and construction tendencies, way of life, etc.
For this, instead of trying to define the "solutions"(very easy to be wrong there), best way is to favor any of them without having to define them, the best policy for this being increasing volume based taxes on fossile fuels.
And this is valid at a country level in a simple selfish sense, even if the measure, instead of being "we will be better off compared to today if we do it", is more "we will be better off in 5 years if we do it than in the same five years if we don't".
I would argue that volume-based taxes often don't make you better off in five years, even if your population uses less fuel (as you usually measure it) because we are working with world markets.
Consider the situation when the tax reduces manufacturing in your country. Manufacturing can simply be moved to a different country that doesn't have carbon taxes, causing job loss in your country. If cheap coal is used for energy in the new country, this makes it even more advantageous to move manufacturing elsewhere. With free trade, citizens can buy agin buy the product, now made in a more carbon intensive way elsewhere. Your country has lost jobs, and through the loss of jobs, reduced its energy consumption, but (based on recent patterns), other countries have increased their consumption of coal.
Also, a volume-based tax doesn't work well on oil, when international effects are considered. World oil supply has pretty much "maxed out". It doesn't increase very much, no matter how much price rises. If your country uses less oil because of volume taxes, it leaves more oil on the world market for someone else. People in less developed countries may very well buy new cars and motorcycles, and get used to the better oil supply that you so kindly have provided them. Then if world oil supply goes down later, there are even more competitors for it.
Again I don't agree with that, I'm not saying it's a "miracle solution", or will avoid the mess, I'm just saying it's the only meaningful policy to accelerate the necessary transitions in a "gradual transformation context", or that in this context a net importing country doing it will always be better than if it didn't.
The "you leave the oil to the others argument" doesn't stand : burnt oil is burnt oil and at time T you pay the same price than the others, pre peak or post peak doesn't make a difference here either, the difference being less oil per GDP unit (and less deficit in trade).
(plus with the jeavons "paradox" it's not even clear you will consume less)
And you can also remove or lower taxes on work in parallel.
But yes, efficiency can only do so much.
By the way Kümmel's book is available on scribd (didn't have time to read it yet) :
http://www.scribd.com/doc/59899019/The-Second-Law-of-Economics-Energy-En...
(also have shorter articles in pdf if you're interested)
The problem is reconciling these two statements
1) we can cope with steady fuel price rises
2) ultimately Peak Oil will cripple the economy.
Recent fuel price shocks could be tolerable since we can make fairly painless modifications to our vehicle usage. In a sense we are cutting into fat not muscle. Beyond a certain point that may not be possible for several reasons like loss of employment, huge increases in food prices or when even tiny compact cars are too expensive to run.
The day must come when low wage jobs will not pay enough after meeting the cost of the journey to work. This applies to long commutes, night shift work or irregular transit connections. Perhaps this is already happening but is not acknowledged because we want to believe in the 20th century full employment paradigm. Maybe that acknowledgment will come in the 2020s. I'm speaking from an Australian perspective with 5% unemployment and petrol ~$1.55/L.
Yes, but part of what happens is that high oil price creates problems for the economy (fewer jobs, perhaps lower paid jobs, more payments to compensate for this, lower tax revenue). The government spends a great deal of effort covering this up. What looks like recovery is just the effect of all of the government cover-up going on. So it is really unsustainable.
In your post, you describe what happens to a typical person. But there are always a mix of people and businesses affected--some rich and some poor. It is people "at the edge" and jobs "at the edge" that are cut back. A government may lay fewer miles of asphalt roads because of high oil price, so workers are laid off. A subprime mortgage holder may default on his loan, because he cannot make all of his payments, if oil prices rise. In the US, we are still experiencing the financial impacts of this--the government is to a significant extent covering up what is happening though, with deficit spending, and ultra low interest rates.
At a certain point EVs become cheaper, and offer a fixed cost.
I'd argue that point is around $80/bbl in the US (around $120/bbl in Europe, due to lower VMT per vehicle), but it's well before the point where commuting becomes unaffordable.
There is a huge difference between now and the spotty areas of economic troubles, like those that were popping up around the world ever since WWII ended. Now we can not see anywhere that is prospering. It's greatly helpful for the American politicians that Greeks, Spaniards and others are rioting, hungry, jobless, etc. "Connect the dots", would be what politicians would like to say, but there is no need to say it.
Anyone with a junior high school education can connect the dots. It's clear what has happened. Everyone knws we are like unspayed and unneutered cats being fed by an old rich woman. We cover the front lawn, all the rooms, every windowsill, the driveway, the roof. We did not realize what had happened until it was too late. Now the old woman is slowly dying, and doesn't feed us so often. We look helplessly at each other, across the oceans, over to other continents, "you too?" Our suffering is pretty universal, and it is somewhat of a shock. We were always supposed to be advanced, intelligent, rational. How could we find ourselves in the same predicament as a bunch of hungry cats living at the mercy of one rich old weak woman?
Since the economic problem is patently universal, then the politicians are given much more leeway to "manage" the economy to try to help us desperate creatures. I suppose, if I continue with my analogy, it is like a team of doctors (summoned by the cats) showing up to give injections to the rich old woman who is still dying. They inject her with stimulants and she staggers out of bed to feed the cats, but always a bit less and a bit slower.
Meanwhile the cats are getting bored of waiting for her. Some are fighting and dying off, some young ones are turning to natural mouse hunting. Some are too hungry and weak to breed. Things aren't going well, compared to before. Yet the cats persevere, and so do we. How could we just let the economy collapse? We have got some recourse, and we understand in a basic way what has happened. So we take steps to alleviate our suffering.
True, pi but we all know how easy it is to herd cats...
http://4.bp.blogspot.com/-XJYezLLImuo/Tv1VxCPoOZI/AAAAAAAACeo/8xAqrvYCx2...
[Mod note- hate to be catty, but I can't leave an off-topic thread for posterity. :/]
Is the question West specific ? If it is then the answer is an affirmative, if people there can get past the psychological barrier of high expectations that Nate Hagens describes then it can be done without much trouble at all. There is a lot of what I'd call 'spare capacity' in the west. We (the developing countries) unfortunately have no such 'spare capacity'. Oil is a prized resource here and people will fight to death for it. No one's willing to go back thirty forty years and live in the dark ages again. Most power structures here are based on the availability of affordable energy.
No, obviously it is not. We live in a global economy. Though some nations are better able to cope with high oil prices than others it is the world as a whole that counts. And high oil prices affect every nation on earth to a great extent. And as oil prices continue to rise every nation will suffer.
But oil prices may not continue to rise. If the world slips into a deep recession, then a depression, this will hit oil consumption dramatically, driving down prices. Either way, high oil prices are having, and will continue to have, a dramatic effect on the economies of the world, eventually driving them all to ruin.
Of course high oil prices are not the only thing affecting the economies of the world. It is just that the world is already at the tipping point. High oil prices will be the thing that gives the world economies that final push that tips them over completely.
Ron P.
There is a bit of disconnect in the argument that the US cannot adapt vehicle size and fuel efficiency because of the graphs that Gail presents. These graphs show that in spite of rising fuel prices the US hasn't adapted. Basically, if fuel efficiency mattered they would have adapted. They still can.
Now who in the world made such a silly argument as that?
Nonsense! They definitely would not have adapted.
Average age of cars on U.S. roads rises to record 10.8 years
The average new car is smaller and gets much better mileage than the old cars. So the adaption is in progress. But it takes many years to replace the fleet. So the argument that "if fuel efficiency mattered they would have adapted" could only be made by someone who has no idea of how long it takes to adapt by replacing the fleet.
Ron P.
I remember a serious spike in big SUV sales in 2009 though.
The thing regarding cars in the US is that :
- the 40ies 50ies 60ies period of the typical "big american car" sedan or station wagoon kind
- more or less lost ground in 70ies 80ies to japanese and european cars (that were also on the pressure of higher gas prices through volume based taxes)
- the SUV concept or truck resurgence in the 80ies 90ies, bringing back an American "character" to a kind of vehicle
For sure if the message "first oil shock=US 1971 production peak"(what it was) had been given instead of the "first oil shock=Arab embargo" little group lie song, things would have been a bit different.
"I remember a serious spike in big SUV sales in 2009 though."
That was after the 2008 price spike had turned into a price crash. IIRC there was a lot of unsold 2008 SUV stock that they were offering big discounts on. So, big discounts and the price of gasoline was low again - short memories, big sales. It doesn't explain the rising sales in the face of rising prices since then though. At the point of sale I don't think Americans think much about fuel economy...they'll talk about it like it matters, but when it comes to buying they'll go for the image and ego over everything else. Then just bitch and complain about how much they're spending on gas afterwards.
I purchase a new car roughly every 10yrs.
So I will predict I will adapt, if the article is correct, at most two more times before the 18yrs is up.
Jay Hanson's "America 2.0" http://jayhanson.us/america.htm suggests a possible upbeat future after an economic collapse caused by unaffordable energy. The premise is that "jobs" are a major consumer of energy, and most are not necessary to provide the basic needs of food, clothing, and shelter, or indeed most of the good things in life such as entertainment and social interaction. Civilization could actually thrive on one-tenth of the energy if the government just provided everything at no charge!
It's an attractive alternative to resource wars, civil unrest, and dieoff, and makes eminent thermodynamic sense. But the needed transition from Homo economicus to Homo reciprocans is not likely on any large scale.
Presumably from replicators powered by perpetual motion machines.
"Everything" was perhaps a too subtle choice of words. People would not be provided with MacMansions, casual travel, filet mignon, kilowatt 2 meter televisions etc., and they would be forced to amuse themselves at the local level. 10x energy reduction is conservative under those conditions.
Note that would be a sustainable energy consumption. Some people would be happier, some maybe not.
Dak - Most jobs aren't necessary to provide for basic needs? If that wasn't meant as sarcasm it has to be one of the strangest statements I've ever seen on the net. If serious I have no response. At 2:30 this morning I stopped at a Denny's on the way to one of my wells. The place was packed...Texas makes all bars/clubs stop serving at 2 am. About 4x the normal wait staff. In that part of Texas such jobs are gold. Without those jobs these folks would have to move or try to survive living under a bridge. But move to where...somewhere else where you don't need a job to provide basic needs? He has to be joking.
But why are people working at 2:30 in the morning? To service and support fossil fuel extraction? Technology has progressed to the point where robotic production of food and other essentials could be supported entirely by renewable energy, *if only* people would not drive so much!
Wouldn't you rather learn to play the banjo :)
Substitute "unlimited (inexhaustible) energy" for "renewable energy" and you have a major theme in eutopian science fiction. Of course, that leaves open the question of where the inputs to the manufacturing process come from. To be sustainable, it would require recycling of non-renewable resources, careful management of renewable resources (presumably by robots), all services to be provided by robots, all repairs and maintenance performed by robots, etc.
Would the banjo be provided to you for free by the government? If you got the banjo from someone else, would you have to give him something in return? If you needed to make your own banjo to have one, would the government give you the materials and tools for free?
Well it's not that cut and dried. Agriculture can provide positive or negative EROEI, it depends on the fraction of fossil fuel input vs. that that comes from our glorious Sun. Productivity may suffer, and people may or may not die off from lack of flank steaks, but given the choice I suspect most would switch to sustainable consumption.
If you can't make a banjo, I feel sorry for you, but thanks for making my point.
I have to say this is actually true. If wealth and income was distributed a bit, it would be very easy to keep people fed, clothed and housed. In fact, in 1950 the labor force participation rate was lower than now, at under 60%. There were more large families with kids, more men worked and fewer women, but overall it was lower. Many people have jobs that contribute fairly little - push paper around and such. Ultimately, feeding people is done by a very small part of the workforce. Housing could be very cheap, if it was treated as a right (distibutivist idea here) and/or government stepped in (as in Singapore).
Mitt Romney doesn't work, and he pulls in $20 million+ a year. I don't see how he is less of a parasite than the unemployed. Divide up the wealth that is flowing every upward and you could support literally a hundred or more million people (the Wal-Mart heirs literally have as much as the bottom 100 million Americans), if not luxuriously. It might a bit like Singapore, or like the Soviet Union, depending on how we did it.
