How to Address Contrarian Arguments – part III
Posted by Luis de Sousa on February 8, 2007 - 10:43am in The Oil Drum: Europe
On this third installment of the Contrarian Arguments series we’ll address the "Markets Will Solve It" claims.
A regular economist will tell you a fable like this:
If a shortage of potatoes occurs either by lack of supply or by growth on demand the market price will rise. This new higher price will signal to the farmers a need to produce more. Supply will rise, meeting demand, lowering the price and bringing the market back into balance.
Let’s see what’s wrong with this apparently correct logic.
Warm Up
In spite of the mathematics behind it and the historical data supporting it, Peak Oil is often dismissed on the basis that (free) markets avoid such phenomena. The so called Market “Magic Hand” purportedly guarantees that the right amount of a commodity is traded at the best price. The “Magic Hand” will take care of any occurrences that momentarily disrupt this balance.
From a regular economist’s point of view Oil is like any other good or commodity subject to the same rules above. As you might suspect it isn’t so. In the next lines we’ll see why and what is the real role of Markets and Prices in Oil Depletion.
The Basics
For starters we’ll use that old Price vs Quantity graph (if you never heard of it I think you’ll understand anyway, but you can learn more about it here or at Wikipedia). On the yy axis is represented the Price, on the xx axis is represented the Quantity traded for the good or commodity in study. To represent Demand a curve with downward slope is used - the higher the price the less consumers can by, as price lowers consumers are willing to buy more of the good. Supply is represented in an opposite fashion – the higher the price the more goods producers are willing trade, at lower prices producers will not be willing to sell as much.
In real life Demand and Supply are not linear, hence called curves, but for didactic purposes are usually represented as straight lines. These two curves meet at a specific point - the equilibrium. If the Demand and Supply curves used represent the market correctly, the equilibrium point determines the price and quantity traded of the good in question, as seen below:
Market Equilibrium. On an unconstrained Market, price and quantity traded are set by point where Demand and Supply meet.
Now imagine that consumers really like this particular good, or become more dependent on it, in that case they’ll be willing to buy more than before. This case is modeled by shifting the demand curve to the right. As seen in the next picture a new equilibrium point will unfold, where more goods will be traded, but at a higher price.
The Demand curve shifts right to reflect a new will from consumers to buy more of the same good.
More goods traded at higher prices, this means profits for producers. This new profitability will make the market attractive for new producers that will make more goods available to trade. This new movement in the market can be modeled as a right-ward shift of the Supply curve.
The higher price set by the right shift of Demand triggers in its turn a right shift in Supply.
On a free market (without price or quantity regulations) after these two moves the final price will be the same as the initial. Such is the market “Magic Hand”. In a market with perfect concurrency (goods are not differentiable from producer to producer) goods are sold at the lowest price possible, and producers get virtually zero profits over base costs, benefiting consumers the most.
In the case of Oil this kind of movements happened constantly for about 20 years, from the mid 1980s up to 2004, where global demand for Crude plus NGL moved up from 57 Mb/d to 80 Mb/d. During that time Oil prices moved very little, apart from the 1990/1991 period with the invasion and subsequent liberation of Kuwait. Sometimes one tends to forget about this little detail, Oil demand has been a monster growing relentlessly.
So the regular economist might be right to some extent. Before moving on give it a little thought: is the present Oil market a free one?
Prices and Reserves
Among the financial and economic communities there seems to exist a hidden belief that Oil Reserves are set by prices. If prices go up by growing Demand then Reserves should follow, in order to allow Supply to match it. Even if Reserves grew with prices, it’s the flow of Oil to the market that has to grow in order to meet Demand. It’s really hard to understand why such belief exists or what created it, because there’s no physical or logic reason to think that way.
Unfortunately some institutions not only fail to dismiss such naive beliefs but even seem to propagate them. Following is a graph produced by the IEA that leads one to believe in some sort of link between prices and recoverable reserves:
IEA’s Reserves ties with Prices.
Hopefully the IEA has already made its act of contrition with the last World Energy Outlook, acknowledging energy supply problems in the next decade. But what the economics and environmental folks remember is that nonsensical graph.
The amount of oil found at a certain reservoir was formed dozens of million years ago, it’s a physical reality impervious to what happens above ground in the market. Whatever the price of a barrel of oil, whatever the amounts of money oil companies hold, the amount of oil remaining in a reservoir is the same. Pretty obvious, but hard to understand for some.
One could remotely argue that it is the money that oil companies hold that make it possible for the exploration of a certain reservoir. But that money only represents the availability of surplus energy to produce more oil, what really makes a reservoir producible is the energy profit that it will yield. As we shall see in the next section, the price of oil (and in tandem the money resources that oil companies may hold) are just mechanisms to set which reservoirs are more profitable and should come on stream first.
Money and Oil Flows
If it is the net energy that determines the amount of oil recoverable from a reservoir, what’s the role of oil prices? Actually they have a very important role, they set at each point in time which reservoirs should be on production, pushing those with higher EROEI first and leaving those with lower EROEI for last.
To illustrate this effect let’s use another parable: imagine there are two different energy sources available for exploration in an imaginary country (it could be Melnibone if you like):
. Energy Source A producible with an EROEI of 1:10 at a maximum rate of 10 energy units per time frame;
. Energy Source B producible with an EROEI of 1:2 at a maximum rate of 20 energy units per time frame.
In the beginning there’s one energy unit available got from human hard work, and energy demand of 9 energy units. Although with larger reserves, energy source B does not provide enough profit for the current energy demand given such low input, so in the market it’ll have a prohibitive price. As for energy source A its market price will be lower and affordable, for it fulfills the entire energy needs of the imaginary country. If supply keeps steady we have equilibrium, were at each time frame 10 energy units are produced, 1 to produce energy in the next time frame and 9 to meet demand.
A possible scenario where energy production gets started from source A, covering a Demand of 9 units per time frame.
