What happens when...
Posted by Stuart Staniford on December 7, 2005 - 5:06am
Which is mightier: the logistic equation with it's stern command that production shall increase no more? Or these two-and-a-half billion people with their exponential desire to drive?
Oil consumption of China and India as reported by BP Statistical Review of World Energy.
Oil consumption of China and India as reported by BP Statistical Review of World Energy, together with exponential fits to the data extrapolated to 2025.
Annual percentage changes in oil consumption of China and India as reported by BP Statistical Review of World Energy.
Oil consumption of China and India as reported by BP Statistical Review of World Energy, together with exponential fits to the data extrapolated to 2025. Logarithmic scale on the y-axis.
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When I hear all these people around here talking about how China is the current `Promised Land of Opportunities' for economic investment, I can's stop asking myself: With which energy resource?
Many people say: "The 20th century was the American century, the 21th century will be the Chinese century"
I say: "The 20th century was the Oil century, the 21th century will be the Oil depletion century".
http://www.energybulletin.net/newswire.php?id=11460
Excerpt:
"Money is nothing more than the right to command energy to do what you want it to do."
The WSJ had an interesting article yesterday about what is basically a global savings glut. Reading the article, it occurred to me that capital and energy are going in opposite directions--capital going up and energy resources depleting. Of course, energy resources have been depleting since we first started mining for coal and drilling for oil. The key point, as we know, is that we are looking at the peaking of our ability to grow the daily oil supply.
If we looked at the ratio of total world capital in dollars equivalent divided by total remaining BTU's, that ratio is increasing at an extraordinary rate--because the numerator (dollars) is rising while the denominator (BTU's) is falling.
Another way to look at it would be total capital divided by total world BTU consumption (from nuclear + fossil fuel sources) per day. In terms of oil equivalent, the world consumes the equivalent of about 200 mbpd from nuclear + fossil fuel sources--the equivalent of a billion barrels of oil every five days.
We are now looking at the probability that the actual daily supply of nuclear + fossil fuel sources is about to enter a long term decline. So, what this means is that even on a daily supply basis, the ratio of dollars to BTU supply will start skyrocketing because the numerator is rising while the denominator is falling, at least until the world economy starts contracting.
If fossil fuel generating plants were taxed for the true cost of CO2 emissions, or for the future value of the hydrocarbons they burn, we would already be in a crash program to replace them with nukes.
My point is that just because exponential growth can't continue doesn't mean something bad will happen. Okay, the two situations are very different. The US may have swapped its primary oil consumption growth for a growth in imports of oil based products manufactured in... China for example. China and India don't have anyone to export this oil demand growth to!
You'd think, my god, the U.S. must have gone to hell. All those decades and centuries of thinking the world was getting better, that each generation would have more than the one before, must have come to an end. The U.S. must have descended into a turmoil of suffering and bitter fighting over who gets the next barrel of oil. It must have been 30 years of stagnation, of no economic growth, of no technological progress. The world of 2000 must be far worse than the riches we have here in 1970.
This is basically what Peak Oilers have been predicting when they imagine the same thing happening on a worldwide scale. This is what lifeaftertheoilcrash and similar sites are predicting.
Yet we know it is not true. U.S. economic growth over the past 30 years has been robust. Productivity is increasing faster than ever. Technology has made incredible advances. The U.S. today is so far ahead of 1970 that it is unbelievable. Longevity continues to grow as medicine improves, technology has given us new tools that were not even imagined back then, and we are on the verge of even more dramatic changes in these areas. By any objective standard, the U.S. today is far richer and has a far higher quality of life than it did in 1970.
Who is to say that the same thing can't happen to the world as a whole, even if oil does peak soon? Suppose a time traveler from the world comes to you and shows you a chart of world oil consumption over the next few decades that looks much like what the U.S. experienced from 1970-2000? A general leveling off, with lots of ups and downs?
Are you going to assume that this is a world of suffering and hardship, a dog eat dog struggle for survival with an ever increasing desperation to grab the few remaining dregs of oil? A world with a lower lifespan (or even a population "dieoff"), a world without the wealth to expand technology and solve its problems?
Or are you going to assume that human intelligence, creativity and productivity will rise to the challenge, as it has done before? Look at the lesson from 1970 and think hard before you bet against the intellectual power of six billion people working to improve their lives and those of their children. I would never bet against humanity in such a challenge.
Maybe we just borrowed our way to prosperity the last 25 years?
It seems to me that this may be different if we face the prospect of decreasing supplies of oil at any cost. Of course, it is all related to how fast worldwide depletion occurs. Also, our demand is much greater now, so it will be harder to transfer it to other sources. Of course, if depletion happens slowly, then societal disruption will not need to be great, which is a point many have made before. It's all about the rate.
