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79 comments on Further Evidence of the Influence of Energy on the U.S. Economy
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79 comments on Further Evidence of the Influence of Energy on the U.S. Economy
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Figure 1 is misleading
On an inflation adjusted dollar basis the FF price peak in the 1970s and the FF price peak of a year ago are roughly equivalent.
The present day US economy is much less dependent on energy than the economy of 1970. The figures I have seen indicate something over a 25% decline in the amount of energy to produce a $1.00 of GDP
S0 you folks are acting like global warming deniers and both misrepresenting the data and skewing it to support your thesis or you simply do not have a satisfactory understanding of your topic. Either way your posting is unworthy of TOD.
I think you can find a more civil way of stating your question. Dave Murphy put this together. He is teaching a class now, but will be back later this afternoon.
I would like to start seeing us pull some of the pieces together. It is important that we understand exactly is going on. If we don't start looking at them, we will never know.
Admittedly, my inflation adjustment is probably not the most accurate adjustment that can be made, but oil prices did hit an inflation-adjusted record high in the summer of 2008. Please go to this site on EIA and download the spreadsheet. The EIA estimates of oil price in 2008 are higher than the historic estimates. Also - note that the average price for 2008 would be much lower than the peak in figure 1, as figure 1 shows 2008 as monthly data.
So we have become more efficient at using our energy, according to your figures. That says nothing about dependency.
Post hoc ergo propter hoc? You could draw similar graphs with milk, and then we come to the conclusion that milk is what drives the global economy.
That is true, but we know the physical laws support causation of energy->economic activity.
Nothing can be mined, refined, manufactured, or used without the expenditure of energy (even if that energy is in the form of honeyed tea consumed as I type these characters).
If milk occupied a similar place as energy in our laws of thermodynamics, physics, and chemistry, then I would say we could not tell if it was milk or energy that drove the global economy.
This is misleading. Goods and services, not energy, drive the economy... that is what GDP is meant to measure. Energy is a tool employed to manufacture and deliver these goods. But we are in no way employing energy to increase GDP at maximun levels dictated by thermodynamics. When energy was cheap, it made more sense to use more rather than conserve. Until the crash, the pain, there was no reason to adjust and change energy use.
In other words: my boss doesn't care how may BTUs it takes to get me to work, only that I show up (or stay home and get the job done).
This is misleading. It is preposterous that something as complex as a global or national economy be reduced to just one number: GDP. GDP is more a measure of our collective stupidity.
Of course we employ energy during each and every activity we perform, whether one wishes to slap the label "economic" on it or not. Even the electronic excecution of a trade sues energy. So in principle you cannot decouple energy expenditure from econmics. Under certain circumstances you can, as an operating assumption, ignore it.
It is not money, but energy that makes the world go round.
That depends on the horizon of your point of view. Bearing in mind that debt is borrowing from the future on the expectation of increased wealth, it would be interesting to know if inefficient (as opposed to uneconomic) use of energy is, in the long run, cheaper than efficient use.
In principle you and your boss care how much the energy costs. How much you care depends on the energy cost as a fraction of total expenditure and total income.
GDP is a valid concept, even if defining and measuring it is messy. If we let the perfect be the enemy of the good enough, we would also have to throw out ALL of the charts on this site estimating oil production, EROEI etc...
I was not "decoupling" energy from economic output... I was saying that the RELATIVE RELATIONSHIP BETWEEN THE TWO IS NOT FIXED until you reach a thermodynamic maximum on production and end use... this will never happen anyway, but I assure you we are no where close. For example:
No, my boss does not care about how many BTUs I use (I said BTUs... YOU put words into my mouth ands started acting like I said price... I did not). He couldn't give a flip if I took a bike or a Hummer, only that I get there. So let's see, I could decrease my gasoline use by about 99.9% and not effect my economic output. And yeah, I care about cost... when it costs 20% of my income for gasoline, I'll take the bike.
Yes, many car companies will go broke... that's what must happen to unneeded industries. This could be a one-time hit. Oil shocks in the past have never been permanent enough to create longterm change.
I'm not sure I like this analogy. A tool is an instrument which is used to perform an operation. One can usually substitute one tool for another (with varying results: you don't want to see the shelf I put up using scissors and a dictionary instead of a screwdriver and hammer). However, there is no substitute for energy: nothing can occur without it. It is a prerequisite for the manufacture and delivery of goods and services. Goods and services don't drive the economy, they are the economy.