Now imagine that demand rises to 12 energy units per time frame. Energy source A wont suffice, energy source B has to come on stream. In this case equilibrium will be achieved by producing 10 energy units from source A and 6 from source B. In order to achieve this new equilibrium a period of turbulence will be underwent in order to raise the energy inputs needed to put source B on stream – this is where the price comes in to play. Until the new equilibrium is found the price will go up reducing demand and opening space for higher investments in the following time frame. After the new demand of 12 energy units is fully met the price will come back to its original value.
A possible scenario where a new effort has to be made to bring source B on stream. After a period where total surplus diminishes a new Demand of 12 units is finally covered.
Take now a new scenario where energy source A goes in to depletion, diminishing 10% per time frame. The price will go up again to make possible the coming on stream of the full production from energy source B. But after the depletion cycle is over only 10 energy units will be available for trade, the price will remain high to keep Demand low.
A possible scenario for source A depletion. A new effort is made to bring source B into production but in the end the original Demand of 12 units cannot be met.
Prices basically set the order by which Society uses the energy sources available, putting those with higher EROEI at front. In light of this one can draw an interesting postulate:
A new energy source will come on stream on an unconstrained market if and only if all other energy sources with higher EROEI do not entirely cover current energy demand.
By doing so prices and markets guarantee that Society uses energy in the most profitable way possible. The only problem is when the energy sources with higher EROEI are finite.
Another point worth observing is that the Market is in itself an Agent of Depletion. It is the market that makes the low hanging fruit go first, producing the declining EROEI phenomenon observed in part I of this series.
The Regular Economist
If a shortage of potatoes occurs either by lack of supply or by growth on demand the market price will rise. This new higher price will signal to the farmers a need to produce more. Supply will rise, meeting demand, lowering the price and bringing the market back into balance.
What the regular economist doesn’t tell you is that the farmer will need more oil to produce more potatoes. It’s that simple. As long as enough energy is available the farmer can continue to adapt production to the signals sent by the market.
Now imagine that energy supply constraints prevent the farmer from acquiring more than some amount of fertilizers or diesel fuel, he won’t be able to meet a possible surge for potatoes. The same with Oil, energy surplus has to be found to produce more of it, or else rigs will falter, access to reservoirs will not be possible, etc. This is the major difference from Oil (and energy sources in general) to other commodities: more Oil (energy) has to be invested to produce more Oil (energy).
Conclusion
Although we don’t see the Market’s Magic Hand has been working quite well for the last century, making sure that Supply meets a breathtaking surging Demand. Major exceptions happened in 1973 (OPEC embargo) and in 1980 (Iran-Iraq war) but even then the Market prevailed, bringing things back to normal with time.
This “Magic Hand” is itself assuring that depletion will unfold by guaranteeing that energy sources with higher EROEI are explored first. That way net energy keeps falling to the point where production can no longer tackle demand, eventually peaking and entering in decline. Once energy scarcity unfolds there’s little the Market can do about it, for to generate a higher supply of energy more of it has to be invested.
Traditional Economics fails to grasp this reality for it deals with energy like any other good or commodity. The mainstream economic thinking does not acknowledge energy as a propelling factor of growth, even less as the major factor doing it. Researchers like Robert Ayres, Charlie Hall, R. Kummell et al. have been trying with some success to estabilish this link between energy, money and economic growth, but that’s a story for another time.
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If I recall Economics 101 the upward sloping supply curve takes account of 'diminishing returns' so that it doesn't shift as shown in the third diagram. However I do agree the market seems to have a kind of inbuilt shortsightedness. A guy on TV discussing house prices said supply and demand is OK but not affordability, which like EROEI is a factor not explicitly shown on the supply and demand graph.
Somebody needs to look at the embodied energy capital requirement for the low EROEI future, especially grid generation. This implies a nontrivial fraction of current fossil energy should be set aside eg to smelt and fabricate aluminium for wind turbines. My guess is at least 10% instead of which we are using it all up having a good time.
Hello Luis,
This sentence from your Conclusion may need a correctional edit:
This “Magic Hand” is itself assuring that depletion will unfold by guaranteeing that energy sources with lower EROEI are explored first.
Don't you mean higher ERoEI?
Thanks for the tip, it’s correct now.
Economists say more than a) higher demand generates a higher price that in turn produces more of what is demanded. They also say b) that higher prices curb demand, and c) that higher prices encourage substitutes. So, in looking at the oil market as prices rose to last summer's peak, the response a) was weak, old field decline/depletion prevented higher production, but b) we have seen demand destruction in some parts of the world, which accommodated higher consumption in china and some exporting countries, and c) we have seen various substitutions, eg traditional ng taking the place of oil in those electrical generating plants that accommodate fues switching, and newer substitues, eg ethanol and tar sands. Turning back to a), it seems clear that in the absence of higher price some e&p, eg ultra deep water, would not occur... so, even as production stagnates, it should be conceded that production is nevertheless higher than it would be if prices were still at 25/b.
I have long thought that PO'ers and economists talk past each other, a pity as both have some things to teach the other.
Being both an engineer and an economist I can vouch that for the most part each profession sees the other as short-sighted fools. Pity indeed.
Hellasious and jkissing:
Those folks that I referenced on the Conclusion are trying to do just that, bring Economics and Engineering/Environments together. Also I used the term ‘Regular Economist’ because there are Economists out there that acknowledge these problems; I have the luck to know some.
The connection between energy, economic activity and money is organically obvious.
In a comment to Robert Rapier's recent request for alternate energy policy recommendations "If I were a global dictator", I offered this: tie money supply growth with renewable energy production growth. Properly done, nothing else is required policy wise. No tax revisions, no incentives, no CAFE regulations, no pollution agreements - nothing. It will all be done through this "simple" measure.
If anyone has questions on this, fire away...
A bright remark. Although to be done correctly it has to relate to exergy not plain energy, and that’s all but easy.
By exergy I take it you mean the thermodynamic definition, yes? Excellent remark and ultimately that is the theoretical limit one would strive for, but from a practical standpoint I really don't think you need to get nearly so complicated.
Equivalent renewable-source BTU or KWh will do just fine for a long time. Just the transition alone from a purely fiat currency to one backed by "green" BTU will take decades.