We have already achieved the society where most people could have much more leisure and wealth, we just let the wealth accumulate at the top as it naturally does without active intervention.
I had an "Ah-Ha" moment when I read Craig Dilworth's, Too Smart for Our Own Good: The Ecological Predicament of Mankind. See my post on Our Finite World, Human Population Overshoot--What Went Wrong?
All biological species are programmed to produce far more offspring than needed to survive. The excess are generally weeded out through "survival of the fittest". To some extent this is determined by food supply. A species cannot grow to the point where it eats too much of its food supply, or its food supply will become extinct, and the species itself will become extinct. Humans have gotten around this issue by supplementing our energy supply, first with fire applied to renewable energy sources, and later with fossil fuel energy. Without this supplementation, our population would likely be like that of other primates--perhaps a few hundred thousand (not millions or billions).
But even apart from the food supply issue, there are other ways nature make certain that population does not grow too great. In K-selected species, which includes large mammals, there are inborn instincts that make certain that population will not grow too great. One of these is territoriality. The male of the species normally marks out a much larger territory than it needs for food purposes for itself and its family. It then will defend this territory, fighting with others, even to death. We can see this in mammals we are familiar with, like cats and dogs. Humans do not seem to be exempt. This instinct helps prevent "tragedy of the commons"--too many of a species over-using common resources.
A second way K-selected species keep population in line is with hierarchical behavior. We have seen this in dogs and many other mammals. It is pretty clear that it is an instinct in humans as well. This instinct works in animals to keep population down by concentrating resources in the "fittest". Those at the bottom of the hierarchy are cut out of the picture. This instinct seems to be most prominent when there is overpopulation, and nature is trying to bring it down.
The whole situation is very frustrating, especially to those of us who have been brought up with religious backgrounds. Religions (at least some of them) talk about looking after the poor and needy. But in practice, if this happens, it means that the poor and needy have more access to resources, and their population grows, growing the total population even more, and making the resource shortage even worse.
At any rate, I see hierarchical behavior we are seeing now as part of the instinctual pattern. While I don't like it, it is hard to see a good solution. Poor people don't like being told, "We think the world needs to be limited to one-child families, you included. It is too bad if you don't have enough offspring to take care of you in your old age. Here are contraceptives."
Poor people aren't being prevented from having babies in any part of the developed world, and in fact their poverty, if anything, makes them more likely to have babies as they have poorer access to birth control. Income inequality in the developed world is worse in the US but the US still has a higher birth rate than Europe. The world's highest fertility rates are found among poor African countries.
Your argument sounds good but fails the test of reality.
I agree. When poor people have access to education and resources they have lesser number of kids. We have over 200 years worth of data to prove that. Ecological footprint goes up though, significantly, to the point that it overrides the fewer number of kids.
I think that it's the slightest bit short-sighted and parochial to proclaim that all of the economic crisis tendencies that we see emerging are solely derived from disruptions in the financial sector and government manipulations. The crises that we are seeing emerge are considerably more structural, and the financialization of the economy that originated in the mid-'40s and was augmented in the early '90s are symptoms of these structural problems.
Put simply, the problem is overcapacity, though some like to call it overproduction or over-accumulation (this is the tendency for capitalism to build up tremendous productive capacity that outruns the population's capacity to consume, owing to social inequalities that limit popular purchasing power and market saturation, which erodes profitability); a massive general glut/deflationary spiral, and Malthusian pressures. These may seem at odds with each other, but they don't have to be.
It all really started when the Golden Age of Capitalism (1945-1975) ended. This was a period of rapid growth both in the center economies and in the underdeveloped economies - one that was partly triggered by the massive reconstruction of Europe and East Asia after the devastation of the Second World War, and partly by the new socioeconomic arrangements that were institutionalized under the new Keynesian state. Among the latter, key were strong state controls over market activity, aggressive use of fiscal and monetary policy to minimize inflation and recession, and a regime of relatively high wages to stimulate and maintain demand. Well, this period of high growth came to an end in the mid-1970s, when the center economies were seized by stagflation, meaning the coexistence of low growth with high inflation, which was not supposed to happen under neoclassical economics.
Stagflation, however, was but a symptom of a deeper cause: The reconstruction of Germany and Japan and the rapid growth of industrializing economies like Brazil, Taiwan, and South Korea added tremendous new productive capacity and increased global competition, while social inequalities within countries and between countries worldwide limited the growth of purchasing power and demand, thus eroding profitability. This was aggravated by the massive oil price rises of the '70s.
Capital tried three escape routes from the conundrum of overproduction: neoliberal restructuring (Reaganism, Thatcherism in the global North and structural adjustments in the global South) globalization, and financialization. Of course, these only prolong the inevitable.
This brings up the question of whether the dramatic augmentations in the price of commodities are due to the commodities (& energy) bubble or the real forces of supply, demand, and production costs; Marx vs. Malthus. I think that both are technically correct and factor into the price, but that the Malthusians are correct in the long-term, as the overproductionist theory doesn't necessitate an overproduction of use-values, only exchange-values.
Exchange values indeed!
Well stated.
Thanks! Well, I should have said 'the overproductionist theory doesn't necessitate an underproduction of use-values, only an overproduction of exchange-values,' because I do think that there is an overproduction of use-values. Demand is not infinite.
Re figures 2 and 3 the categories are defined in the footnotes as:
Note that the categories in Figure 2 are a somewhat unique grouping of various sized cars; small, medium and large SUVs; mini and large vans; pickups of various sizes with or without dualies; and actual trucks.
Thus, the auto fraction of the fleet in Figure 3 can't be related exactly to the curves in Figure 2.
My take would be that the fleet has decreased in size and increased in mileage since minivans have fallen out of favor, small SUVs in the CR-V, RAV-4, Escape class have sold very large numbers in recent years, and large SUVs and pickup trucks are a smaller part of the mix.
Also, demand for single-family homes in far suburban developments is very muted, while multiple dwelling unit construction in closer in communities has revived.
Note that the average fuel efficiency of all vehicles is not my calculation. It is the calculation of the Federal Highway Administration. Based on their numbers, the overall average isn't moving very quickly.
But your time series appears to miss the current trend, which is about a year or so old. Despite rhetoric in this election year about the coming US energy independence, it appears that many buyers have trouble seeing past next month’s fuel costs. Over the first nine months of 2012, US sales of Fiats were up 136%. While you may think that’s a new model effect, Smart car sales were up 95% with essentially no model-year change. Chrysler sales were up 53% on the back of demand for cars, and GM eked out a small gain as rising car sales offset falling demand for trucks and SUVs. While the Ford F-series pickup remains that company’s biggest seller, Focus sales were up 91%. My take on the above is that fuel costs have started to bite even those who can afford to buy or lease a new vehicle, changing the general preference for bigger into right-sized.
As I said, this report only goes only through 2010. Maybe 2011 will be better, and 2012 even better yet. But in general, it takes a long time for the effect to new cars to flow into the mix. The effect depends on old cars removed, as well as new cars added. If people are poorer, old cars are kept around longer. The average age of cars has been rising, indicating this is happening.
Also, if we are talking about oil in general, rather than simply fuel for automobiles, there are also a lot of other kinds of oil uses, that may not be seeing very rapid efficiency gains. There are aircraft, boats, construction equipment, trucks, trains, barges, electric generators, irrigation pumps, and lots of other kinds of equipment using oil. Many of these are made to last many years, so aren't often replaced.
Table 4-5: Fuel Consumption by Mode of Transportation in Physical Units gives the actual gallons used by various modes of transportation including the categories used in your Figure 2. From this data, it is clear how much the categories changed in 2006. For all categories, the volume consumed in 2010 is less than in 2007. This is most likely due to fewer miles being driven, rather than a significant increase in vehicle miles/gallon.
But it really doesn't matter much whether the reduction in fuel volume comes from increased vehicle efficiency, smaller vehicles, or fewer miles so long as the adjustment to higher prices is to reduce the use of fuel. Increased vehicle efficiency results in premature depreciation of older vehicles. Smaller vehicles reduces auto industry revenues and profit margins. Fewer miles driven results in less spending on recreational activities, vacations, etc.
I hadn't noticed that table. The big changes don't give a person much confidence in the data.
Vehicle registration data comes from a number of tables which seem pretty much unchanged for many years. "Automobile" vehicle registrations are down by 4.5% between 2008 and 2010, from 137.1 million 130.9 million. The total number of vehicles registered peaked in 2008 at 248.2 million, before declining to 242.1 million in 2010. So at least part of the lower mileage is fewer vehicles on the road. I know the insurance industry has noticed that young people are driving less now. If they don't have jobs, they don't drive as much (or at all).
There has been a lot of technological improvement over the past 5 or 6 years which has enabled at least the Western Hemisphere to significantly increase energy production (and oil production)as a whole -- at a price. These technological improvements include deep water drilling, fracking, and oil sands among other techniques.
Energy usage in the Western Hemisphere seems to have stabilized due in part of efficiency gains and in part to slower economic growth.
I'm not as sure that either of these trends is in place in the rest of the world.
The main problem with the US economy doesn't seem to be a lack of energy, but, rather, seems to be an overhang of bad loans which are slowly being cleared. In two or three years, the US mortgage market and financial system might well return to something like normal (i.e. less than 1% in foreclosure, 4 to 5% serious delinquencies, and banks with only $200 billion or so in assets in problem banks.) Growth in the US economy might well accelerate then.
There is much potential danger over the next two or three years. The recession in Europe will slow the US economy down. It could easily spread to the US.
Eventually, a more inward looking, but growing US economy is likely to develop based on more appropriate housing and real estate development pattern, more fuel efficient production, a more fuel efficient vehicle fleet, and more use of cheap natural gas to generate electricity.
A more inward looking US economy, even if growth rates were to double from current levels, is not really a happy prospect. It suggests a slower growth rate than was experienced before the 2008 recession hit. The prospect of leaving the rest of the world out of the growth equation suggests a very dangerous world situation.
Interesting times.
"The greatest shortcoming of the human race is our inability to understand the exponential function."
Dr. Albert Bartlett
Thanks. I took freshman physics off the dude 40 years ago this semester. Totally awesome.
Combined net oil exports from the seven major net oil exporters in the Americas* in 2004 (BP):
*Canada, Mexico, Venezuela, Argentina, Colombia, Ecuador, Trinidad & Tobago
The following charts (courtesy of a helpful Oil Drum participant) show the gaps between where we would have been globally at the 2002 to 2005 rates of increase in production and net exports versus actual data for 2006 to 2011. Note that because of the nature of "Net Export Math,” on the upslope, net exports tend to increase faster than production. Of course, on the downslope this reverses, and we have seen measurable declines in Global and Available Net Exports (GNE & ANE), versus generally flat to slowly increasing measures of oil and liquids production.
And of course, one of the other implications of "Net Export Math," is that the depletion rate, the rate that we use up remaining resources, tends to be quite high in the early stages of a net export decline period.
For example, the observed rate of change in the annual volume of GNE was -0.7%/year from 2005 to 2011, or an GNE decline rate of 0.7%/year. However, I estimate, based on the 2005 to 2011 data, that the rate of change in post-2005 Global CNE (Cumulative Net Exports) was about -4.1%/year, or a depletion rate of 4.1%/year in the estimated post-2005 cumulative supply of (net) exported oil. In other words, I estimate that the supply of post-2005 cumulative global net exports is declining at about six times the rate that the volume of GNE is falling.
The observed rate of change in the annual volume of ANE was -2.2%/year from 2005 to 2011, or an ANE decline rate of 2.2%/year. However, I estimate, based on the 2005 to 2011 data, that the rate of change in post-2005 Available CNE (Cumulative Net Exports) was about -11%/year, or a depletion rate of 11%/year in the estimated post-2005 cumulative supply of (net) exported oil that will be available to net oil importers other than China & India. In other words, I estimate that the supply of cumulative available net exports is declining at about fives times the rate that the volume of ANE is falling.