A poor man approaches a heavily dressed rich man (a famous economist BTW) and asks him for a dollar. The rich man stops, looks at him and lights a luxury cigar.
-"Do you see this cigar, my friend?"
-"Yes, what about it?"
-"It costs 100$. If I only quit smoking I can earn $3000 per month and live wealthy and happily. So, why can't you just stop smoking?"
I thought only Sith Lords speak in absolutes. By "any" obective standard?
Talk about your freak-o-nomics. Halifn's argument leaves out the HUGE HUGE externality of fossil fuels coming in from foreign sources to save the US economic glutonmaximus. I guess those time machine aliens are going to come to our global rescue the next time around and bring us extra-galactic oil. Right. Well yea..eh..aah. You never know. There's sound logic for you.
As for "far richer":
I don't know if being in debt up to your eyeballs (2 Trillion) makes you "richer".
As for "quality of life", it's a complicated subject:
http://www.rspb.org.uk/birds/sotukb/wildbirdindicator.asp
http://www.flynnresearch.com/indicators_sochealth.pdf
http://www.co-intelligence.org/y2k_upnotup.html
http://www.flynnresearch.com/calvert.htm
It's quite hard to evaluate USA personal wealth, let alone quality of life, over the last 20 or 30 years, many of the official stats have been so messed with. I have seen credible data that indicates the income of the lower 80% of the US population has declined fairly steadily in constant $ terms since the late 1970s. I think that US per capita wealth in constant $ terms peaked in about 1978.
The truth for more than 50% of the US population is probably: life is worse now than 30 years ago. Despite economic growth, despite the extra consumption of fossil hydrocarbons, despite the extra money bouncing around. I'm not talking relatively (they feel poorer but are actually richer) I am talking in absolute measures of life quality. Is a child richer for watching hours of cartoons on TV or for interacting with a parent?
Later, when we or our descendents look back, I think they'll conclude that somehow we bought a delusion and went off the rails in many ways. It will seem so obvious then, in retrospect. They will find it hard to understand how we couldn't see it.
There are many inaccuracies in Halfin's post. US oil consumption was exponential to 1973, corrected by 20% by 1980 then grew on a linear basis to date and is forecast by the EIA to continue so.
Speaking of the irresistible force meets the immovable object...
"RUPPERT-CORSI RADIO DEBATE CANCELLED AT LAST MINUTE
Today FTW's agent publicist Ken Levine received a call from radio station KHNC in Denver. The short message stated that Jerome Corsi would be unavailable to debate FTW Publisher Mike Ruppert tomorrow as scheduled and that Corsi's staff would call to reschedule next week."
http://www.energybulletin.net/11493.html
However,the Subcommittee on Energy and Air Quality of the US House of Representatives are going to be "Understanding the Peak Oil Theory" at 09:30 ET December 7, 2005 (today, Thurdsday) and you can watch it:
http://energycommerce.house.gov/108/Hearings/12072005hearing1733/hearing.htm
The EIA, bless their cotton socks, also think that US demand is set on a linear uptrend:
http://www.eia.doe.gov/oiaf/images/fig3_wouttitle.jpg
...but sometimes I think that straight lines and averages are the only maths the EIA use in their forecasts ;-)
The case of India is different because the rural population fraction has been around 70% since the 80s, I will try to do the same graph for India later.
Rural population percentage: Statistical Indicators for Asia and the Pacific 2004 Compendium, Volume XXXIV
Note: the definition of rural/urban population varies widely between studies (see Definitions: Urban, Rural, City, Town).
Just what we need a whole Culture learning to love the highway.
Just like we do.
Hey wait a minute.....maybe i should be opening auto insurance outlets over there using a lizard wearing a turban to promote my business. I can see it now!
On the express ways there are few two-wheelers, but very large numbers of trucks. They are very underpowered compared to US trucks and crawl up hills at 5-10mph. They break down a lot too. They are all decorated with flowers, paintings of Hindu gods, etc, and say "Horn OK" on the back to encourage other drivers to announce themselves.
http://majorityrights.com/index.php/weblog/comments/two_stories_from_other_sites/
Actually both of them move. The force is not irresistable and the object is not immovable. This is the lesson from economics that Peak Oilers refuse to hear.
I think many people who look closely at China would say that it is in a bubble. They have had a real-estate bubble just like here - people were buying and flipping condos in major cities. Venture capital people were over there throwing money anywhere they could - smarter ones were trying to be careful - ones from overseas with less experience in China were more indescriminate. Expat Chinese were returning to China to work for startups. And so on. Some of the stuff I was reading was from a few years ago, and I haven't seen any indication that things have slowed down at all over there yet.