I call it the "Greenback"... But if we used your exergy suggestion we should call it the "Carnot(e)".
(smile)
Regards
That is hilarious! Thanks... gave me the best laugh of the morning.
:-)
Hi H,
Okay, so I have a question: Could you please expand and explain?
For example:
1) renewable energy prod. growth - you mean what and who exactly?
2) Who counts the "production growth"?
3) No money supply growth allowed otherwise? How do you stop it? Who stops it?
4) Can this be done unilaterally, eg. by the US only?
And so forth.
Hello Aniya,
The first two questions are pretty simple, really - solar, wind, geothermal, fusion,...the list is pretty long. It could also be defined as non-fossil and non-fission. Who counts? The same people that count it today..power cos., national and int'l agencies.
Now as to the other, more complicated questions:
(3) If you want true sustainability, no money supply beyond that will be allowed. But there has to be a very long transition period, too. Eventually, imagine a currency that is backed by say, 1 Greenback = 100 000 "green" BTU. This is not so far-fetched as it sounds: the US dollar today depends on oil for its global reserve status. Who and how stops money supply? The same people who regulate it today: central banks.
(4) Yes it can, and that is very intriguing because it IS feasible, by comparison with a single, global currency. It could happen thus: say today the split in production between "black"/"green" energy is 95%/5% and that production (in BTU) is rising 5%/20% respectively.
The "strictest" money supply policy would only allow M3 to rise by only 5%*20%= 1%. That would be so restrictive right now it would immediately throw the economy into a deep recession.
The "loosest" policy would be 95%*5% + 5%*20% = 5.75%. This would accomplish nothing.
A "transition" policy would be something like this: (1/2)*95%*5% + 5%*20% = 3.375%, i.e. you "penalize" black energy by 50%. At the very start of the transition period that "penalty" could start at 5% and rise gradually.
Monetarism with a twist..."green" monetarism.
Regards
Excellent article!
Ironically, nineteenth century British economists worried a great deal about running out of coal and worried a lot about the consequences of running out of coal. They understood that energy is fundamental and not "just another commodity."
Where cornucopian economists go wrong, in my opinion, is in their unwavering belief that good substitutes for oil exist or soon will be found. This issue comes down to technology: Are there good substitutes or are there not? My own opinion (and I'm an economist) is that for many uses there are no good substitutes for oil and natural gas. To some extent we may be able to substutute electricity generated from nuclear power for oil and natural gas--but this is not a quick or easy or complete substitution by any means. Biofuels have limited potential as substitutes for oil. Solar and wind power are more silver BBs, but again are not a quick or easy substitute for oil. Unconventional oil will help as will coal-to-liquids, but these are slow, difficult, and high-cost technologies with significant environmental concerns. Call them tarnished silver BBs.
The Econ 101 graphs work only where good substitutes exist. I think this is the essence of the issue: If there are good substitutes for oil, then Peak Oil is nothing to worry about. Because, in my opinion, there are only difficult and expensive substitutes for oil, Peak Oil is a Big Deal that will transform our lives.
"Because, in my opinion, there are only difficult and expensive substitutes for oil, Peak Oil is a Big Deal that will transform our lives."
1) I mostly agree -- depending on how we define the word "transform". I am certainly no "doomer", but finite resources are a constraint. Accordingly, I have already begun educating my boys on PO, its implications for the future, and for the types of job openings likely to be in demand in 10 years when they finish college.
2) This implies that the price of oil will rise faster than inflation in the years to come. If we add geopolitical concerns on top of this, we get that we all should be hedging this risk by owning domestic reserves in our portfolio. The energy index funds contain exposure to refining and the drillers, but there are a few publically traded firms that are more narrow.
3) I hope those who post here that truly believe in peak oil have been investing what funds they have accordingly. There's an old saying that goes roughly as follows, "If you want to know what someone believes in, flip through their checkbook". (A variation of "preferences are revealed through choice" phrase so often used by those in econ departments.) I hope the more vocal posters here are investing according to their beliefs.
Sonic - I adopted this very strategy last year, dumping many higher risk oil and mining stocks, to focus on companies with reserves concentrated in the OECD. Encana is I believe 100% N America, but the list of companies not exposed to political risks is pretty short. Quality exploration potential and growing production tends to be outside the OECD. So you got to balance growth prospects against safety.
I invest in small US e&p's with positive net and growing reserves. To sort, I try to extrapolate future net and compare with present EV,
reserves/ q production x q net/EV; the result should be at least 1.0; not many are.
Of US e&p's I have found 3 above 1; ard/gpor/gmxr
The first two are oils, the latter ng... imo the potential for increase in NA ng price is much higher than for world oil.
"imo the potential for increase in NA ng price is much higher than for world oil."
Many people agree with you that the odds of, say, a near-term 2X price increase is greater for NA nat gas than world oil. I don't know, but I am certainly not going to take the other side of your position.
Both oil & nat gas prices concern me. With my electricity mostly coming from NG, I have been one busy person lately: I've doubled my attic venting (all passive), added some radiant barrier stuff (if interested, see savenrg.com), and will soon add some solar shading on a few windows to reduce the a/c bill this summer. (If I install any more compact flourescents in the house, I think my wife will slug me.)
- Sonic
Which savenrg.com product did you use, the chips or the membrane?
I used something similar to the membrane: it's a major hassle to install (I got the stuff I used on an "inventory clearance sale"). The RB chips are FAR easier to install, but pricey. The TCM product, due to it being multi-layered, is not adversely affected by dust when placed over the attic insulation. Dust accumulation is not a major problem in my attic. Therefore, a single-layer, double-sided product (like the one I installed) installed over the insulation should perform well for many years -- at least I hope it will.
Best I can tell, dust problems are most prevalent for attics with powered gable fans: they seem to draw the dust in on one side of the house and deposit it along the way to exit fan. For these, the two savenrg products would work best.