In reviewing the actual data, from 1995 to 2001, for my Six Country Model (Indonesia, UK, Egypt, Vietnam, Argentina and Malaysia, or IUKE + VAM), we found that that the supply of post-1995 Six Country Cumulative Net Exports declined (at 23%/year) at about four times the rate that the volume of net exports fell (5.6%/year), from 1995 to 2001. This chart shows the normalized production and post-1995 Remaining CNE, by year for the Six Country (IUKE + VAM) case history (1995 = 100%):
http://i1095.photobucket.com/albums/i475/westexas/IUKE.jpg
Note that the actual post-1995 CNE Six Country depletion rate was about 50% higher than the estimated value of 15%/year, based on extrapolation of the 1995 to 2001 data. If this same pattern holds true for post-2005 Available CNE, it suggests that an estimated 11%/year post-2005 Available CNE depletion rate may be too optimistic.
Updated “Gap” Charts:
EIA Total Liquids, 14 mbpd Gap:
(2002-2005 rate of change: +3.1%/year; 2005-2011 rate of change: +0.5%year)
http://i1095.photobucket.com/albums/i475/westexas/EIA_total-liquids_02-1...
BP Total Petroleum Liquids., 13 mbpd Gap:
(2002-2005 rate of change: +3.0%/year; 2005-2011 rate of change: +0.4%year)
http://i1095.photobucket.com/albums/i475/westexas/BP-world-production_02...
EIA Crude + Condensate, 14.5 mbpd Gap:
(2002-2005 rate of change: +3.1%/year; 2005-2011 rate of change: +0.07%year)
http://i1095.photobucket.com/albums/i475/westexas/EIA-CC_02-11_gap-1.jpg
Global Net Exports, 18 mbpd Gap:
(2002-2005 rate of change: +5.3%/year; 2005-2011 rate of change: -0.7%year)
Available Net Exports (GNE Less Chindia’s Net Imports), 17 mbpd Gap:
(2002-2005 rate of change: +4.4%/year; 2005-2011 rate of change: -2.2%year)
Westtexas,
Thanks for the thoughtful input. The chart of net exports in the Western Hemisphere is an excellent resource. Clearly, pretty well every oil exporter in the Western Hemisphere except Canada is suffering from a decline in oil available for exports. It is clear that the technical (and political) challenges of exploiting newer sources of oil are very large.
It is important to note that exporters aren't the only producers. The US is a net importer of oil, but it is still a significant producer. I believe that US oil production began to increase significantly in 2009 and that increase has accelerated ever since. The number that sticks in mind is a 2 million barrel per day increase since 2009. If you add the increase in domestic production to the decrease in imports annual US oil supplies have increased since 2005 by over 1 million barrels per day.
This increase does not mean that everything is good. Supplies have increased, but at the cost of increased oil prices and of a very much more dangerous international situation. The increased prices cause a direct drag on economic growth. They also were a major cause of a recalculation of what makes a valuable real estate investment. The recalculation was a major (but not the onl) cause of the mortgage crash.
Similarly, the high oil prices are a major (but not the only cause) of recession in Europe and a slow down in growth in China.
Again, good and valuable comment. Thanks.
Incidentally, I define a major net exporter as a country with 100,000 bpd of net exports (of total petroleum liquids). Canada and Colombia both showed increasing net exports from 2004 to 2011, but their combined increase was more than offset by declines by the other five countries.
Regarding the US, I think that the most appropriate reference year is 2004, prior to the 2005 hurricane damage. The EIA shows 2004 annual crude oil production at 5.4 mbpd. It seems likely that US crude oil production may average around 6.4 mbpd in 2012.
Following is an excerpt from a paper I wrote:
http://www.energybulletin.net/stories/2012-04-24/update-global-net-oil-e...
To borrow another metaphor:
The "Sixth Sense" is an American movie about a boy who sees ghosts. In the movie, some ghosts don't know they are dead, and they only see what they want to see. My view is that for most Americans our auto centric suburban way of life is dead, but most of us don't know it yet, and we only see what we want to see.
Westtexas you have again pointed out excellent information. So US production is up by 1 million BPD and rising as they build out various shale formations, deep water, etc. It appears that this increase will probably continue for at least the next decade. All of these developments make it likely that there won't be a hard crash in supply in the US. On the other hand, none of technical advances come cheap.
There are also lots of problems with increases in the cost of oil infrastructure -- everything from deep water drilling equipment, to pipeline construction, to materials for fracking shale, to materials for tar sands, to repairs on aging refineries.
It is very clear that the suburban lifestyle, replete with large houses, long shopping trips, and longer commutes are very vulnerable to high prices.
Merrill has a post a bit further down in this stream on the lack of growth in ex-urban communities in the US. I can't say it better. It isn't necessary to predict the slow strangulation of these communities in favor of areas with better access to jobs, services, and more fuel efficient services. The last recession and the current painfully slow growth rate are doing the job right in front of our eyes.
I am a shale play skeptic. Note that Texas has the longest history with intensive modern efforts to develop shale gas plays, and Texas natural gas well production started declining in 2009, even as natural gas production from the Barnett Shale continued to increase (using a common data source, the Texas Railroad Commission). In other words, rising natural gas production from shale gas plays could not keep total Texas natural gas well production on an indefinite upward slope. In my opinion, this model does not bode well for US (oil and gas) shale plays.
Also, note that a number of recent reports, e.g., from the USGS, have tended to confirm what Art Berman has been saying about shale plays for quite some time.
wt – “…the dominant trend we are seeing is that developed oil importing countries like the US are being gradually priced out of the global market for exported oil...” I’ve been thinking for while that the time may have come for you to retire”ELM”. You have had a good run and should be proud of yourself. But it seems the important dynamic today is the “ILM”...Import Land Model. As a typical gluttonous US consumer I couldn’t care less how much oil the exporters consume. I only care about how much we can import. The rest of the world can go sit in the corner and suck their thumb as far as we’re concerned.
Are we importing all the oil we need to expand our economy? At current prices it doesn’t appear we are. Does it matter whether the KSA is exporting less or if we are being outbid by China et al? As you’ve pointed out before China can create a superior return on its energy investments compared to the US and thus can pay what is required. ILM incorporates not just the changing export volume in the market place but also the price determined distribution. China may be able to outbid the US to some degree but also consider how many economies can’t compete with the US. Exporters may have decreasing supply but if the US had an economy booming like China would ELM have much of an effect on US?
As a fellow rock licker I’m proud of you son. But, just as I have grown old gracefully and will soon fade away you should let ELM quietly slide beneath the waves. LOL
On the one hand, I've thought this since I first heard of ELM : many exporting countries would be basically unable to maintain production without the export income (because most of them aren't in the production tech business), so they're not able to price their customers out of the market, even if they do subsidise domestic consumers. It's not economically possible for global net exports to go to zero.
On the other hand, westtexas' entire point was *always* a drastic counterfactual simplification : IF exporting countries (and the BRICs) continue to increase their demand for oil as predicted according to trend, THEN the international market will be unable to supply the rest of the world (aka OECD and non-oil-producing developing countries) with their demand for oil as predicted according to trend, and indeed the export decline will be faster than the production decline.
This proves pretty convincingly that projected demand trends are nonsense. It doesn't really tell us anything about how production will be distributed a decade from hence, or a century. Ultimately, the present exporting countries and the BRICs are themselves competing players in the consumption market like everyone else.
There have not been any significant technological improvements recently. The price of crude oil has risen high enough to make those plays economic to extract.
I am not sure what would qualify as a technological improvement if you disqualify fracking techniques (which didn't exist 10 years ago), deep water drilling (which has gone from well in hundreds of feet of water to wells in over 10,000 feet of water in the last 20 years), and a continuous stream of innovation that has kept the tar sands at least marginally economic over the last 40 years. None of these innovations have kept oil prices down, but they have kept it flowing
It is sort of like saying that quadruple bypass surgery is not a technical advance because the procedure didn't bring the cost of health care down. Note that they didn't do a lot of bypass operations 30 years ago either.
Poobserv-“… if you disqualify fracking techniques (which didn't exist 10 years ago)...”??? We’ve been frac’ng for more than half a century. There have been some refinements over that time but the basic methodology hasn’t changed: drill a hole (vertical or horizontal), run steel casing into the hole, pump a propant carried by a viscous fluid down the casing with several hundred thousands of horsepower and then flow the oil/NG out of the well. That’s how they are doing it in the Eagle Ford et al today, that’s how they were doing it in the Austin Chalk wells 20 years ago, that’s how I did it in my first Eagle Ford well 25 years ago, that’s how I did it in the Edwards Limestone 35 years ago (a 500,000# “massive” frac), and that’s how they were doing it in west Texas 50 years ago.
Perhaps you were thinking about the horizontal component of some wells. But we were drilling and frac’ng 10,000’ dual wing hz wells more than 20 years ago. And Maersk has been drilling 35,000 hz wells in the Persian Gulf for quite a while using the same tech (and some of the same old farts) as was employed in the Austin Chalk. Many, many hundreds of Austin Chalk hz wells were drilled and frac’d in Texas. At the time it was THE most active play on the planet and doubled Texas oil production. Unfortunately as is the nature of fractured reservoirs, this didn’t last very long.
The oily shale plays have gotten hot dues to higher oil prices...not some great tech advances. Just as rising NG prices led to the boom in horizontally drilled and frac’d dry NG wells seven plus years ago. And since those prices collapsed the NG drill rig count has fallen 70%. And none of the “new” tech has been able to resurrect those plays. I won’t speculate on how low oil prices would have to drop to reproduce that outcome for the current hot plays but there is a price the tech won’t be able to overcome. In fact, the Eagle Ford profit margins are starting to slide as more of these “new” techs are expanding. A few years ago wells were being frac’d with 3 or 4 stages. Today 20+ stages are needed to produce those “legendary” high initial flow rate but at huge increase in cost: some frac jobs are now costing more than the drilling costs.
But you make a valid point about deep water drilling. On my 37 years it has jumped from 600’ to many thousands of feet. As far as the Canadian oil sands I’ll leave it to RMG contrast new tech vs. higher oil prices.
Hydraulic fracturing was an established technique when I started working in the oil industry over 40 years ago. The discovery well in the Pembina oil field, the biggest conventional oil field in Canada, had to be fracked in 1953 to get it to produce, and since then about 170,000 wells have been fracked in Alberta with zero cases of groundwater contamination. Alberta has tighter regulations and more experienced regulators than most places, though.
As for horizontal drilling, that is not a new technique, either. I remember a VP of the oil company I was working for saying, "It is difficult to justify drilling a well that ISN'T horizontal any more!" about 20 years ago.
A newer technique that HAS made a difference is steam-assisted gravity drainage (SAGD). It allowed Canada to book an additional 170 billion barrels of proven oil reserves, enough for 100 or so years of production at current rates. It is only applicable to Canadian oil sands though - it wouldn't make much difference to US oil fields or even US oil sands. It might work in Venezuelan oil sands but that assumes Canadian companies would be allowed to drill there. I don't think PDVSA has enough technical experience to make it work.
SAGD needs oil prices of $60 or so to make it economic. We've been above that level for some time, so there are $100 billion or so with of new projects in the proposal or development stage. This doesn't mean much in the global context, but it makes a significant difference to North American oil prices, and China has been buying up a lot of the companies producing oil sands.
Rocky - And I think one can make the argument that SAGD isn't so much a new tech but an old tech being applied in a new area. Thermal EOR projects, including steam injection, were big more than 40 years. And as you point out hz drilling isn't a "brand new" technology either. SAGD is taking a 40 year old tech (steam injection) and applying it via a 20+ year old tech (hz well bores). A viable application of proven technology that wouldn't be happening today if oil were the same price now as it was a dozen years ago.