You are both missing my point (and to the first poster, not Violinst, it almost seems intentional).
I know they are the economy, that is my point. I worded it poorly.
There is no substitute for energy, but we will have energy, just less for a while. But less energy can be made to do more work. The ammount of energy we use to complete a task depends on infrastructure and haabits from the past when energy was plentiful.
You want to talk bad analogy? How about comparing scissors to a screwdriver. What I was doing was comparing a chainsaw to a hacksaw... both will get the job done. Or better yet, comparing riding my bike to work to my neighbor who drives a Hummer there. We both get to the office, get the same work done, but I will have spent far fewer resources.
We are not borrowing against future energy, we are borrowing against future prosperity/work/economy. Just because energy use went up with the economy doesn't mean they are interchangeable. I KNOW we can do more with less, if we have to.
Energy and GDP are inextricably related. Without staggering amounts of energy there would be almost no goods and services.
Practically all of our modern standard of living is made possible by energy. The amount of energy embodied in almost everything we take for granted is almost inconceivable to anyone, even those like me who deal with energy first hand. Without massive amounts of energy most of us would starve, or else almost everyone would be engaged in agriculture. However we cannot go back to 1865 when animal and machines did comparable amounts of work because we simply don’t have enough farmland to support the animals much less the people. In 1920 there were 15 million work horses in the US and almost no tractors. By 1970 we had 90 million horsepower in the form of tractors. And here we’re just talking about farming. You would literally have to cover the planet with horses to replace all the work performed today by machines.
As an example of how productivity improved living standards, the hours worked to buy a 3-1/2 pound chicken fell from around 2 hours 45 minutes at the beninning of the 20th Century to 12 minutes at the end of the 20th Century.
(Data on horses and tractors is from Fig. 4 in http://www.iea.org/textbase/work/2004/eewp/Ayres-paper3 which I previously referenced).
Paul,
The question isn't do we need energy for every unit of GDP, it's can we have growth in GDP if energy costs increase.
A good illustration is a 1903 house I once lived in in 1980's. It had almost no insulation and an coal furnace that had been converted to run on NG. We added insulation replaced the windows with double glazing casement, replaced the furnace with a high efficiency gas furnace. The house was more comfortable and probably used only one tenth the BTU's of the old house. This made income that was spent on energy available to buy a CD player, etc, so the GDP increased( or didn't decrease ) with 10% of the energy(11% allowing for the energy used to produce the CD player). This is part of the 80 years of efficiency improvements, that have been averaging 1-1.5% per year.
So you are correct to say our standard of living is only made possible by energy, but wrong if you are implying a one to one relationship GDP:BTU that is fixed.
The productivity of the chicken farmer isn't just cheaper energy, its breeding of chickens to convert more grain to feed, higher yielding maize ( 30bu/acre in 1920; 155Bu/acre today), antibiotics, phytase enzymes to get better feed uptake.
Neil:
Rising cost of energy has an immediate negative effect on GDP ex- energy, mainly because energy is such a large percentage of the cost of production and transportation of goods. Over time, investment in energy saving technlology very slowly reduces energy intensity. This has been happening since the first steam engine.
Energy conversion approaches thermodynamic limits. We approached the limits with the major conversion technologies decades ago. By mid century the best boilers, turbine generators, electric motors, gasoline and diesel engines were nearly as efficient as today, although it took time to phase out the old equipment and bring the average up. Automobile engines are less efficient than in the past because of lower compression ratios necessary for unleeaded gas.
The remaining easy conversion and conservation took place after the high oil prices of the 1970’s, although there are many houses needing insulation and energy efficient windows.
Besides energy and energy conversion, chemical fertilizers are big factors in improving our living standard. Take away modern poultry management and you may double the cost of that chicken, say to the 1970 level of 22 minutes work, but that is still less than 15% of the work hour cost in 1900.
Computers and the internet had almost no effect on the cost of that chicken. The work cost of that chicken had fallen over 80% before mainframe computers.
Against the minor increases in real per capita GDP we have the counter trend of rising extraction costs for energy and basic materials. The cost of new production is much greater than the price of oil today. At some point in the not too distant future, perhaps a decade or less, the rate of extraction costs, in terms of energy and capital, will increase to the point that GDP will go negative.