The next house that I build (assuming it's in the South or Southwest) will be wrapped in the multi-layered TCM product. I also hope to avoid placing the a/c units & ducting in the attic. Homes with such setups (like my current home which I did not build/design) get a triple penalty from attic heat: the heat eventually seeps through the insulation, the insulation acts as a heat sink so that heat continues to radiate in after sundown, and the a/c ducts get super-heated. Just wonderful. When I moved into my current home, the attic would hit 120-130 when the outside air temp hit 100: that meant I was trying to get sub-80 degree air out of my a/c unit at a time when the ducts were 120-130. Surprise, surprise -- it took a very long time to get cool air out of ducts and into the house.
My experience (via electric bills normailized for avg temp) is that increased attic ventillation is a first order magnitude effect as is sealing the ducts for leaks: I lose less cool air due to leaks and have less of a temperature loss through the ducts since the ducts (& attic) are no longer 120-130 (just a chilly 110+!).
I found the radiant barrier to be a second order effect, but only if the attic is ventilated properly. RB installed over the insulation reduces the heat sink effect of the insulation by eliminating it from absorbing any radiant heat directly (it still gets heated by other means, hence the need for excellent ventilation to keep the attic relatively cool). A faculty member at Texas A&M has a study/note on RB placement -- something I'd like to quote right now, but can't seem to find. NOTE: In some cases, adding RB to a poorly ventilated attic can actually make the a/c bill worse, especially if the RB is installed up on the rafters.
Thanks for your words Don, I guess you got the main problem:
Substituting Oil is not solely about technology. Alternatives do exist on that basis, but what none other source seems to provide is the colossal energy flow that Oil allows.
You are correct that technology is not the only problem in finding substitutes. Another problem is that the "Great Transition" away from oil will require truly humongous investments in nuclear energy, wind power and other alternatives. Oil infrastructure is already in place, but to find the funds and get the land, skilled labor, and capital (including energy, a special kind of capital) and management together is a prodigeous task.
How well will market forces work to facilitate this prodigeous task? Most economists think it will work fast and with great power. I am concerned about the dynamics, the time lags, the nuts and bolts of making the Great Transition away from oil, and while I grant the power of market forces I also see their limitations.
If I were dictator of the United States I'd implement a World War Two type of mobilization and put half of all resources into dealing with Peak Oil using the command mode of organization. I think five years of such effort would do the trick, because with wartime priorities we could build (for example) hundreds of nuclear power generating plants in five years.
With business as usual, I expect major disruptions and serious hard times coming--and coming pretty darn quick, i.e. within the next few years.
In reading economists theorizing one frequently sees words and phrases such as "eventually the market comes into balance..." and "in the long run..." implicitly ignoring what goes on during the transition between one 'balanced' state and the next. If the doomster's dieoff occurs, the market will indeed come back into balance through demand destruction of the worst sort. Wasn't it Keynes who quipped "In the long run, we are all dead."
I'm admittedly fairly ignorant of the current state of economics thought (I read Heilbroner and others in the 60s), so I'll pose the question, "does educated economic thinking take the 'transition' into account as to how long in might be, how difficult it might be, what the human cost in suffering might be.", and so on. You seem to indicate that the answer to this is a qualified 'no' which leaves me more skeptical of the academic discipline of economics than ever.
Most of economics at the undergraduate level is comparative statics and has nothing to say about dynamics (the path from one point to another) at all--or there is sometimes a very simple growth model.
At higher levels of economics the problems of dynamics are well understood. Keynes was a prominent advocate of looking at the costs of change as well as the benefits from the final position; he was a practical man who understood the real world as well as he did economic theory. However, economics is only as good as its assumptions. A key assumption of most economists is that there are ALWAYS substitutes lurking out there--real or potential ones that will be developed in response to higher price.
The education of most economists is deplorable. They learn economics and math but not much else. Although engineering is essentially applied economics ("An engineer is somebody who can do for a dollar what any damn fool can do for five dollars.") few economists can or do communicate with engineers. Indeed, outside of their specialties, most economists are woefully ignorant: They become captives of their elegant mathematical models and quite unable to think critically about the quality of their premises.
Now, having said all this, I do not mean to include all economists within my sweeping generalizations. The great economists of the past were also great critical thinkers--Keynes, whom I've already mentioned, Alfred Marshall and the other great nineteenth century economists, Kenneth Boulding and others.
To some extent I blame the writers of economics textbooks. To make a complex subject intelligible to undergraduates they oversimplify. Premises are left hidden and seldom are examined deeply (or at all, for that matter). The logic of economics is powerful, but its assumptions are often questionable. Most questionable in the context of Peak Oil, I think, is the question of the availability of substitutes for oil and natural gas.
For example, many economists seem to assume that because coal-to- liquids technology exists, and because coal is abundant, then there can be no Peak Oil problem, because coal-to-liquids (or some other and better) technology will save us. In a weird way, the economists are sort of right: If we could get effective carbon sequestration at reasonable cost, then (by itself) coal-to-liquids or coal-to-gas technologies could defer the harsh consequences of Peak Oil for several decades. In other words, oil production will probably not diminish faster than coal-based substitutes could be developed; the financial constraints are formidable but not insurmountable, and the binding constraint of not enough engineers could probably be relaxed in half a dozen years, if we really put our minds to it.
But for now carbon sequestration is a dream, not an on-the-shelf technology, and for now we have too few engineers--and most of them are not far from retirement.
For engineers there is no substitute.
If we could get effective carbon sequestration at reasonable cost, then (by itself) coal-to-liquids or coal-to-gas technologies could defer the harsh consequences of Peak Oil for several decades.
But if carbon sequestration is skipped, then CTL would defer PO even better, no? I'm afraid that is what will happen, and the climate will be ignored, since today's crisis takes precedence over tommorrow's even-bigger crisis.
Even if carbon sequestration technology existed, it would not be actually used if and when an energy "crisis" is upon us, because carbon sequestration necessarily uses up a significant fraction of the energy output, i.e., it lowers the EROEI, net energy output, and profits. Without stringent enforcement it would be turned off - and will the political will for such enforcement be there when CTL is not quite meeting the "demand" for liquid fuels?
And thus it (sequestration) will be ignored for most part. I'm finding it hard to believe that coal will not be that magical substitute turned to as oil and NG get more difficult to deliver to the customer.