The technocopians often seem to intentionally ignore how pricing drives much of these "new" technologies. It would be great for our economy if someone did develop a technology that could produce billions of bbls of oil at a cost of a few tens of $'s. But it hasn't happened yet and I'm not holding my breath. IMHO the only recent significant advances in oil patch technology were developed more than 20 years ago: 3d seismic and Deep Water production engineering. Which was very important because without those advances the US would probably be importing 50% more oil than it is currently.
The SAGD concept itself is relatively new. Government researchers hit on the idea of digging a mineshaft vertically in the oil sands and drilling out wells horizontally from it. However, oil companies said, "We have better ways of doing that" and started drilling them from the surface. By that time directional drilling methods had improved sufficiently to give them enough accuracy to do it.
Cyclic steam stimulation (CSS) works too, but having talked to a geologist who was drilling SAGD wells directly across the lease line from an XOM CSS project, SAGD is the way to go. XOM complained he was "stealing their oil", which he admitted was probably true, but felt it was more like "eating their lunch." Shortly after our conversation, Shell bought the little 20 employee company he worked for for $2.2 billion.
Rocky - Exactly. A new concept utilizing existing technology. That was the point of my original post: the oil sands got hot because oil prices rose enough to justify using existing tech to exploit them. You know the numbers better than me: if oil were selling for less than $30/bbl as it was in the late 90's how many SAGD projects would be running today...if any? Hz drilling and steam injection have been around for decades. The oil sands have been there for millions of years. What has changed is the economics driven by higher oil prices. Similar to what we're seeing in the fractured shale plays. As mentioned before the oil potential of the Eagle Ford Shale has been known for decades as has the ability to drill hz wells. In this situation the boom was caused by more than just the increase in oil prices. The pubcos couldn't find enough conventional prospects to justify their existence. Thanks to higher oil prices and well established tech they are no able to hang on by their finger nails IMHO. Should oil prices collapse, as did NG prices back in '08, I have no doubt we'll see another blood bath for many pubcos. It seems many folks are convinced that higher oil prices are leading to great tech advances. Tech advances that will, in their minds, eventually drive oil prices lower. As I mentioned earlier the last major jumps in oil patch tech IMHO were hz drilling and Deep Water production engineering. We've been benefiting from both for years. Personally I see no new tech of any significance on the horizon. Do you see any game changing tech coming down the road?
Rockman, no. There's not much that is new coming down the pike. Some people were excited about Toe to Heel Air Injection (THAI) which is a form of fire flood, but I haven't heard anything about it lately, which I interpret to mean the pilot project was a failure.
SAGD is cost effective at current oil prices, and companies are refining it to get higher oil recovery rates - up to 80%. There is also a trend related to the oil sands - the "carbonate trend" - bitumen trapped in carbonate rock. It's not as easy as the oil sands, which are unconsolidated sandstones, but oil companies which were late to the oil sands trough are using SAGD on it and some have booked reserves in it, indicating they are having some success. Higher prices are needed to make it profitable, though.
The Bakken formation isn't nearly as big as these, so I expect it to be something of a flash in the pan.
Sprawling Suburbs Growth Falls To Historic Low Amid High Gas Prices
Note that this was written in April before the recent run-up in gas prices. Suburban sprawl has reached its limits and is now retreating.
Excellent information and excellent comment.
The slow strangulation of these ex-urban areas is a direct result of increased fuel prices. In many ways the 2008 recession was caused by the increase of fuel prices beyond a tipping point which made these communities uneconomic. If the US financial institutions had been better organized and run, the results of this tipping point being reached would have been far more muted than they were.
Instead the results were a sudden cascading financial crash followed by a very long slow recovery.
Not pretty.
Yes, the gas price spike threw the "make money in real estate with no money down" machine into reverse, especially in the non-recourse mortgage states, and the whole thing cascaded from there.
But the recovery will be very slow since it will require financial recovery, real estate development realignment, and a lot of business restructuring that the housing boom was masking.
Suburban sprawl has reached its limits and is now retreating.
That article doesn't say "retreating". Low or zero growth is stagnation, not decline.
High oil prices ?
When is that going to happen ?
The money printing made the dollar and the other fiat currencies cheaper.
The oil price went down in the last 60 years.
http://pricedingold.com/crude-oil/
Why price oil in gold? Why not it in Apple stocks? For most of us we paid oil products with cash.
Try pricing crude oil relative to to the price of oil drilling rigs, exploration and salaries of oil workers, that is the cost of producing and refining the crude oil and bringing the finished products to market.
I'm fine with that, but you forgot to include military costs of maintaining supply lines and the cost of domestic information warfare and political corruption required for the status quo.
Yes, true.
"We really have two kinds of headwinds: (1) higher oil prices, and (2) cheaper competition for jobs from Asia and other developing countries."... It seems looking at the global trading figures that at least in manufacturing (1) might be counter-reacting (2) - wages in modern manufacturing actually are a small part of overall global trade costs - fine for global outsourcing trade when oils is $20, not so cool when oil is $95 or move as a threshold support price for shale oil. Depends on local raw material prices - ie WTI been cheaper than Brent.
$4,500 in Gas Siphoned in Latest Calif. Pump Heist.
If this is what happens with gas at 5 bux a gallon,imagine the chaos when it reaches 6 and up a gallon!
http://tinyurl.com/9343wgz
Seems there has been a big increase in gas tank drilling over the last week, e.g. in my neck of the woods http://www.wral.com/news/local/story/9241707/
Only temporary. That's why a posse used to hang cow and horse thieves. Same idea; different century.
Business owner just needs to setup one or more security webcams discreetly, run zoneminder, then give the faceshots and license plates to the police.
Of course in places like Oregon, where there is a paid fuel station attendant pumping the gas, I would expect few (if any) fuel thefts using that method.
"zoneminder"
What if you use PCs or Macs?
Upgrade to Linux, run it on a dedicated machine(would a RasberryPi handle it?), run it on a virtual machine, create a Windoze build etc
NAOM
In the UK most fuel pumps operate without a credit card or pre-charging by an attendant. Many stations have automatic number plate recognition cameras that read your number plate before releasing fuel to the pump. Some require an attendant to release the pump using a switch in the kiosk.
There is a long tradition of stealing fuel by using stolen cars and vans, false number plates, and /or large barrels in the back of the van rigged to the filler cap.
Simply fill up and drive off.
Edit - the enterprising thieves walk into the kiosk or store, whack or knife the attendant, and steal the cash register.
Aside from all the discussion about energy and money supplies, I believe there is a far more fundamental reason why the world is in crisis now at this point in history.
For about the past 600 years, tools have been developed to enable mass production. And as far back as then, craftsmen have clearly recognized that such things would put them out of business before long. The obvious reaction was to protest against the new tech and advocate for the old ways. However by now it is obvious, that approach only works in the short run.
The American answer has been to use the new manufacturing techniques to the fullest, and simply switch from producing necessities to fulfilling wants and preferences. The poster child is a 40 foot motorhome towing a yacht. But the modern economy has become so large and efficient that we are up against planetary limits no matter what games we play with money. If some brilliant scientist came up with a cheap non-polluting source of liquid fuel before quitting time today, we would enjoy another brief burst of economic growth and then smack up against other resource limits.
So now we are back to square one. What do we do with all the masses of people who are not needed to produce basic goods and services? Our current answer of converting stuff into toys cannot grow any more and is clearly unsustainable in the long run. It's not right and it's not wrong, it's simply devouring the planet. As a society we don't have a clue. Until we do, the current malaise is going to continue and intensify.
What we need is some voluntary and equitable way to engage the majority of the population that does not involve decimating the planet. What would that look like?
One other thought, I speculate that the proliferation of online games and 'worlds' could be our salvation. More and more people are satisfying their urge to compete and accumulate prestige through online worlds rather than in the material world.
Personally, I live in what many would consider to be impovershed conditions and I couldn't care less. I have at my fingertips an online community of friends, up to the minute news from all corners of the globe, and a massive library of information about everything you could imagine. Most of my leisure hours are spent tapping away at a netbook and it never seems to get old. I'm far from poor and could buy just about anything I want. It's just that I don't want any more things.
All the power that our server farms consume is an outstanding value if it keeps more yacht-towing motorhomes off the road. Yes, you read that right. World of Warcraft could actually save our collective asses.
Maybe many of us will need to go back to trying to grow food without much use of fossil fuels. I expect yields will drop a lot. Even techniques which we think of as organic still use a lot of fossil fuels.
I plan to give that a try real soon. Once again I would like to point out that it is entirely possible to annually produce the heat equivalent of more than 1000 gallons of diesel from one acre of ground. This is enough fuel to permit cultivation of about an additional 100 acres using conventional equipment (but a different tractor). That's an EROEI we can live with. And I believe the key to good yields without fossil fertilizers is to get scientific about the compost heap.
"What we need is some voluntary and equitable way to engage the majority of the population that does not involve decimating the planet. What would that look like?"
I've been wondering the same thing. Robots are not going to put me out of a job, but a good AI could. Fortunately, by the time they get around to building an AI for my little niche I should be retired.
Having everyone live in a state of permanent World of Warcraft doesn't seem very entertaining either. Personally, I find computer gaming boring. Building boats is much more fun, but how many boats can one person use? And then I need both space and money for materials and tools. Which implies a job, leading right back to a job not subject to automation.
I do not see how this is likely to play out, but in 20 more years BAU will have evolved in interesting directions.
What if you were able to access user-friendly CFD models like a computer game to analyze 100,000 shape variations, and then compare and discuss the results with other boating mavens? And eventually perhaps build one boat that it is the best damn boat possible for the purpose.
What if there was money in it?
It's already happening anyway, whether us old duffers like it or not. Only one of my nieces and nephews is interested in bikes or cars. All of them have full and interesting online lives. My kid cousin gets killed by a guy from Germany at least twice a week. They can't afford to mess around with cars and they don't seem to miss it at all.
Yep, resource depletion and stiff competition due to globalization is making it hard to recover. But I don't think it is even that easy. I'd add:
(3) Aging population as the baby-boomers retire.
Like Japan (but not as bad), the USA has a rapidly graying population and that is also limiting growth in addition to those first two factors.
Having a huge aging population is a good thing.
And a population as a whole decreasing is part of it.
Since the elderly couldn't have enough descendents to replace themselves, the population goes down.
There are empty houses in every neighborhood in my town.
If someone needed to "camp out" in one they could.
The elderly eat less and less every year, making more food available for others.
The elderly don't drive (at least here). Fewer cars on the road.
The elderly have money so they keep the economy going with their pensions and savings.
They walk slowly and take life easy (at least when they get into their 80s and 90s) so they make nice neighbors, always ready to chat, give advice. But not young enough to care about competition and brand items.
Probably governments secretly like having a large population of elderly.
Young people have big ambitions, egos, drives....it leads to wars, economic domination that later goes bust, heavy use of electricity, massive cement build-outs, freeway construction, etc. (short-term and risky thinking). Of course "youth" and "sex" goes together. The young have kids and this motivates them to drastically increase economic intensities if they can.
The elderly would be happier and happier with a low-key schedule that involves fewer and fewer resources. Wisdom comes from within.They have seen it all and simply sitting quietly in the sun is a joy.
My pension (such as it is) comes from a system that has almost all its funds in the stock market. My liquid savings (such as they are) are almost all in funds (stock market, bonds, money market). We do have some equity in our house, but the assessed market value of the house fell again this year. I probably should move much of my liquid savings into some sort of fixed income investment, but if the economy goes really sour, those probably won't be safe, either. So, if seniors spending from their pensions and savings keeps the economy going, and the value of those pensions and savings depends on the state of the economy, it sounds to me like a quasi-stable system, one that could be pushed to a tipping point.
As the baby boomers pass from their power years into their retirement years, they decrease their spending because they go onto fixed incomes. With fewer people entering their power years, there is reduced consumer spending weakening the economy. Because fewer products are consumed, less products are produced increasing unemployment. The economy suffers.
I would agree. When Social Security was first added in 1935, one view I have heard is that a major part of the reason for setting it up was to absorb some of the excess labor force that was no longer needed, as agriculture got more efficient (with more fossil fuels). But that was back in the days of very few old people.