The other unintended consequence of our productivity miracle is life expectancy. No longer do two-thirds of the population die before age 16, as in London of the early 18th Century. We now live a decade or more past retirement age. This easily explains the so called “health care crisis”. Take the over 55 age group out of the insurance pool and you get dramatically lower insurance rates. (Perhaps Gail the actuary has some hard numbers. If so, this would make an excellent post).
"Rising cost of energy has an immediate negative effect on GDP ex- energy"
Only for oil importers, like the US and the rest of the OECD.
"Over time, investment in energy saving technlology very slowly reduces energy intensity."
It's been slow because energy has been so cheap.
"Energy conversion approaches thermodynamic limits. "
In a trivial way, but a Prius uses half the fuel of the average light vehicle, and a Volt will use 10% of the fuel and 15% of the BTU's.
Take a look at 1)income transfers from oil exporters to importers, 2) oil-importer GDP vs exporter GDP, and 3) world GDP vs oil prices. Hamilton's analysis showed that world growth continued well into the price shock - OECD economies started to slow down, while Russia, ME and other exporter economies expanded and even started to overheat.
All of this seems to indicate that the problems of an oil shock have little to do with not having enough BTU's, and more to do with the unexpected stresses that income transfers place on the world's financial systems: petrodollar recycling, mortgage collateral for petrodollar debt, etc.
There are a lot of intrinsic problems with inflation adjustment of oil prices.
Rising oil prices or even more subtle rising demand for oil can itself trigger inflation leading to and expansion of credit and then monetary and price inflation.
Demand expansion before "demand inflation" leads to other inflations including monetary is in my opinion important and difficult to model. One would have to have a situation where oil demand was falling i.e the economy was getting more efficient and GDP was rising but had not yet entered inflation to see price inflation without tie into oil. So basically you would need and example where the economy become more efficient and efficiency increases resulted in monetary issues.
Once the oil prices start increasing then in my opinion the interplay of money and oil becomes effectively impossible to figure out.
Looking back at the historical data
You can look at a lot of different pieces of data but I prefer days of supply since it tends to average out the interplay of oil price, inflation, economic etc.
What we find is days of supply drops steadily at least as far as the series goes back and it goes back fairly close to when US production itself peaked.
The other half of the trend is of course imports.
This is important because it represents a net drain on the US economy until the late 80's the US was growing oil production and overall had a healthy internal supply. This means that money for oil purchases was mostly recycled back into the local economy instead of moving out into the ME and then globally.
Rising oil prices in the 70-80's happened in a nation that was transitioning from being both a major oil producer and and industrial power house to a new country dependent on oil imports to function. And also one that had in 1973 left the gold standard and effectively introduced a new currency the so called petrodollar.
On top of this without the recycling of dollars caused by local oil supplies we also increased the rate that manufacturing was moved offshore. The position of the US dollar as a fiat reserve country helped immensely in this endeavor. On the oil side it artificially increases the GDP vs oil as more and more energy inputs are coming externally instead of internally. Certainly efficiency increased but probably more important inefficient oil dependent industries where moved overseas.
Intertwined with this is of course the move to controlled runaway pollution making relocating factories in poor countries and killing them even more lucrative.
So I think its wrong to look at US statistics much beyond the ones I showed throughout most of this time period the US increasingly became a producer of dollars that held their value no matter how many we printed. Certainly we had slight recessions but these should be viewed as stumbles in the expansion of and Empire. I'm sure Rome had problems with inflation and large influxes for slaves and goods from newly conquered areas.
We also faced similar problems as we added millions of new slaves every year as America expanded and differentials between expansion of our slave trade and transitioning your average American into a consumer of slave goods instead of a producer. Slave based bread and circus economies don't it seems expand smoothly.
And of course you have to also expand the number of dollars pushed into the military-industrial complex since your effectively constantly at war.
Cold wars, Hot wars, Wars on drugs, Wars on terrorism, economic ware fare assignations, corruption of governments, managing regimes and just plain killing a lot of people to insure hegemony is a nasty and economically bumpy business. Our recessions are just the tip of a monstrous iceberg made of blood. Untold millions killed in Africa alone via our meddling.
http://odile216.blogspot.com/2007/08/africas-world-war-stealth-conflict....