Reminds me of a favorite physics problem. Lean a ladder against a wall and then imagine that the bottom starts to slip, how fast does the person (say, 3/4 of the way up the ladder) fall. The important thing to realize is that it's actually two problems. At some point the ladder stops touching the wall, and then it behaves in an entirely different manner, the guy just falls as if there were no ladder at all. The important thing is to realize when "the wheels fall off" of the original equations, and figure out the consequences of that.
Long story short, scientists learn early on that equations are only valid in certain domains, and you have to be careful to consider what happens when the situation leaves the domain in which your equations are valid. It seems that economists don't think this way. When the earth holds infinite (or effectively infinite) oil then the economic models work, but at some point it is clear that no matter the price production will be zero, so the model breaks down somewhere. The important thing is to realize where that boundary is, and account for it. Economists don't bother with such trivialities, so their equations become insanity at some point.
Reminds me of the extensive work put into divisia for EROEI calculations, but clearly nobody ever asked "why are we doing this.", because it is not in general a terribly useful thing to do, no matter how interesting the math. Let me just pose it in this way, if I ask how many barrels of ethanol the US can produce, I expect an answer in barrels of ethanol. EROEI is a dimensionless quantity, so in order to produce the answer, given an EROEI, you need to multiply by.... barrels of ethanol. Given EROEI, you can only compute the answer if you already knew the answer, not terribly useful it seems. Try it yourself and you'll see that EROEI is not useful for computing the answer to this problem. No matter how you go about calculating the answer it always ammounts to just throwing out the EROEI and computing from first principals. Given that, why bother with the EROEI at all if you'll just throw it out whenever you're asked an actual question of relevance?
With all due respect Slaphappy, I believe you mischaracterize the position of most mainstream economists. Few scientists, including economists, would argue that standard models begin to break down at boundary conditions.
What is important to remember is that under any reasonable oil depletion scenario there will be a non-trivial amount of oil being produced 50, 75, or even 100 years from now. So while you are correct in theory that the models will eventually break down, econometric modeling is in fact a very useful tool for analyzing and predicting the possible effects of peak oil and its after-effects even decades after peak.
I've only ever seen two things come from these models.
1) We'll always find more oil, so it isn't a problem. If the price goes up, there's oil to be had.
or.
2) The price of oil will diverge towards infinity as we pass the peak, and therefore everything will become arbitrarily expensive and we'll all die.
It's rare to see any argument that rests upon economic principals to not fall into one of those two camps, both of which are entirely unrealistic. Might as well be talking about dragons and unicorns at that point. Any argument that rests upon actual science (hmmmm, where are we planning to get energy, and is this a viable option) almost always avoids both of those pitfalls.
Slaphappy, I don't know what / who you've been reading. Most likely you are simply misunderstanding economists because neither of your two scenarios are predicted by economics.
What an economist will tell you is that we are currently seeing market forces at work. The high prices of the last two years has encouraged:
1) Increased efforts to pump conventional crude (with questionable results)
2) Increased production from non-conventional sources (tar sands, biofuels, etc.)
3) Increased efficiency and conservation, and in the long run, structural changes to the global economy to make it less dependent on oil.
The sum total of all three means that supply can be down slightly over the last two years without causing any major problems. If we've really peaked and supply continues to drop, prices will rise further, encouraging 1, 2, and 3 above.
None of this implies that either of your two scenarios will come to pass.
"good substitutes for oil exist or soon will be found" NOT.
I'm afraid I have to repeat your other admirers. It all has to do with substitutes. What does one eat in Ireland during the Potato Famine? Grass etc.. was a very poor substitute. Die Off (and move-off, of course, cause there was somewhere else to go) happened, und the pop. is still a little more than a third of what it was back then.
What do we substitute during an oil famine? Well..
"The Stone Age didn't end for a lack of stones". Clearly we'll find something better than oil. From an energy density point of view that would be ... let's see ... nuclear fission ... nuclear fusion ... antimatter. Hmm, Houston, we have a problem!
"What do we substitute during an oil famine? Well.."
We substitute busses and trains. We substitue the common sense NOT to live 50 miles from work but only five. We substitute solar and wind and well insulated windows for 3/8" panes of glass that were installed in the 1920s when the houses were heated with coal and wood.
We substitute smarts for desperation and a good sense of humor for doomerism. Once we do that, we'll be fine. Even you, my friend.
"Even you, my friend"
I just spend 70.000 Euro with a new roof (14cm of the best insulation you can imagine), solar panels to support the heater and hot water, new heater with an 800lt storage tank in the basement, windows, new facing insulation etc, etc, etc..
I ride the train to work every day.
I share a car with one of the neighbors and drive only when really necessary.
My point has nothing to do with an economy based on TRANSITION away from FF. This is doable. There will most certainly be JOLTS (discontinuity) to our system along the way, which our system MAY or may not survive.
Again: what substitutes do you use during a famine (electricity black-out, for instance) at the moment of the famine, when the UN can't come running to your aid. Have you ever experienced a famine?
Cheers, Dom living in Munich
Let me see... you are doing all the right things, yet, you are worried. Why is that? I am not questioning that you are worried, I am simply wondering why you are worried since you know the right answers already.
The "jolt" hypothesis as well as the "may not survive" hypothesis have very, very little in common with reality. What are your indicators that there will be serious jolts or that there even might be famine?
The last time I was in Germany, food was plentiful and there was not a single thing missing from the stores.
Now... in my oppinnion doomerism is essentially an American export, just like creationism.
As I see it: my diet as well as the diet of my former Americans is mostly protein based. Meat protein takes enormous amounts of food starch to produce (approx. an order of magnitude more than what we would consume directly). Moreover, my daily caloric intake is probably 50% above what I need. In order for there to be famine, we would have to lose MOST of our agricultural production capacity, not just some. Would we have to change our diet? Yes. Would we starve? No.
Energetically speaking... I can cut down on my electricity demand by half without doing much else than by buying a European size fridge and by not using the stove as often as I do (or by using a slow cooker instead of evaporating water as I do in most of my dishes). I can cut down on my heating without being truly cold by insulating the windows better and putting on a sweater. I can cut down on my transportation fuel demand by having twice as many people use the train I am on. It would certainly be less comfortable but not impossible. I can also work from home four days a week, if necessary.