Now the boomers (and I am one) are approaching retirement age, and that will be a huge hit to the system. Europe and Japan will have similar issues.
Can an Economy Learn to Live with Increasingly High Oil Prices?
I don't think an economy can learn anything... the question is can individuals learn to live with increasingly high oil prices? And can the economy adapt to the new economic behavior that results?
To some extent, I think yes. Individuals in most societies can trim wasteful energy use, drive fewer miles, reduce heating and cooling, and stretch their energy dollars or euros or rupees farther. But there comes a point where this is no longer possible without impacting the ability to earn a living or survive.
Economies, too, especially in the West, have headroom for adapting to high oil prices through efficiency improvements, substitution, mass transit, etc. But that too can only go so far before it begins to impoverish the society as a whole.
I get the feeling that we are seeing exactly this effect since 2008: reduced vehicle miles traveled, increased fuel efficiency, increased use of mass transit, and more. But these will not save us from the long-term effects of peak oil.
Yeah, there is a lot of 'fat' in the western oil budgets that could be trimmed. Just get on the freeway during rush-hour in any major US city and look at all the massive cars carrying a single occupant. More public transportation usage, smaller ICE cars, more hybrids, more plug-in hybrids, more EVs, and people living closer to work could combine to easily cut oil usage by 30% or so without any significant change in lifestyle.
In the US only about 1/3 of the miles driven are for going to work and back. About another 1/6 are associated with business uses. There is a lot of fat in the other 1/2 of miles driven.
I was going to bring up the same subject. While I do concur with Gail's perspective on an 'economy', I also believe it is made up of individuals making choices every day, often on autopilot. What do those individuals see as a "normal" lifestyle? How motivated are they to impress others with the conspicuous consumption? I hear too many people say "Riding a bike to work is ok for those who want to do it, but I'm never going to". Or "I can't see myself carpooling, I need my personal space and freedom" [oh, the irony].
And then we have the somewhat long term human settlement pattern negatives such as sprawl to consider, as well as the time it takes a vehicle fleet to turn over. The urban legend of the frog in the slowly warming cooking pot is all too true for too many Americans with respect to the lifestyle they believe they should continue to struggle to maintain, at ever increasing costs (social, international, personal, and financial).
Regarding impoverishing the system as a whole, one of the issues is that other people's jobs depend on the "fat" you trim. So cutting back tends to equate to job losses.
It would cause readjustment of the system, but it may not be too disruptive. Some trips, such as to visit friends or relatives within a few hours driving distance, do not affect others employment much at all. People may go to more local restaurants, sporting events, religious meetings, etc instead of those farther away. If the person that would go to a NFL game 40 miles away choses not to, do they stay home or go a few miles to a sports bar to watch the game with their friends?
The biggest hit may be to the leisure travel industry, but that is pretty focused on certain localities and types of business establishments. Even then, businesses that support "staycations" will win. Las Vegas will lose, but your local casino will win.
Less driving means less fuel consumed and a longer lifetime for the automobile which translates into fewer gasoline stations, fewer refineries and fewer manufactured cars. People in those industries lose jobs.
Gas stations are mostly self serve, and refining is more capital than labor intensive. Assets per employee and revenue per employee in the oil and fuels industry are among the highest of all -- way higher than restaurants and hotels, for example. So fewer gas stations and refineries won't affect employment much.
Auto manufacturing may increase jobs in the EV sector as ICE sector declines. There may also be some added demand as people retire their ICE vehicles early. The industry is already undergoing downsizing as auto lifetimes become longer due to customers rejecting planned obsolescence and frequent style changes in favor of incremental design improvements and increased reliability and durability. A large part of the "auto industry rescue" was rescuing the pension and health benefits of the previously much larger workforce which is now retired.
Gail,
Awesome report, as ever, but I have an issue of contention vis-a-vis vehicular fuel economy.
While you're correct to point out the marginal gains in miles-per-gallon efficiency over the total vehicle fleet in the US, since the number of gallons consumed ultimately depends on how many miles driven, this provides an incomplete picture.
I drive something of a guzzler, a 2006 Toyota Tundra. Yet I pay substantially less gas than friends of mine who drive Mazdas because I live in New Orleans, a compact city, and my commute is relatively short. I also walk and bike on the weekends, whereas they live in Houston where you're always 45 minutes of highway driving away from wherever it is you're going, and pedestrians are hunted for sport.
Even though my vehicle has the lower fuel efficiency, I use less fuel because I simply drive less.
So what matters here is both fuel economy AND total miles drive. Consider the following:
http://www.eenews.net/public/climatewire/2012/07/05/2
"According to the Federal Highway Administration's "2011 Urban Congestion Trends" report, there was a 1.2 percent decline in vehicle miles traveled (VMT) last year compared with 2010. The drop follows years of stagnant growth in vehicle travel following a peak in 2007, before the economic downturn."
It is my opinion that this is adaptation in action. Most people can't afford an electric car, or even a new car, but they can afford to move closer to work (a proposition made easier by foreclosure). Look at the building cycles: new single-family homes are still relatively small, but there's no bottom to the demand in apartment complexes and condominiums in more dense urban environments. People are tailoring their lifestyles where they cannot tailor their technologies.
I think economies can and are adapting, but it does translate badly in conventional economic metrics because it looks like contraction as people abandon suburbs for cities and hold on to their cars longer because they aren't as reliant on them as in the past.
Just a theory, largely supported by anecdotal evidence, but there are other ways for an economy to reduce consumption of petroleum and I think chronic high oil prices trigger other adaptations, adaptation in local and lifestyle, besides just upgrading to a more efficient car.
Yes, I agree that there is adaptation occurring.
My problem is that the financial figures look badly fudged. I don't see adaptation as being more than a small part of the fix to date. Most of what passes for adaptation is funny business on the financial side.
Too true, but given that our prior economic "growth" of the past 20+ years was essentially built on successive financial, technology, real estate, and financial bubble economies, I'd say financial funny business IS about the only thing that's business-as-usual.
So I tend to look more at per capita consumption: how many BTU's are we burning up, and where are they coming from, and for what purposes? What technologies or behaviors can be adopted or, more importantly, what ARE being adopted and at what price-point do we see wide-spread acceptance of these adaptations?
I think the end of economic growth is upon us, though it is more as a result of chronic public and private mismanagement of wealth than oil depletion, and future prosperity will largely be determined by "trimming the fat", becoming more frugal financially and in terms of resource consumption, largely due to chronic depletion or economic competition for both.
Things will be a lot harder and wealth won't be so easy to come by, but I think the world is being painfully dragged, kicking and screaming, to a more financially and ecologically sustainable paradigm.
How the pain of that transition is shared, however, will define the politics of the next few decades. But I think aiming to return to anything that once was is folly and we need to abandon those old metrics by which we define and measure the success of societies because things are going to be a lot more marginal this century than last.
America's Demand For Gas Is Tumbling, But It's A Long Way From Being Energy Independent
Gallons/person-day peaked in 1990 at about 1.31, slumped to 1.21 in 1994, rose to 1.28 between 2000 and 2005, then slid to 1.12 presently.
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%.
An analysis can use short-term elasticities, but if you're talking about a long-term/secular rising trend, you have to use long-term elasticities. That's the whole point of the distinction between the two.
2nd, you can't use elasticities developed in the low price range of the price curve for the high price range: they will be very different.
In fact, this is strongly non-linear. Even now, when oil rises to about $80 electric transportation becomes cheaper than liquid fueled transportation. When oil rises above $80, investment grows in alternatives, especially batteries. As both R&D and manufacturing volumes increase, innovation and economies of scale are creating disruptive competitors whose costs will reasonably soon start to fall well below the old oil-based price norms - at that point oil consumption will continue to fall even if oil prices start falling.
At that point, oil exporters will be in deep trouble, and wish they had saved as many of those T-bills as they could....
Production in the Bakken just reached around 0.701 mb/d. I realize that Rune Likvern acknowledged that production may rise slightly above 0.7 mb/d, but this is an alarming development for the legitimacy of his analysis. I hope for the economy's sake that Likvern's wrong. Anyone got any ideas as to what's going on?
Free - I think much of debate gets confused by different context. Rune presents data highlighting the apparent change in productivity of newer Bakken wells. That has little to do with the trend of total Bakken rates. If the wells are recovering less per well but a lot more wells are drilled then total Bakken production will increase. Two different metrics with two different implications IMHO.
ROCKMAN,
I certainly agree that much time is utterly wasted lambasting an argument or analysis out of context (the most prominent example being marginalist economists discrediting classical economists' theory of exchange value, even though the classicals reached the same conclusion, just through the lens of production, not exchange), but I wasn't referring to Likvern's methodology or analysis. I was referring to his prediction that total production of shale oil from the Bakken formation will move much above present levels of 0.6 - 0.7 Mb/d on an annual basis.
Free – Well heck…if you wanted an accurate prediction of future Bakken production why didn’t you sat so? Here is exactly what they’ll be producing in the future. Multiply the number of wells to be drilled by their average production curve less the decline of existing wells. There you go…no problem. Now run out side and find a 10 yo kid who knows how many Bakken wells will be drilled each year for, let’s say, the next 15 years. LOL.
This is what I meant about context. Rune and whoever can debate if Bakken wells are getting better or worse. If tech is improving performance or not. If the sweets spots are getting fewer or if more sweet spots will be found. And take all those models, roll the up in a tite little ball and you can flush them down the toilet IMHO. It doesn’t matter if those are valid models or not. The bottom line will depend on how many wells are drilled each year for the next 15 years. And no one has a reliable model for that IMHO. They are certainly free to make assumptions (i.e. wild ass guesses) but there is no way to measure the validity of such assumptions. The number of Bakken wells drilled isn’t a natural distribution. It won’t be determined by govt mandate. It won’t be determined by Wall Street brokers. And it won’t be based upon the future budget projections of every Bakken driller. Why? Because those budget projections are no different than the ones I made two years ago. Between this year and last I’ve given back 60% of my projected budget for my company’s deep NG drilling program. Why? For the same reason all the dry NG fractured shale players sh*t canned most of their plans after Jan 2009. Because when NG prices collapsed the whole game changed for them. Just as the game changed for players who had small NG drilling budgets in the late 90’s and then saw NG prices more than triple in a short time.
IOW you can not accurately predict future drilling activity (and thus future production rates) unless you can predict the future economic dynamics. Predicting geologic and reservoir engineering models are a snap compared to accurately predicting the future economic conditions that will determine what gets drilled and what doesn’t. Just ask Devon: in the fall of 2008 they had 18 drilling rigs drilling shale gas in east Texas. And then just 6 months later they released 14 of those rigs and paid a $40 million penalty for doing so.
IOW the future Bakken production profile has little to do with the characteristics of the reservoir and everything to do with the future economic conditions. Consider this: all the techonolgy utilized in the Bakken today existed 10 years ago. The reservoir geology of the Bakken was also well known 10 years ago. So who was predicting the recent surge in Bakken production 10 years ago? Easy answer: NO ONE!!! LOL. And why? Because no one was predicting $100+ oil ten years ago. At least no one that was considered sane. The basics of the debate have little to do with the nature of the Bakken and everything to do with the price of oil each year for the next 15 years. Come up with a believable model for that and then we can have a serious discussion about future Bakken production levels.
So who amongst us feels they have defendable model for the price of oil for each of the next 15 years? Go ahead…make my day, punk.
As an aside, I see some posters in here drifting into the "curve fitting trap". I think it was Nate Silver who commented that anyone with access to a computer with a graphing program can fit curves to a set of data points. You can get all kinds of curves out of a given data set by playing with the parameters. You can design and tweak models that match those curves. But such curves and models are often not useful for predictions. Per Silver, "...predictions are potentially much stronger when backed up by a sound understanding of the root causes behind a phenomenon." Rune has given us, in my non-expert opinion, a basis for understanding the production profile of an average Bakken well, which can be used to predict what production from the field will be for a given number of new wells being drilled. As ROCKMAN says, how many wells will be drilled is a different function, one hard to predict because I don't think we have "a sound understanding of the root causes".