So yes from time to time during the expansion of Imperial America and the petrodollar we did stumble ever so slightly and bruise our lilly white feet but thats not the real story to get the real story you have to look beyond our borders and at the real war of expansion and dominance then you should see that the petrodollar cannot be considered as two different things is one thing in fact its really three things oil, money and blood. How our economy moves depends on the ratio of these three things at any one time.
We are now however entering the era of peak oil where we have plenty of money and are killing people at a furious rate just as we are used to doing but we are no longer getting any more oil to fuel our empire. And thats our real problem we have reached the point that killing and enslavement and printing money can no longer cause more oil to flow into the US simply because there is not more.
We need to either redouble our efforts at killing and enslaving people to make up for dwindling oil supplies or we need to change.
My opinion is this country has recognized this it realizes that it has to change it can no longer depend on killing and enslaving people in other countries instead it has decided that the easiest way to solve the declining oil problem is to kill and enslave its own citizens this kills two birds with one stone it reduces oil demand ensures a continued supply to the elite and war machine and it gets rid of the last vestiges of democracy making it easier to execute even more brutal wars overseas.
If I'm correct then the US has reached another major transition point that happens to all empires. Once growth by external slavery slows the vestiges of power sharing and equality are thrown away and an autocracy is formed.
This transition renders even incomplete analysis of the past useless since most don't recognize the true trend they fail to capture the transition to a leaner meaner form of Empire.
On the financial side we had the transition from the gold standard to fiat petrodollar to global currency independent of the US government.
On the oil side we have transition from oil for citizens to oil for elite.
Looking back at the Roman Empire eventually having the capitol in Rome became inconvenient. Given that Haliburton one of the important companies in our Empire has moved to Dubai I'd not be surprised in the least to see our Empire move to Dubai thats been liberated along with the rest of the ME. If the Roman Empire is any guide it seems natural that eventually both the source of money and oil will become one place geographically. Plus a new world capitol somewhere in the region makes sense like it has for all empires since controlling Asia is the hardest task.
At the very least include the Asian criss and collapse of Japan and fall of the Soviet Union and rise of China in any attempt to look at oil and money. Bring in a few of the big ones :) Inflation adjusted oil prices simply don't do the real game justice.
The commenters ignore this historical overview, which seems to me to draw attention to some major attributes that are critical for the people of the US to recognize. A reference to Hubert in another comment seems to state the dicotomy of the assumption of infinite growth of finance in comparison to the real world of stuff, again is ignored. The role of interest and the growth of money seems to be set in stone in the minds of most people. Environment, Power and Society by Howard T. Odum says most everything that can lead to a way out of our turmoil. This book gives the energetic analysis of what Memmel is saying. If you look at the evolution of life, what I think is seen at every increase in complexity is a greater organization based on cooperation. Enlightened self interest looks beyond. Ants have adopted and raise aphids, etc. These examples were produced presumably by chance. Now we as a species have the ability to recognize these relations and should have the capacity to develop the proper policies. Odum in the last chapter of his text delineates these, as do many other authors who have looked at cooperation. These people however seen not to be readers of TOD. The Energybulletin.net and the Post Carbon Institute are places where there is more recognition of the larger picture.
Thanks what I'm trying to say and its a bit more the Hubbert was the exponential growth in energy allowed the exponential growth in money.
As he notes and I think all of us agree once energy goes into decline the growth in money will slow and then decline.
The key and I think I like the way you say it is its a complex system our analysis to date has looked at the fluctuations at the top of the economic pyramid. It does not mean its wrong it just means there is a huge pyramid thats the rest of the world that was swayed and shaken by changes in oil supply and dollar supply. Many of these can be huge and not show up in the changes at the tip. The Iran-Iraq war for example only shook the tip once it erupted but it was certainly the cumulation of decades of meddling on the part of the US and friends.
Looking only at when the tip of the pyramid finally shakes misses these underlying events which are themselves at tight interplay of oil and money.
The exponential increase in the money supply was itself done to control the exponentially expanding oil supply. Given this viewpoint our government and top leader cannot help but be peak oil aware they are very well tuned into the oil supply side of growth.