Look, the US is using 10kW/capita where Europe is using only 4kW/capita. We are not achieving anything that the Europeans can't achieve and don't achieve regularly. And I bet, you can get by on 3kW with some efforts. 3kW/capita is an amount of energy that can be generated with renewables, even in Europe and more easily so here in the US.
Reality is: there is not the smallest sign that there will be famines in the US or Europe. Not one. Every number derived from reality you look at points to the one conclusion: Americans are fat and they will have to lose some weight. Europeans are somewhat leaner but they won't be starving, either. We might have to go back to diets that look more like those of our grandparents (more beans, potatoes and veggies) but that's it. No famine. Just a more healthy lifestyle.
On the other hand, if you want famine, I would suggest you relocate to the Sahel. They have it there all the time. They use way less energy per capita, too. Probably more like a couple hundred Watt, one twentieth of what you have.
Dearest IP,
I am doing the right things. This works great in a system that TRANSFORMS, which you ASSUME will happen. This is MY hope.
"The "jolt" hypothesis as well as the "may not survive" hypothesis have very, very little in common with reality. What are your indicators that there will be serious jolts or that there even might be famine?"
1st - not food famine but energy famine - usually known as a shortage. More specifically, Russia cutting off its nat. gas, or not being able to deliver everywhere it delivers now; lines at the gas station, without knowing when the next delivery will be there; blackouts, especially in Italy and the US-NE.
*I* will do fine through all this as long as "the system" continues to work. As long as I keep my well-paying job. As long as the socialistic German government continues to provide a social net. But an individual is 98.5% dependent on the system he lives in. If something goes wrong with the system, then it really doesn't matter what precautions *I* made.
I believe that our energy systems, especially oil and gas, are very prone to disruptions. VERY prone.
If you want to call this doomerism, go ahead. I call it a basic REALISTIC distrust. I hope that the system will always continue to work - it has for the past 60 years! I doubt that it will, though, continuously the next 2-3 decades.
I consider your TRUST in the system, once oil and gas producion begins decreasing at 4% per year, as naive at best.
Cheers, Dom
ps If you only knew of the constructs of solar sails and space elevators and solar collection systems etc etc that I have constructed ON PAPER, I think you would understand better..
Actually there was an abundant and readily available substitute for potatoes during the famine in Ireland. It was called wheat. The problem was that it was too expensive for most irish peasants to buy, they simply could not afford this substitute. Also the wheat, barley and copious ammounts of other agricultural products, like pigs and beef were being exported to mainland britain. Apparently in some areas soldiers guarded the wheat fields and wagons carrying the wheat to the coastal ports.
The british government did try to find a substitute for the blighted potatoes. It had to be a cheap substitute though. It was known as indian corn and mainly imported from North America. Unfortunately the irish peasants had not experience of indian corn. Also it was so hard one needed a special iron grinder to mill it into flour. The whole scheme was academic anyway as the government didn't buy enough corn quick enough, or enough grinders, and the means to distribute this substitute and the central organization required to aleviate the worst effects of the famine were woefully inadequate. Government inspectors tried in vain for years to get London to react to the escalating crisis, but to no avail. Simply put the required solutions to the potato blight, solutions that in retrospect appear obvious today, failed because they contradicted the accepted economic and social dogma of the times. All this has of course little to do with Peak Oil, or does it?
Great post.
Potatoes as a metaphor for oil. Far more fitting than I would have guessed.
This is another area where some economists address the underlying issue, but many don't. That is simply the issue of having enough trading capital (money) in circulation to be able to act upon an existing demand. The dirt poor people of Haiti certainly have a demand for food and shelter, but nothing with which to trade.
Yes, a potato famine seems to be a great metaphore.
Actually I wasn't really thinking about the Irish potato famine because of the surrounding "politics". I was thinking of a potato famine in Saxony in the second half of the 18th century. There were no "normal" ways of feeding the population. The option was eating grass or leaving house and home to go begging hundreds of miles away...
Economics tends to describe a system of continuity, but not of Discontinuity.
And an excellent comment, Don.
Yes, it does come down to technology, which presumably will invent these "perfect" substitutes. However, forecasting technology trends is impossible. No one knows if some breakthrough in battery technology, fuel cells, cellulosic ethanol etc. will occur or not. Right now, energy is a "hot" investment and a lot of start-up capital is getting thrown at the problem of creating these substitutes. There are no guarantees. So, to various degrees, one hears statements that express "faith" that breakthroughs will occur. Some breakthroughs will occur. On the other hand, many envisioned, widely anticipated technologies will never come online.
While there may not be substitutes for oil, there are subsitutes for the primary user of oil, the automobile. The vast majority of us profoundly do not want to even contemplate such a world. Some of us are willing to contemplate moving out of the box that so desperately wants to maintain "easy motoring", especially those of us who have actually lived in vibrant communities and areas where the auto is not necessary, and is even less convenient than the alternatives.
One's views on this matter also depend on how serious one takes peak oil and global warming. Every single alternative, including EV, implemented by itself without any change in behavior or radical increases in efficiency will not be sufficient to do what is necessary to stabilize global warming. Many are excited about the fact that we have learned to make SUV hybrids and are convinced we can have our cake and eat it too. This will be woefully inadequate in a world where we need to cut energy use by at least 80%.
Yes, a miracle or a series of miracles may appear. That is what our society is counting on because the prospect of changing its lifestyles, travel habits, location, infrastructure, etc. is just too horrible to even think about.
Does it make sense to bet the planet's future on the efficacy of ethanol, fuel cells, or even plug in hybrids when there is little to no serious discussion at the political level to cut back our consumption? Well, if I had a farm I wouldn't be betting it.
On what do you base that 80% figure?
It's certainly not an argument based on capability to generate energy - there's plenty of that even after oil peaks. So I'm assuming it's an argument based on carbon emissions, and presumably believing they need to be reduced to near zero. Even then, though, current nuclear, hydro, solar, wind, and storage technologies would allow us to generate over 20% of global energy demand with little or no carbon emissions.