"You can get all kinds of curves out of a given data set by playing with the parameters. You can design and tweak models that match those curves. But such curves and models are often not useful for predictions."
You just summarized my Ph.D. dissertation.
My modeling was for a supposedly simple industrial process. I could use the model to match to arbitrary accuracy the past behavior of the system. However, the accuracy of that match was useless in predicting the future behavior of the system. The model might predict the system's behavior for a long way into the future, it might be wrong from the outset of the new data, or it might work for awhile, then suddenly go cockeyed. You could never trust it to run a process control system, which was the point.
I first saw that kind of modeling back in the 1970s, in the process the US Bureau of Labor Statistics used for estimating unemployment numbers and rates. The BLS conducts one major survey a year. The rest of the year they conduct much smaller surveys, and plug those numbers into a model that accounts for seasonal and other effects. But every year, when they conduct the big survey, they find that the estimates have drifted off the actual figures. So they tweak the model to bring it back into line. In the 1970s, the model had something like 60 adjustments to get from raw numbers to the estimated rate. At least the BLS wasn't trying to predict future unemployment numbers.
PredictingEstimating numbers for the recent past was hard enough.This sounds a whole lot like what I am saying in my interview (which I did not submit to TOD) called Renewables are Overrated; We Need Cheap Oil - Interview with Gail Tverberg. I am talking about oil supply in general in that post, not Bakken, though.
Here's my model, from July 2008, which I think will apply for some time:
"It's a serious mistake to think that people and businesses don't respond to oil prices. Overall global demand is unsustainable at this price level, and will fall until prices decline substantially. The level at which demand matches the current plateau of oil production is probably around $100-$120. "
My analysis in July 2008: http://energyfaq.blogspot.com/2008/07/are-speculators-raising-oil-prices...
Do we need oil?
Nah.
Again, there is this 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.
• US vehicles reduced their fuel consumption per mile by 50% from about 1978 to about 1990.
• 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 reduce commuting fuel consumption. That would be far, far more expensive than replacing the car. It makes far more sense to buy an EV and amortize the premium over 10 years at a cost of about $1,000 per year (much less than their fuel savings), 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 more than 15% since it's recent peak in 2007 (while GDP has risen by 3%), 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.
Isn't this expensive?
EVs and their cousins (hybrids, plug-ins, EREVs, etc) already have overall Total Cost of Ownership equal to or lower than ICE vehicles. Making long-haul trucks and coal plants prematurely obsolete is, of course, somewhat expensive, but the US has a big output gap (IOW, we have a lot of people and resources hanging around waiting for something to do), and really, it would cost a lot less than another oil war.
Comparisons to historical technological transitions during a period of rapid population and economic growth are not necessarily applicable to the current situation with slowing population growth, resource constraints and mounting pollution.
The last two U.S. oil wars were fought on credit. Eventually the debt will be repaid in some fashion or the other.
slowing population growth
That can help or hurt. Countries like the US, China and Mexico that are relatively young at the moment will only be helped by a demographic dividend. Counties like Japan that are aging rapidly will have to figure out how to delay retirement, and cope with age-related disability. Still, that's not enormous.
resource constraints
Well, that's what we're discussing, isn't it? See http://www.mpettis.com/2012/09/16/by-2015-hard-commodity-prices-will-have-collapsed/
mounting pollution
Climate Change will be an enormous challenge. It will be useful to keep in mind that fossil fuels can be replaced, as we deal with the Kochs of the world.
Eventually the debt will be repaid
That's not a biophysical problem. That's accounting...
The last two U.S. oil wars were fought on credit.
The deficit was ~10% or less of total spending during most of the last decade, unlike now.
Of course, the deficits were too high in both cases.
The two oil wars should have been paid for with taxes, and the US should have raised both taxes and spending to replace the missing aggregate demand that disappeared during the credit crisis.
But, instead, we wrote IOUs, due to the influence of the wealthy who were willing to weaken the US for their own narrow self interest.
Of course, the deficits were too high in both cases.
Agreed, though the US could run 5-10% deficits for 50 years. It can not sustain 30% deficits, consistently, which is the current case.
the US should have raised both taxes and spending to replace the missing aggregate demand that disappeared during the credit crisis.
During the 2008-9 credit crisis??? While a Keynesian can argue increased spending is the answer in a recession (I did not, do not), raising taxes in a recession does not equate to covering aggregate demand in even version of Keynes.
...we wrote IOUs
Some, but not like today.
raising taxes in a recession does not equate to covering aggregate demand
Yeah, I'm not sure about that proposal. It seems to make sense though: it seems to me that if people are afraid to spend their money, the straightforward answer is for government to tax it and spend it, rather than borrowing it and spending it.
Seems to me that borrowing people's money is making a false promise, as the money is typically being spend on consumption, not being invested in something that will grow the economy.
Eventually the debt will be repaid in some fashion or the other.
Debts can be repaid, defaulted on, or inflated away. While growth and repayment is the best all around answer, there are many examples of the two latter approaches among sovereign governments, especially default.
Hi Nick,
I am very surprised that someone who has been a member here for 7 years (I'm a long termer here myself) should come up with such a cornucopian and focused 'solution'. Either that or you have passed through the depressed stage and have jumped back in at denial becasue it's all unfolding like some slow motion train wreck that's moving a bit too slowly to hold your attention!
And the WWII analogy? I'm afraid the only mobilisation that will begin to happen is each and every counrty securing more and more of thier share of resource FOR THEMSELVES.
Unfortunately it seems you've ignored the human behavioural (and instinctive) side which is really the only part that matters here.
Marco.
Nick, as per usual you do not cover food. The toy tractors your article points to are not an answer in modern agriculture.
In the vast grain growing regions of the western world, large 200Hp tractors are used, often for many hours a day, at the same time that everyone else in the district is doing likewise. The electricity grid that exists cannot cater for E-tractors that don't currently exist.
This comment is clearly incorrect...
If there is no oil tomorrow, then by 3 days time the supermarkets are empty, by the end of the week you would be struggling to keep others from your food, within a month there would be total anarchy in your country, within 6 months billions would have died from starvation, within a year most megafauna on the planet will have been eaten and forests cut down for wood for heat.
Our modern world is wedded to oil use, to say we don't need it rejects reality.
Manual labor can be used to grow large quantities of grain. This was done on the Northern European plain, China, India, and parts of the Middle East and Central Asia.
However, it requires a lot of labor and commercial incentives are not usually enough. Debt peonage, serfdom, and slavery were used in different areas at different times in order to make people work long and hard enough to support large populations.
Merrill, I have no doubt you are correct in the longer term. We will be returning to those ways. However the population today is much larger and the land further degraded.
Here in Australia there are large areas farmed on marginal lands. These dryland grain producing regions are only able to supply surplus grain because of large tractors and low populations. If manual labor was used it would not be possible to farm those areas. The huge population increase would eat the current surplus.
How much would the world's population need to diminish for agrarian ecomomies to work again? Whatever the number, I would call it a crash/collapse.
Nick,
As per usual you change the parameters. You started your long post by clearly stating
As you now state that we do need oil, the questiion becomes how much and for how long, given current realities. At what price point do the alternatives become economic for the real world to indulge them without subsidies? I notice you use the $80 bbl figure in an earlier post....
That does not seem to be happening when looking at the real growth in alternatives, for example the growth rate in world wind capacity goes along the lines of the following...
2004.....20.8%
2005.....24.1%
2006.....25.3%
2007.....26.6%
2008.....28.2%
2009.....32.1%
2010.....24.4%
2011.....20.6%
2012.....14.5%
The above info comes from here...
http://www.wwindea.org/home/index.php
http://en.wikipedia.org/wiki/File:GlobalWindPowerCumulativeCapacity.png
Seems to me the exact opposite of what you claim when the actual numbers are considered. The growth rate of wind energy capacity is declining as the average oil price increases, probably due to lack of investment dollar as well as total cost of construction.
These are the actual real world numbers that show the cornucopian future will not happen.
As per usual you change the parameters.
Nah. The Original Post is clearly about the long-term, and I was clearly responding to that. If all the rice in China were to disappear overnight, China would be in trouble. Does that mean rice is the only thing the Chinese can grow??
That does not seem to be happening when looking at the real growth in alternatives, for example the growth rate in world wind capacity
Wind power isn't a substitute for oil, in the short-term that you're talking about. We have plenty of electricity - wind is needed to reduce CO2 emissions, not fix coal shortages.
In the vast grain growing regions of the western world, large 200Hp tractors are used, often for many hours a day, at the same time that everyone else in the district is doing likewise. The electricity grid that exists cannot cater for E-tractors that don't currently exist.
Well, E-tractors are trivial to build. The larger problem is that it wouldn't make sense to build out the grid for such a narrow, mobile use. On the other hand, those really big tractors and combines aren't used for very long, and they don't use more than 2% of overall fuel consumption. Industrial farmers are net energy exporters, and they'll always be able to outbid other consumers for fuel, or afford synthetic fuel (which is perfectly doable with current tech, just not competitive at $2.50/liter.
If there is no oil tomorrow, then by 3 days time the supermarkets are empty....
Sure. The Original Post is about the long-term problem, not the short term.
"Industrial farmers are net energy exporters, and they'll always be able to outbid other consumers for fuel, or afford synthetic fuel"
Or grow it themselves. Ten percent of crop land devoted to fuel crops would keep the tractors going. This is less than the fraction of farm land that was needed to keep the horses going. There is a caveat that if you have pasture land not suitable for row crops, the horses may have the advantage.
Admittedly this does not bode well for those humans depending on the food grown on that 10% of farmland now going to fuel.
PVguy,
As a person who makes biodiesel for both my car and tractor, I think I know a little about this.
Firstly there is a cost involved to set up the biodiesel production. I use used cooking oil. For farmers to grow the crop themselves they then need to extract the oil from the seed. Seed oil presses do not come cheap. Then there is the time element involved in doing all the processing, from raw seed to biodiesel.
The argument surfaces that the processing can be done off farm in large regional facilities, then distributed back to farms. This of course involves more transportation and higher cost of labor.
Overall the total cost will be very different to 10% of land devoted. My suspicion is that in the real world farmers will both cut down on fuel use as well as grow some of there own, the result of which will be vastly lower yields. Farmers produce products for profit, not to look after everyone else. If the farm enterprise is better off by cutting production in half by combining lower intensity with self production, then that is what will happen.
My opinion is that food prices are going to rise rapidly throughout the world as the availability of oil decreases, plus we will have falling available yields from farms which will exacerbate the problem.
The argument surfaces that the processing can be done off farm in large regional facilities, then distributed back to farms. This of course involves more transportation and higher cost of labor.
It would be useful to quantify all of these: yield per acre, cost, energy and labor of processing & transportation, etc.
I'm sure there will be a role for bio-fuels. Still, we don't really need them: electrification combined with synthetic fuels will work just fine.
Remember, farms don't really use that much liquid fuel per calorie of primary food production, and fuel costs are a small percentage of consumer food costs: fuel can be expensive and food can still be affordable (higher food costs right now are partly due to biofuels not used on the farm).
those humans depending on the food grown on that 10% of farmland now going to fuel.
At least 50% of food is used for animal feed. humans won't starve due to lack of food.
Nick,
Humans are starving right now because of lack of food!!
http://www.catholic.org/international/international_story.php?id=47977
Tell the poor in these countries that they are not starving due to lack of food...."Somalia and the Democratic Republic of Congo, tied for first, Haiti, Burundi, Chad, Ethiopia, Eritrea, Afghanistan, South Sudan, Comoros, and Sierra Leone."
I'm pretty sure that in an oil constrained future the farmers will have plenty of food (until climate change gets them), it is the rest of the population that will have problems.
Humans are starving right now because of lack of food!!
No, they're really not. The world as a whole has far more food than it needs. 50% of food is used for animal feed. More people are obese than are starving.