Many people that believe in peak oil are waiting for the government to wake up and acknowledge peak oil one day they fail to take into account that its already well known and understood. Like the claims that subprime was contained early on they simply choose to not scare the masses.
Given this viewpoint I've reviewed over and over again the recent price action in oil and economics. I've convinced myself that the economy was crashed to prevent the global oil markets from crashing. We did indeed suffer the sharp decline in supply I figured would happen in 2008 and this forced a crises. The government faced a stark choice either see the worlds oil markets fail as failure to deliver multiplied or take out some key players in both the oil and financial markets. The collapse of Lehman was Amaranth on steroids.
http://dealbook.blogs.nytimes.com/2008/07/08/platts-review-bars-lehman-f...
http://www.thestreet.com/stocks/brokerages/10278941.html
And who is left standing today ?
If I'm right then you should become very concerned these guys plan to play peak oil right to the end and they don't take prisoners.
This is of course the conclusion the logic to get here is to assuming everyone in the oil business is lying. The question is how
much and why ? And they are all capable of shaking the economy to the core. Once you achieve a consistent set of lies and counter lies
you have the truth.
And the truth is in my opinion that we almost crashed our oil markets and the choice was either oil or crash the economy.
I actually agree that they made the right decision to crash the economy if the global oil markets had shut down it would
have been a lot worse.
Obviously the fact the people that caused the problem in the first place are still running the show and profiting handsomely
is cause for concern. Especially since it looks like they are going to play another round of cat and mouse with oil.
One more thing since I brought this up one of the key lies has to do with OECD storage levels a lot of that oil does not actually exist
a good bit of it its paper barrels. GS and MS don't actually hold the physical barrels they claim they simply lie.
As long as they can make their deliveries as needed and make money but last year in my opinion because of BS and Lehman they
where forced into a situation where they could not acquire physical oil fast enough to settle physical claims. Underlying this
was of course a fast collapse in overall production. Thus we came close to having a cascaded of failure to delivers hit the oil market.
Amazingly since they pulled it off last time I think that they are playing exactly the same game right now and at some point in the next
few months they will again be scrambling for oil to make good on physical delivery. But with Lehman esp gone they don't care high high
oil goes this time because they have a monopoly.
So it was a combination of financial games and lack of real oil thats the real underlying problem. The problem is I think the losers lost the battle but won the war.
Obviously this is just one aspect of the game but think about it if GS has no problem driving oil to 200 with its games and driving it to 30 briefly with the same games then it knows the economic fallout that will result from its games. This mean its shorting the hell out of housing
for example in the CDS market and at kinds of US companies. It knows that oil supply is going to continue to fall and that its effectively cornered the market for oil. GS does not care they are going to make huge amounts of money off the near term future. If they do feel like they are getting into trouble or need a cash infusion to keep playing no problem the US government is ready and willing to bend over and serve.
So bottom line is yes very powerful people are very peak oil aware but they simply don't care about us they can and will leverage peak oil and the destruction of the middle class to gain enormous amounts of money but far more important power.
One more edit:
Read this link its like a who's who of companies that got blasted they all have a common thread of entering the energy markets.
http://www.forbes.com/2005/09/21/energy-trading-hedge-funds-cx_lm_0922po...
And yes this is energy centric but you have to look and both oil and money.
GDP and energy use is quite a tricky subject. The US economy has changed from heavy industry to services. Then again a lot of services rely on energy in various direct and indirect ways. My point is you cant just use such simplistic data to claim either or.
I have calculated this chart independently and came up with a very similar chart. The chart looks ok to me.
US oil spending as a % of GDP hit a high of just over 8% in 1980. 1980 was an exceptional year and the average for 1970-1979 was around 3-4% of GDP. The average figure for oil spending as a % of GDP for 2008 (total year average WTI price was approx. $100) was 5.1%.
That is a common myth. Data clearly shows that the US economy is just as dependent now as it was on average during the 1970s (see my second answer above).
The post writers are investigating whether "oil prices played a fundamental role in causing the current recession and many previous recessions". Given that large oil spending increases have directly preceeded every recession since 1970 - I would say that the subject merits fair discussion and investigation by TOD.
Thanks! I think another point that has been made is that as the economy has become less dependent on high energy products (which we are now importing, rather than manufacturing directly), we are in some ways more dependent on the energy we do have, since there are fewer high-energy, low added GDP products to eliminate.