So why 80%?
I don't see why people keep claiming this.
It's probably not that it's too horrible to think about, but that it's not salient enough to most people to think about. There's only minimal discussion regarding changing lifestyles now because most people haven't been given a sufficiently compelling reason to consider it. If there becomes a compelling reason for them - either due to government action or due to high costs from other alternatives being insufficient - then people can radically change their habits in a short time (historical times of crisis have proved that), and will probably do so.
That most people don't see the current situation as providing the compelling reasons that you see doesn't mean they'll never be compelled, it just means they haven't been yet. Being fatalistic about their behaviour is like giving up on a first-grader because he doesn't know calculus.
There's plenty of serious discussion on that matter, even if the US is lagging in that regard. If conservation is crucial (as I think it is), then the US will come around. It's not a question of if, but of when, and of how much harder the delay will make the problem.
Re: without any change in behavior or radical increases in efficiency and there is little to no serious discussion at the political level to cut back our consumption
Everytime I make the observation on TOD that no changes in human behaviour are being demanded by those who advocate half-way (or much worse) measures like those you mentioned, I am usually criticized right away or ignored. Yet, it all comes down to voluntary, wise changes in behaviour based on foresight. There is no free lunch.
This brings up the more interesting interesting question of whether such behavioural changes are possible at all — or whether crises will force the issue. Usually, this is couched in terms of economic concepts like "demand elasticity" and other similar arguments. Demand did indeed go down during the 70's and early 80's in response to very high prices. However, that will not do the trick this time around. The large supply response in the 80's (North Sea, Prudhoe Bay, etc) following the oil shocks can not happen again, should we experience a new round of catastrophic geopolitical events. Over the longer term, there is just no option. The oil supply will contract, global warming must be mitigated. Lowered demand due to price helps us muddle through, but does can not solve the underlying problems.
There is a deep question about human nature here. I myself feel that humans can not make significant changes in their behaviour without being forced to do so. Others may be optimistic — in which case, my response is like that of Missouri's U.S. congressman Willard Duncan Vandiver (1897 - 1903) —
All this is complicated by the optimistic forecasts of CERA, ExxonMobil, Saudi Arabia, Michael Lynch et. who, by reassuring the public that there is no problem, make any potential behavioural response utterly impossible. No one will change their behaviour when such "authorities" like these tell them that it is completely unnecessary to do so. This is where psychology and human nature enter the argument. Such statements (by CERA et. al) are in the realm of Freud's defence mechanisms in which the rationalization for not changing how we live reinforces the underlying reality — we are incapable of changing our behaviour. There are exceptions, but these are relatively few and far between. Sometimes these exceptional oddballs people get together — this is called a "peak oil" or a "climate change" conference.The question then becomes this: if everybody across the board was giving gloomy forecasts like some of us do here at TOD, would people be able to change their habits? Would they elect politicians that would enable such changes? Is this even possible?
Please look to Europe for guidance. People there do not waste nearly as much as the people in the US do and they are perfectly happy. Europe is humming along in an intellectual renassaince which the US can't even imagine. Every time I go there (or just watch it on tv), I think, this is what the roaring twenties must have been like. At the same time I love living in the US... I just think it should be a little bit more like Europe: upbeat and less fanatic about having to be No. 1 in everything, including waste. Being No. 2 or even No. 3 has an advantage: you get to do more fun stuff because if the savings.
The good news is: everything that worked for Europe would work for the US. That includes gas tax, higher efficiency standards and wind and solar energy. It just happens that the US is behaving like the faithful man on the roof of his flooded house who says: "God will help me!" every time a boat comes by to pick him up. Let's hope the US will not end up having to listen to God telling it "But I sent you the gas tax, did I not? And did I not send you the higher EPA standards? Did I not give you the most sun on the planet? It is not my fault that you turned down all the help I sent you."
:-)
Europe has some better policies, but they are in exactly the same "behavioural change" boat that we Americans are.
I remember when I lived in northern Italy in Torino. And to think that I once thought that it was only Americans who loved their cars too much!
Absolutely. The Europeans love their cars just as much as the Americans do. Probably even more, given the fact that the only truly beautiful cars are all made by Italians... :-)
The point is that people can learn and people do learn given the right incentives. There will always be some who will drive a 9mpg Lamborghini. And you know what? It doesn't matter if one person in a hundred thousand has one of those. Actually, they are lovely to look at and I marvel at them every time I see them. What really matters for PO is that less than one in two people in the US drive an ugly and useless pickup or SUV.
infinate - I sure agree, I was looking around today and 50% of the vehicles on the road in the US ("silicon valley" area in california) are either SUVs or those huge pickup trucks that are never used for work because it might get 'em dirty.
InfinitePostings:
Can you tell us what has been the growth rate in the consumption of transport fuel in Europe and the US over the past couple of decades?
Which one? Diesel or gasoline? One has gone steadily up, the other one has gone down since 1995 because more and more passenger vehicles are now using more economic diesel fuel.
http://www.ifp.fr/IFP/en/files/cinfo/IFP-Panorama05_10-CarburantsRoutier...
This is not the whole story, though. At the same time as hydrocarbons are being shifted towards the more efficient ones, alternative fuels and EV are ramping up. So you will have to offset the growth of the diesel curve in the future against a ramp up of the alternative and electric curve to get the correct answer. What you are seeing is indeed the second segement of a lengthy process of technological conversion from gasoline to diesel to alternatives.
And what is wrong with that? Change is good. At least in my world.
InfinitePostings: Thanks for your response, right to the point, as usual.
So then, in the twenty years from 1985 to 2004, the use of transport fuel increased by 50% in Europe and by 39% in the US.
Which of the European policies would you recommend as a first step for the Americans?
It's worth noting that vehicles per capita went up by about 10% in the US in that time - since its market was near saturation already - but by about 30% in Europe, due to a less mature car market.