The problem is distribution, and local poverty.
Nick,
Fascinating statement, care to cite a few references in support of such a statement??
During the Irish famine, there were people who had plenty to eat, the equivalent of todays 1%.
Distribution needs enough food for all, plus the transport of the food, oops, we need oil for that today.
I'm willing to bet there were plenty of animals fed in Ireland during the Irish famine, just as there will be plenty of animals fed grain during all the future famines.
Food is a real problem. OTOH, obesity is a health problem for more people across the world than starvation - the world as a whole could reduce it's calories by 20% and be better off. Probably 50% of our arable land is used for cash crops like coffee, coca, flowers, etc. We could reduce our land usage by 50% by just going vegetarian (and help AGW as well).
923 million people across the world are hungry.
http://www.bread.org/learn/hunger-basics/hunger-facts-international.html
WHO’s latest projections indicate that globally in 2005:
approximately 1.6 billion adults (age 15+) were overweight;
at least 400 million adults were obese.
http://www.who.int/mediacentre/factsheets/fs311/en/index.html
http://www.bio-medicine.org/medicine-news/Malnutrition-And-Obesity-Goes-...
The Obesity Epidemic: Analysis of Past and Projected Future Trends in Selected OECD Countries
chart http://www.theoildrum.com/node/7282/755113
http://ideas.repec.org/p/oec/elsaad/45-en.html
A shift to overconsumption of food was causing new forms of illness:
"While nutritional status has improved worldwide over the past fifty years, new nutrition-related problems have also emerged A global nutrition transition has and is occurring on a continuum. While problems of under-consumption and // poor nutritional status continue to exist, increasingly problems of diet/chronic diseases are emerging as significant public health issues globally. A demographic shift has resulted in increased life expectancy in many countries, and in some countries, this means an older population.
Closely tied with this change in age structure is an epidemiological shift, which has decreased communicable diseases and increased chronic diseases, such as diabetes and hypertension.
With the increase in availability of more high-fat and sugar-laden foods there is a surge of nutrition-related chronic diseases around the world. At the same time that diets have changed, physical activity has decreased. The highest rates of overweight and obesity are now often found in low-income groups. Many populations have been left in the midst of an obesity crisis that exists with food insecurity and under-nutrition. Chronic diseases can no longer be labeled as 'diseases of affluence.' "
Distribution needs...the transport of the food, oops, we need oil for that today
Not really. See http://energyfaq.blogspot.com/2008/09/can-shipping-survive-peak-oil.html
Nick,
The links that you referred to actually state the opposite!!
"925 million people are hungry.
Every day, almost 16,000 children die from hunger-related causes."
"200 million men and nearly 300 million women were obese"
" At least 2.8 million adults die each year as a result of being overweight or obese"
Can you at least point to webpages that support your "facts" not ones that show your statements to be incorrect?
http://www.guardian.co.uk/global-development/2012/oct/14/un-global-food-...
Yes, there is serious hunger in the world.
Yes, the world does a poor job of planning food production. It also does a very poor job of distributing food production.
Food prices are still pretty low as compared to historical prices (a significant driver of overweight and obesity), and enormous amounts of food are used for trivial things, like feeding farmed fish, cattle, etc.
The primary problem: there's a lot of poverty in the world, and the very poorest will be disproportionately hurt by any change in food prices.
--------------------------------------------------------------
More thoughts:
It's essential when considering our dependence on oil, to distinguish between various time frames.
In the short term, agriculture is very dependent on oil for farm equipment and transportation, and natural gas for fertilizer and chemicals.
Farming only uses a small percentage of our fuel. In the short term personal transportation will take the brunt of consumption reductions, sparing ag fuel supplies. We'll have plenty of fuel for it for many decades.
In the medium term, farmers can grow their own fuel.
In the long-term, it's pretty easy to electrify farm equipment and transportation (including electric rail); use synthetic fuels and biofuels for a small percentage of power where it's really useful (e.g., very short, intense combine runs); and substitute low-fertilizer crops (e.g., soybeans for corn) and produce ammonia fertilizer via electrolysis. Synthetic fuels and electrolytic hydrogen would be more expensive, but wouldn't increase overall food costs much.
This is a pretty good overview, especially with regard to food:
"Let's begin with two very helpful UN Food and Agriculture Organization reports: World agriculture: towards 2015/2030, and the sequel World Agriculture: Towards 2030/2050. What these reports do is basically look at projections for population and economic growth and then estimate how much food people would want in the future, and what quantity of agricultural commodities would be required to fulfill that demand. The first report focuses a lot more on the supply-side factors of how this could be done, while the second report extends the analysis out further in time but confines itself much more to demand side considerations.
...As you can see, the history is that most regions of the world have been getting more and more food. The exceptions are some of the formerly communist countries which suffered a partial collapse of their societies as they attempted to transition to a different economic system. The FAO projects that as the developing countries continues to grow faster than the developed world, they will be able to afford more food, and thus they will continue to approach, but not completely achieve, developed world levels of (over)feeding."
Regarding Fossil Fuels, from the same article:
"In Powering Civilization to 2050 I argued it was potentially feasible to transition to power civilization with a mix of solar, wind, and nuclear energy, with the transition well on the way to completion by 2050. (Luis de Sousa made a broadly similar argument in Olduvai Revisited 2008). This would require a period of belt tightening and conservation in the next couple of decades, but once the transition had overcome the critical threshold (as solar energy in particular became cheap), I suggested energy in general would get cheap again. I adopted the UN medium population projection which has population at about 9 billion by 2050, with growth slowing sharply. "
http://www.theoildrum.com/node/3702
Nonsense. The people of the world do a really great job of producing all the food they can market. The food is very easily distributed to anyone who can afford to pay for it. But there are lots of people starving for lack of food. After all, that is the definition of starvation, a lack of food.
The problem is not food production and the problem is definitely not food distribution.
The problem is poverty. People who cannot afford food, and live in a country that does not dole out free food, don't eat. Geeze, can anything be more simple than that?
Ron P.
the problem is definitely not food distribution.
Well, if people only getting what they have money to pay for is the world's method of distribution, then the world's system for distribution is bad. Remember, economic systems are defined as the systems for allocating resources. And, our current system ain't working so well.
Basically, I think we're agreeing.
This will cease to be true in a not to remote future. We are heading towards a reality where food production will not add up to the number of moths to put the food into. I guess when we get there, we will see who is poor or not.
Read the article again.
We are consuming more than we are producing. Yes the poor get pinched first but poverty is not the primary problem. Lack of production is the primary problem And that problem is only going to become worse in the near future.
http://www.peopleandplanet.net/?lid=26107§ion=34&topic=44
Read your article again:
"The reason why 850 million people go hungry each day - the vast majority being rural dwellers in the developing world - probably has less to do with food production than poverty - the rich never starve, the poor often do."
You need to read more carefully. Yes in the past poverty was the main factor. There is no doubt that in the last 100 years food production growth has out run population growth. But that is changing.
Will the poor starve first? Sure. But with climate change, soil erosion, fresh water, energy shortages, political instability future good production growth is not going to to be guaranteed.
All you have to do is read the rest of the paragraph you pulled your quote from.
Keep in mind that article is old and drawing on an FAO report from 10 years ago. Things have changed a lot since then. The Worldwatch Institute report also cited in the article seems to have been in retrospect much more accurate.
Do you think poverty is the reason the UN is warning of a food shortage in 2013?
Is poverty causing dangerously low grain reserves?
Per capita food production and consumption has been falling for some years in sub-Saharan Africa, along with life expectancy. And it is in poor African countries such as Malawi, Niger and Ethiopia that population is growing fastest, where the fertility of the land is falling most rapidly, and where the ability to absorb newcomers in the cities is most weak.
That's mostly due to poverty, corruption and bad governance. Africa used to export food in general, and it still has enormous untapped potential for expanded food production. What gets in the way? General poverty.
Is poverty causing dangerously low grain reserves?
Well, we have an economic system that produces food for those who can pay for it. Food production for consumption by those who are poor would be higher if they had the money to pay for expanded production. Instead, paying customers are putting ethanol in their cars, and putting meat on the table in places like China.
If we produced less meat, farmed fish, coffee, coca, marijuana and ethanol there would be a lot more grain to go around for eating.
Afghanistan is one of the very poorest countries in the world. What's the single biggest crop there? Not food for consumption by the local population...
I see, so its poverty that causes falling harvests in the US, Ukraine and other grain producers.
Its poverty that causes wheat production to fall.
Its poverty that causes heat waves and drought and climate change.
And I'm sure poverty causes this as well
Poverty isn't new. Poverty hasn't stopped food production to outpace population production for the last 100 years. Blaming recent poor grain harvests and stocks on poverty is a stretch at best. Asinine is a more honest assessment.
Ah, rethin, you should try to avoid the temptation to get personal - it only reflects on you.
Now, sure there have been some bad harvests in the last year, but that's not why grain stocks have been falling for 7 years, it's not why food prices have been rising for several years, and it's not why people have been starving for quite some time.
Take a look here for some real data on corn yields in the US, for example:
http://earlywarn.blogspot.com/2012/08/estimated-2012-us-corn-yield.html#...
You're right. Its poverty that's causing falling harvests and stock shortages. Its not global warming, droughts, heat waves, soil depletion etc.
Oh wait, no that's exactly what the UN just said was happening.
Don't mistake weather for climate. These events are very recent. On the other hand, I do agree that Climate Change poses very large risks to agriculture in the long-term. Two thoughts:
1) CO2 emissions would be relatively cheap and easy to reduce, if we could get past the death-grip that the FF industry has on US (and other) politics.
2) Humans have a lot of room to expand primary food production. Just going vegetarian would expand primary food supplies by about 2x. So, hunger will likely always be a social choice, not something forced on humanity by LTG.
Social choice is what defines the Limits to Growth. Its the basic premiss to LTG.
Given the social choices made, yes, limits to food production (climate change, drought, flood, heat waves, soil depletion, water shortages, energy prices, civil unrest etc etc) are what is causing hunger right now and will be causing hunger in the short term, medium term and long term.
http://www.telegraph.co.uk/news/worldnews/asia/china/9605048/China-now-e...
Is that poverty?
I'm not sure if we're disagreeing at this point, or not.
Yes, Chinese demand for meat is a big factor - that's part of what I was saying. And, yes, if Chinese demand for meat is raising crop prices so that the poor elsewhere are hungry, then poverty is a big factor.
So, we're agreeing that social choices and organization are more important than biophysical limits?
Here's my point: we could feed 3x as many people and eliminate hunger if we made different social choices and:
1) gave everyone food regardless of income, and
2) stopped feeding primary food production to fish, cattle, chickens, etc; stopped wasting food; and stopped growing non-food crops like coca, marijuana, coffee, etc.
The problem is there is less food being produced than food being consumed.
That's very different from what you were arguing above.
You have my vote for communist dictator of the world.
The problem is there is less food being produced than food being consumed.
No, more food is being wasted on meat production. Primary food production per capita is still historically quite high, and food is still quite cheap, by historical standards.
You have my vote for communist dictator of the world.
You make that sound like a bad thing...
Seriously, it's not that hard to make a difference in these things. If we started doing nation building in poor african countries, rather than in the Middle East, if we promoted women's education and family planning, etc, etc...
Heck, remember Milton Friedman, well know for conservative economics? He suggested a reverse income tax, to provide income support. Combine that with strategic taxation of wasteful food practices, and you've got an effective free-market solution.
Hide_away,
Try not to be so literal.
Yes, my memory was wrong - the links showed that more people were "overweight" than were hungry. And, yes, it suggests that about 5M are dying from hunger, while only(!) a minimum of 2.8M were dying from overweight.
Still, it's perfectly clear that that people are not dying from an overall lack of food in the world, they're dying from lack of access to food. Just like the Irish.
Nick,
Your overall commentary is about "we can do this" and you often make assumptions about how the future will pan out in a perfect world. However as Ron has pointed out above there is no "We". Everything is interconnected and the exact reasons why there is both obesity and starvation in the world is why the cornucopian future can not/will not occur.