People talk about what percentage oil is of the economy, but it might be better to think about the reciprocal of that amount--how much GDP one barrel of oil is capable of generating. That amount is higher now than when we produced more energy-intensive products. If we now lose one barrel of oil, we now lose more GDP than we would have when we were less efficient.
I have compared oil to food for our machines. Machines may use less oil each because of efficiency improvements, but they still as dependent on oil as they ever were.
Since the manufacturing is taking place a long way from the end users and with old- fashioned, less efficient equipment, the energy consumption embedded in imported products is probably greater than it would be if the energy not the products were imported.
At the same time, imported products use more hand labor which is less demanding of FF energy. Efficiency has its own energy costs.
Also:
The causes for DECLINES in oil prices and emergence from recessions differes. The 1973 and '80 - '85 recessions ended as Prudhoe Bay and UK North Sea oil came into mature production. Additionally, interest rates declined sharply during the early part of the Reagan administration along with tax cuts and large defense outlays to 'stimulate' the economy.
The 1991 and 2001 recessions ended with both sharply lower interest rates and relatively low energy prices.
This is a Fed chart, so it is probably good.
Real oil prices were higher in 1980 but not by much. One reason energy prices during the last go- around caused little public anguish was because there were no gas lines or 'odd- even' rationing.
I think GDP is almost useless since it depends on assumptions; such as identifying zero- sum activities such as gambling as production. The statistical basis is unverifiable year to year (consider all the revisions of different department statistics). I also question efficiency improvements because they don't always allow for the inefficiencies that propagate up and downstream from the efficient link in the newly inefficient chain. Processes have greater and greater complexity and have unforseen effects on system efficiency. An example is updates to Windows that make the program work slower or crash ... or communications gear that works faster but requires a larger cooling system. Lots of newer basic processes are computer/machine centered rather than craftsman centered. Agriculture has become more and more energy intensive since there are less human inputs ... less HI means more 'productivity' (measured in man- hours) but the machinery requires more energy than a man does. Same with a lot of high tech manufacturing. A man couldn't make a microprocessor with hand tools even if he knew how. All that machinery gobbles energy. Even if one machine is extremely efficient, the increase in the total of efficient machines results in greater total use (dependency) on energy.
1) Luckily Peak Oil doesn't mean no oil, it means less oil.
2) Machines, speaking generally, are primarily dependent on energy, not oil.
Not to say that less oil isn't a problem, but your talking point seems to be that because machines need some oil, less oil will not be enough. This doesn't necessarily follow.
And less oil, and less oil, and less oil, and less oil...
This is an interesting point. Overall, peak oil doesn't mean 'no oil' (at least not immediately), but as oil becomes increasingly scarce it does mean 'no oil' for an increasing number of activities, processes and people. As oil becomes more strictly rationed, either by price or other mechanisms, more and more people will find that for them, there is effectively 'no oil'. It's not a one-off adjustment to using less, it's a ceaseless string of adjustments all the way down the downslope of Hubbert's curve.
This begs the question, what is meant by enough? Enough for what? For whom?
Enough oil to facilitate a smooth 'transition' to alternative forms of energy? Enough oil to permit the perpetual growth of a debt-based economic system? Enough oil to sustain green revolution agricultural practices worldwide? Enough oil for everyone in India to run an automobile? Enough oil to avoid ugly conflicts and resource wars? And in the light of continual depletion, enough for how long?
The current economic paradigm demands perpetual growth or it begins to disintegrate. Considered in isolation, having less oil may not seem that big a deal. However, the context in which 'less' occurs is vital. Peak oil is a complex conundrum where what matters is how much less, in what timeframe and under what circumstances.
There are alterative energy sources. No, they won't yet (or for a while) drive SUVs 1000s of miles on inefficient ICE drivetrains, but they exist. If you don't agree with the existence of possible alternatives, we will simply have to agree to disagree. Concentrated solar, nuclear breeding, wind, conservation, plant-based oils for lubrication and stranded use, coal, oil shale as coal/feedstock, toe-to-heel air injection for tar sands, etc.. I am always amazed at how the best discussions on this site about possibilities like the LFTR, Toe to Heel, etc are so thorougly discussed in one thread and then ignoredin all others. I wonder if there is someway to restructure the site so as to be less compartmentalized?