It reminds me in so many ways of the Internet boom here.
This does bring up the other point that others have raised though. It seems like there is an oversupply of cash chasing investments around the world. People are not satisfied with 6% return any more - they now expect a 20% return, which means riskier investments.
For an interesting and very detailed read on the subject of too much cash chasing too few good investments see The Dollar Crisis by Richard Duncan (not the same Richard Duncan associated with Olduvai theory).
Between 1980 and 1995 about 40% of the world population has lived with 2.5-3 mln.bpd.
This should stop the fears that PO will cause a world-wide hunger... The whole world can survive with 6 mln.bpd. - a rate that we can possibly expect not earlier than the end of the century. I suspect (and hope) that when the time comes if we are forced to choose between food and cars we will not pick cars.
To expect the worst of people is a self-fulfilling prophecy. If you don't believe that others will do the right thing you will be less likely to do it yourself and the expectation propagates through the culture. The converse is also true.
The connection is not always direct, but in this case it is pretty clear.
Our current economic paradigm generates pathologies like this all the time. We want to take advantage of the efficiencies associated with economies of scale but have no way other than an increase in consumerism to generate employment for those left unemployed by these efficiencies. Those of us who would like to switch from reliance on automobiles to mass transit have to face questions like, "How are we going to feed the resulting unemployed auto workers?"
Well a reduction in automobile production doesn't result in reduced food production. Any connection is an artifact of the way we have structured our economy. It is a result of human choices and nothing else. We need to rethink these choices.
Furthermore, most farmers in the US do not even grow their own food. Most typically grow one or two commodity cash crops like wheat, corn,or soybeans. Others might grow a small number of different vegetables. Ditto for livestock operations. Thus, most farmers in the US buy most of their food in the supermarket just like everyone else. While such farmers could, in an emergency become food self-sufficient, most currently are not.
For that 40% of the population who only used 3 million bpd of oil, I wonder where they rank on the 'wretchedness index', which must have a very nice inverse correlation with oil consumption.
"type of living"
This is complete shit. Most of the people in the industrialized world don't live in the USA. In addition, in the USA anybody who lives outside big cities claims they can't live without a car. I know from personal experience that this is not the case. I know several people who claim they can't live without a car because they live in suburbs when I know for a fact that they could commute to work on public transportation in less time than I do. They just don't want to be inconvenienced.
They are capable of saying in one breath that millions of people are going to die because of oil shortages and with the next breath claim that they can't do anything about it because they just don't want to be inconvenienced. Then you'll hear them claiming that they deserve to be among the survivors because they've made themselves aware of the situation and they're arming themselves to be sure.
Three cheers for Jevon's paradox, the get-out-of-jail-free card for peak oilers.
"So, for the vast majority of people in the UNITED STATES: no oil means no car; no car means no job; and no job mean no food."
Better?
Can you deny that the statement is true?
And yes, I AM talking about the status quo, for what else would I be talking about/
With awareness comes responsibility. When someone tells me that energy shortages are going to end our civilization and result in a Hobbesian war of all against all, that requires them to everything in their power to reduce their energy consumption to prevent this from happening. When they latch on to an outdated and irrelevant economic concept like Jevon's paradox and use it as an excuse for doing nothing about their own contribution to the problem I have to question whether it's appropriate to consider them decent human beings.
It isn't just cars, of course. McMansions are another aspect of the whole thing - my hope is that higher heating bills this winter will squish this bug just like higher gas prices have squished the SUV craze.
Then you need to go beyond this. So much of everything we do is energy intensive. Consider just to ship fresh produce from Florida, Mexico or California to New England in the wintertime.
In any event, it is clear that Europe can do quite nicely on half the oil we use in the U.S. - I don't see any reason why this won't be doable. It is just a matter of finding the political will. Unfortunately that will have to wait until 2008..
There are enough structural issues to make it a real challenge:
EU 25 USA
Sq km (000) 3,977 9,631
Roads km 4,725 6,348
Population 459,000 297,000
people/sq km 115.4 30.8
Europe has a smaller space, fewer roads, more people living more densely, good public transport built over decades of investment, far more efficient cars, tolerance for cooler homes, and the list goes on.
If Americans lived a European lifestyle, they would still use more oil per capita just because of bigger spaces.
But consider:
China has 1.306 billion people, which is 4.4 times the size of the US population of 296 million. If the Chinese all consume, even at a very frugal level, it adds up to very big numbers.
If China used the same amount of oil as the US in total, their barrels per-capita consumption would still be only 22.6% of America's per-capita consumption. That does not sound like an implausibly big number.
I suspect the constraints on Chinese growth will be the availability of oil, transport, and world markets for their products. There is certainly no lack of people, drive, or ingenuity.