You talk about short medium and long term future and what will happen if "we" get it together. Yet the numbers clearly show it is not happening. The ELM model shows that there is trouble for oil importers dead ahead. Australia is one country that is a large food exporter and a large oil importer (% of use). Only if some other importer misses out on their allocation can Australia continue to be the large food exporter. Europe is similar.
Countries that have increasing oil import bills, have less to spend on the alternative infrastructure.
Changes in the availability of food leads to "Arab spring" type events, which then has further disruptions to the whole system. The last "Arab Spring" happened because of high oil/food prices (the two related), poor people were being squeezed, yet in many places, like where I live there was a continued abundance (of food).
Your overall commentary is about "we can do this" and you often make assumptions about how the future will pan out in a perfect world.
I'm just looking at the biophyscial reality. We can speculate all day long on the stupid things humans do, but it's helpful to know what our physical limits are.
The ELM model shows that there is trouble for oil importers dead ahead.
Not really. It does suggest that oil exporters are heading for trouble, if they don't curb their wasteful internal oil consumption.
Changes in the availability of food leads to "Arab spring" type events, which then has further disruptions to the whole system.
hmm. So far we've had a temporary reduction in Libyan oil exports. Not that big a deal. I'd also note that uprisings happen not just because of poverty - poverty has to combine with rising expectations.
Nick,
Those in power in the exporting countries know how to stay in power. It is by subsidising local use of both food and fuel. Possibly the only reason why there was no "Arab spring" in Saudi Arabia was because of the handouts and subsidies. The populations in the exporting countries are hooked on cheap fuel. I agree that when they have no more exports they will not be able to subsidise, then there will be trouble for the rulers.
However none of that helps the oil importing countries. Here in Australia the government just puts there head in the sand and refuses to look at the looming problem. From what I read I see that most importers are the same.
I am not naive enough to believe that governments dont think there is a problem worth studying and preparing for. It is far more likely they already know there is no solution, therefore they don't ask the questions. In government circles you only ask the questions you already know the answers to.
Here in Australia there was a Senate committee inquiry into the future energy availability. The report is here
http://www.aph.gov.au/Parliamentary_Business/Committees/Senate_Committee...
This report, which mentions the problem of peak oil, was tabled in 2007. The governments response occurred this year, it is on the same page above. The governments response is along the lines of 'no problems because the IEA 2011 report said plenty of oil through 2030'. This is despite the fact that the IEA 2006 report used by the senate committee has already proven to be incorrect with the oil supply projections and prices for 2010-12. The attitude is as long as we can point to some projection that looks like BAU in the future, then that will be the response.
There is no planning for any of the future you envisage. To have farmers growing their own fuel in the medium term and be all electric via renewable in the longer term, requires vast planning and investment in infrastructure that an only occur in times of surplus. As we descend the back slope of peak oil and oil importers are squeezed, there will be less resources for infrastructure. How much do you think the governments of the PIIGS are spending and planning to spend on infrastructure compared to times past?
Those in power in the exporting countries know how to stay in power.
That's true. Still, their money and power comes from exports, and so they'll have to do what's necessary to maintain exports, including ways to subsidize the poor while controlling domestic fuel consumption.
There is no planning for any of the future you envisage.
There is in Europe and the US. I don't know about Australia, but US fuel efficiency regulations are getting much tighter, and EVs are being promoted.
To have farmers growing their own fuel in the medium term
They're doing it now, in the form of ethanol. That's why farmers are doing so well: ethanol demand raised food prices.
be all electric via renewable in the longer term, requires vast planning and investment in infrastructure
It's happening right now, and it doesn't take vast investment. The plug-in Prius and Chevy Volt are here right now - they just need to expand.
that an only occur in times of surplus. As we descend the back slope of peak oil and oil importers are squeezed, there will be less resources for infrastructure.
We have more than enough FF, too much in fact (for climate change mitigation). Plenty of solo SUV drivers can consume less.
How much do you think the governments of the PIIGS are spending and planning to spend on infrastructure compared to times past?
They're spending quite a lot on wind and solar. Spain and Ireland reach 50% solar kWhs occasionally even now.
The electricity grid that exists cannot cater for E-tractors that don't currently exist.
Annual diesel consumption for all US agriculture is ~0.4 quad btu (0.4e19 J), so it could be replaced by a theoretical electrified tracter/combine fleet using ~0.13e19 J. That's the annual output 4-5 large one GWe power plants to run *all* of US agriculture. Bump that up for peak harvest usage as you like, but the 5GWe/all-e-tractors baseline is ~1% of the *idle* portion of US electric capacity.
As I stated above, its the electricity grid that cannot cater for electric tractors. Here in Australia much of the vast dryland grain growing regions have SWER connections (Single Wire Earth Return). There is no way that enough electricity can reach the farms when needed, especially when all the neighbours would want to charge their batteries at the same time.
The logistics of diesel deliveries can be difficult enough in the busy times, which is why most farms have decent fuel storage.
Perhaps so. I have no information about the Australian grid with respect to farm connections.
In the US I think it is fair to say that many modern farms have connection to large amounts of power for various operations already.
hhhmmm.
Many of these combines run 24x7 during the season. With no downtime for charging, they'd have to rely on battery swapping.
Charging of those batteries wouldn't need to happen on the farm - it could easily be up to 200 miles away, which would greatly reduce the need for secondary transmission. Trips of 200 miles would be inconvenient, but if that were the max, the average would 100 miles, and with careful siting it might be less.
Yeah, what the heck, batteries could work.
It probably would be affordable (we'd have to run the numbers), but it's unlikely to be the optimal solution. It would require that quite a lot of transmission be built out, over a very large area.
Synthetic fuels or biofuels will likely remain the solution for intensive seasonal farm work even at the remote date when fossil fuels are retired completely.
Another possibility is battery swapping (possibly with a special purpose asymmetrically charged battery chemistry like aluminum) from a central location, but battery energy density and cost effectiveness would have to improve significantly for that to be the optimal solution.
Marco,
I passed through the depressed stage more than thirty years ago, when I first read LTG. Since then it has become gradually clearer to me that our problems are, as you say, human and not biophysical.
The political problems are difficult. Still, it's valuable to know that our problem is not a lack of resources - we have met the enemy, and he is us (or 1% of us....).
In fact, the idea that civilization will crash without oil/FF is not only unrealistic, but it's a major talking point for the Koch's and Peabody's of the world!
Do you really want to help them in their campaign against renewable energy and EVs?
The range problem. Range then, range now. Adding a range extender (i.e. small ICE) causes a price 'extension'.
Adding a range extender (i.e. small ICE) causes a price 'extension'.
Not a large one. GM invested quite a lot of money on R&D to get the interface correct (10M lines of code, more than current fighter jets), but software is cheap to copy, once developed.
It's a small ICE, which likely will get smaller.
Consider the Prius C: it costs 2/3 as much as the average US new light vehicle($20k vs 30k), and uses 40% as much fuel. If oil prices tripled the cost of fuel per mile in a Prius C would still be no higher than the average US light vehicle. As best I can tell (based on Edmunds data), the C has the lowest total cost of ownership for any light vehicle.
Then, if we add $10k in batteries to the Prius C (20kWh, assuming a conservatively high cost per kWh for cells of $500), bringing the cost only up to that of the average US new light vehicle, we'd have a plug-in with an electric range of 60 miles (3 miles/kWh x 20kWh), reducing fuel consumption to less than 10% of the average US light vehicle. That's a scale small enough to be covered by solely by ethanol.
Electric vehicles of various sorts will work very well (though some people will have to wait for them to become available used). The only thing stopping them now is artificially low fuel prices.
Consider the Prius C: it costs 2/3 as much as the average US new light vehicle($20k vs 30k), and uses 40% as much fuel.
The long distribution tail of high priced vehicles pulls that average price up. Median is more like $25.5K. And if we talking about *new* US light vehicles, their 2011 mpg is 34-cars/ ~25-trucks, call it 30 mpg, so the 50 mpg Prius C uses 60% of the average light vehicle.
Then, if we add $10k in batteries to the Prius C (20kWh, assuming a conservatively high cost per kWh for cells of $500), bringing the cost only up to that of the average US new light vehicle...
Makes sense, but there's the PHEV Volt at $40k, with even less battery.
The PHEV's are close, much closer than the EVs in Edison's day, but I don't think they are quite there yet. I'll be interested especially in the 2nd and 3rd year models.
Median is more like $25.5K.
Have you seen data? As best I can tell that tail is fairly thin.
2011 mpg is 34-cars/ ~25-trucks
Even with adjustments, I believe that's too high. And, its worth pointing out that if we divide 2.9T VMT by 138B gallons per year we get an average for the existing fleet of 21 MPG.
there's the PHEV Volt at $40k, with even less battery.
The overall price of an EV is a very complex mix, and can't be reduced to the cost of the battery. Car makers have many costs: drive train; ancillary devices such as steering and braking; suspension/wheels; body (including aerodynamics); etc. Almost all of these have to be redesigned for an electric drive train (which includes EV/HEV/PHEV/EREV) because the design requirements are very different. For instance, ICE vehicle efficiency is dominated by weight. Weight is much less important for EVs because they have regenerative braking, so aerodynamics move strongly to the forefront. Another example: elimination of mechanical control and power transmission (brakes, steering, etc) affects a lot of secondary systems. Heck, window wipers get redesigned!
Battery packs are complex: there are the individual cells; the connections; cooling and heating systems (air and liquid); charge and discharge management systems; temperature sensors, heat insulators and radiators; electronic communications and control, with hardware and software (including 10M lines of code, more than recent fighter jets); containment systems, structural support and crash protection; etc.
So, economies of scale apply to the whole car, and cost comparisons are complex. That's why I raise the example of the Prius C, which has the advantage of Toyota's economies of scale and willingness/ability to aggressively price a new vehicle based on long-term costs before it has achieved the large sale volumes which will enable those low costs.
A Prius C has both ICE and electric drivetrains, each of which are sufficient to drive the vehicle. That's substantial duplication. And, they have a full battery pack (with battery management), yet they can price the vehicle starting at $19k. We can get a pretty good idea what a small PHEV could cost, based on that. Of course, we have a plug-in Prius for the purpose of analysis, but it's larger, and IMO Toyota isn't pricing it quite as aggressively because it's newer tech (e.g., it uses li-ion), and Toyota is very careful with it's roll-out rampup of new tech (especially lately, with it's recent quality failures).
A Prius C has both ICE and electric drivetrains, each of which are sufficient to drive the vehicle.
If the Prius C transmission is like the regular Prius then the main electric motor can drive the car independently but the gasoline engine can not drive it alone. There are actually two electric motors within the transmission plus a clutch between the two electric motors and ICE. It's a flippin' box of magic.
Here's a tear-down to show how it works: http://youtu.be/ZmHpSyTsfm0
Even with adjustments, I believe that's too high.
[shrugs] Why? The linked data comes from BTS. Have I misused it in some way?
And, its worth pointing out that if we divide 2.9T VMT by 138B gallons per year we get an average for the existing fleet of 21 MPG.
Why is it worth pointing out the MPG of the on-the-road fleet, with its 20 year old cars, etc? In discussing affordability, the economic decision point is whether or not to buy a *new* EV/PHEV or a *new* ICE vehicle.
Have I misused it in some way?
I think those numbers are too high, from what I've seen of differences between specs and actual - I don't have a source handy. Note that the median VMT comes from vehicles about 7 years old, because newer vehicles are driven much more. So, that big difference between the specs for new cars even 5-10 years old and the actual for the current fleet is suspicious.
There is a difference between "affordability" and "competitiveness".
The cost of what people are driving right now seems like a reasonable benchmark for what they can afford. They may have better/more optimal choices available, and be drifting towards them as time goes by, but this is what they're driving right now. I'm talking about "good enough" vs "best".
Have you seen data? As best I can tell that tail is fairly thin.
No. I gleaned that from various web hits making the assertion, so feel free to disregard.