Anyway whe science is there to feed and care for, and even to power (if at a lower level), the world. But it is not yet in place. The transition is what I am scared of. We don't have the best track record so far, but then again, we haven't really felt the constraints till just now.
So let's go with this one as a TARGET: Enough oil to facilitate a smooth 'transition' to alternative forms of energy.
Possibilities, Andrew. I beg to suggest that it isn't just this site that is ignoring these possibilities, but also the people who could be imagined to put forward the money to roll them out on a sufficiently rapid scale to make a useful difference. And even if they did do that, then a thorny question might arise of how long it would take before the energy debt in development is paid off by output. Till then, these technologies would be burdens rather than saviours.
And the problem of compartmentalisation is also far more serious outside this site than inside it! Notice how now the price has gone back down the visits here by newbie loons have also ceased (said he, foolishly!).
http://krugman.blogs.nytimes.com/2009/04/16/reconsidering-a-miracle/
..here's another good point in regards to productivity and GDP. This should make on think again when making assumptions relating energy & GDP.
A good point indeed!
Let's not ignore industry moving abroad. That might effect those energy/$GDP figures a little bit.
US manufacturing uses about 22%(22Quads) of a total 100Quads of energy. High energy users such as steel and cement only used 1.8 Quads in 2002. Transportation uses 27.8 Quads in 2008 and electricity production 21.8 Quads.
We often see statements that we are exporting our energy use, but I can't see how more than a few %( ie one or two years reduction in energy intensity) can be accounted for by now importing manufactured goods.
The US may be importing more refined petroleum products( a big user) and more aluminium but I don't see reductions in manufacturing accounting for the big gains in GDP/energy use.
Do you have some figures of declines in manufacturing industry use??
A good chart of several energy intensive industries is Figure 15 in Exergy, Power and Work in the US Economy by Ayres, Ayres and Warr at the link:
http://www.iea.org/textbase/work/2004/eewp/Ayres-paper3.pdf
V. Smil discusses energy intensity in Energy at the Crossroads.
This series of papers is one of the best on the relationship of energy and the economy I have ever read. If anyone knows of anything equal to ether these or V. Smil’s work, I’d love to know about it.
V Smil greatly underestimates wind resources and power density. He uses average wind speed over the entire land mass, a bit like estimating the average oil content of the earths crust or the energy in hydro electricity on rainfall/m^2.
Solar, wind, hydro, geothermal, tidal energy are all concentrated in specific regions so using average power density is meaningless. I don't see how energy density of renwewables is relevant, electric wires can carry very high energy density thousands of km, to where its needed. The actual resources are enormous by present rates of consumption of all energy.
The link to the Ayres et al paper is interesting, it seems to show that energy intensive industries have greatly reduced energy use by improvements in efficiency, and that the US has had a continued improvement in GDP/energy use for 100 years.
The GDP was distorted by the finance and housing bubbles, which lowered the energy intensity (energy/$ of GDP). Offshoring of manufacturing also lowered energy intensity.
Most of the decline in energy intensity is real and results from better insulated homes with more efficient appliances, more efficient factories and lower weight cars, at least until SUV's became popular.
The present day US economy is much less dependent on energy than the economy of 1970. The figures I have seen indicate something over a 25% decline in the amount of energy to produce a $1.00 of GDP
This is a totally meaningless statement. A house can be sold several times over for more money each time, creating more and more GDP. Yet in this process nothing has been created. Heavy industry always uses oil, hence China is using more each year.
Some industries are far more vulnerable to energy price increases. The airline industry can make a profit at $70 but add another $20 and they start losing money. The fact that this price increase is small when looked at as % of GDP is irrelevant.
The same cost increase will have no impact on say running a bank, any country overly reliant on the finance industry to make up it's GDP will realise what folley they engage in.
"A house can be sold several times over for more money each time, creating more and more GDP. "
Resale of an existing house isn't included in GDP.
"Heavy industry always uses oil"
Industry mostly uses electricity. In China diesel is sometimes used for generation, but that's a temporary patch.
"The airline industry can make a profit at $70 but add another $20 and they start losing money. "
The airlines are always losing money. Seriously, airlines just aren't a good moneymaking proposition. They're like farming - a part of the industry is always in trouble, and most don't do all that well in the best of times.