Take public transit into account during city planning - that's cited as making a substantial difference in transit ridership in Europe and Canada vs. the US. Other transit matters (such as empowering the guys in charge to make customer-centric changes to routes and the like, improving the quality of the service so it's not seen as being beneath most people, etc.) are also cited as important differences.
High gas taxes, of course, provide an obvious and clear economic incentive to reducing oil consumption, and at relatively minor social cost (since much of the added price can be effectively removed via smaller and more efficient cars).
Rehabilitate city centres - New York is very walkable; Los Angeles is not. Detroit probably is, but you wouldn't want to. More trips during the day by foot means less driving, and synergizes nicely with public transit.
...
Unless you meant to suggest that Europeans have nothing to teach Americans about fuel consumption, since their use of transport fuel has increased relatively more quickly in the last 20 years.
I'm sure you weren't doing that, of course, because that would be silly. It would fail to take into account the fact that most of the European techniques were already applied to the European market 20 years ago (e.g., expensive petrol), and would nonsensically imply that an 80% lower per-capita gas usage was somehow irrelevant.
But, of course, you weren't suggesting anything of the sort, I'm sure.
From 1990 to 2002, GHG emissions from transport in the EU-25 grew by 22%.
If you look at Western Europe plus Italy (including the UK) you have very close to the same population as the US using slightly less than half the tranport fuel per capita. This is a fairer comparison to the US given relative levels of economic development, than one which includes Bulgaria and so on.
Europeans have more fuel efficient cars, and then large numbers drive as though they are training for the F1 race series. What is the fuel consumption at 160 klicks?
While the economy of Western Europe grew rapidly post WW2, it was nonetheless a period of hardship and sacrifice. Maintaining, rebuilding and expanding the public transport infrastructure was the most feasible way to provide the labour mobility a modern capitalist industrial economy requires. It was not an environment in which Firestone/GM and the rest could successfully tear up the competition's track.
In recent decades, Western Europeans have been resting on their laurels and have no lessons to teach. They are large consumers of hardwoods from former tropical rainforests and now of course want to feel green while racing down the autobahn at 160 klicks burning palm oil biodeisel grown where formerly the hardwoods prospered.
Americans are perfectly capable of sorting out their own mess, even though as of late they only appear to be capable of messing up other peoples' countries.
That we Canadians need to smarten up goes without saying.
"What is the fuel consumption at 160 klicks?"
Well, my minivan - 7 seater with room for luggage - gets about 34MPG at 160 klicks. Might not get there as fast as the BMW next to me though..
Cheers, Dom living in Munich
You are right about one thing: even the Europeans have means to lower their fuel consumption. Gas is around $6/gallon over there right now. When it will hit $5/gallon over here, they will be closer to $10/gallon. It will be interesting to see how many cars will be racing on the Autobahn then... :-)
You are kind of dismissive of European success but are not offering anything different for solutions. I guess it just hurts too much to know that North Americans are way, way behind and that physics leaves no wiggle room but to emulate what other people have done before. Sucks, doesn't it?
It does little good to talk about Potsdam in Peoria.
Generally, I agree with the tenor of the practical measures you propose; for example, in the case of anticipated 'food shortages' in the wealthy countries, I agree that the solution is evidently fewer calories per person, less meat and so on.
I also support doing things smarter. At the moment, I am trying to convince engineers, planners and politicians alike, that planned sewer replacement work in my neighbourhood presents an opportunity for the installation of a sewer heat system (type of geo-exchange hardware) which could service both an adjacent municipal recreation centre and firestation. Of course, it is a European technology employed in a number of European countries. And I make mention of that fact. But what is relevant are local supply issues, local financing opportunities, local benefits and so forth.
That's odd - the database (wri.org) I'm looking at gives the liquid-fuels CO2 emissions from Europe as going down by 15% from 1992 (earliest year) to 2003, as opposed to up by 25% in the USA. France, Germany, Italy, UK - all the majors are flat or down over that period, with only Spain and a few other late-developers going up.
Total CO2 emissions are down 20% in Europe and up 20% in USA.
Methane is down 30% in Europe and flat in USA.
Flourinated gases down 10% in Europe and up 35% in USA.
Maybe there was some really unusual quirk in the transport sector or something, or maybe the database I've been looking at (World Resource Institute, earthtrends.wri.org) has totally different numbers than whatever you were looking at, but everything I can find shows Europe coming out much better than the US in the last 15 years.
In 2003, adding diesel+gas, we had (litres per capita per year):
France 810
Germany 740
Italy 740
Netherlands 770
Portugal 690
Spain 840
Switzerland 880
United Kingdom 800
Western Europe: 770
United States 2,140
Ratio: 2.8:1
So the US used about triple the transportation fuel per capita that Western Europe did. (And, looking at the numbers, I'm strongly suspicious that the CSM may have given the gas-only numbers rather than the gas+diesel numbers that they claimed.)
Perhaps you mean they have no new lessons; the US (and Canada, to a large extent) still haven't learned their old lessons. 'cuz, in this regard, Europe has rather more laurels on which to rest.
"EU officials said road transport accounts for about one fifth of the EU's CO2 emissions, with passenger cars alone responsible for 12 percent. They said carbon emissions from road transport rose 26 percent between 1990 and 2004."
http://in.us.biz.yahoo.com/ap/070207/eu_vehicle_emissions.html?.v=2
So the trend from through 2002 continued until 2004, and probably is ongoing.
Major reasons for the growth of road transport carbon emissions are the increasing size of vehicles and increasing trip lengths (sound familiar?), and the increasing use of heavy trucks to transport freight. The share of rail is now about one-half of what it was 30 odd years ago.
http://www.iht.com/articles/2006/06/30/business/wbrail.php
You use a different data source and a different grouping of countries than I did to find a comparison with the US on per capita transport fuel, but still 2.8 times is not what was originally claimed. In any case the gap between Europe and the US is narrowing.
It appears to me that the Europeans having being attempting to 'americanize' as much and as quickly as their historical legacy and current economic conditions allow. Since what the world needs is to 'de-americanize' as quickly as possible, I won't be looking to Europe for direction.
The EU expanded from 12 to 25 member states between 1990 and 2004, so that statement is exceptionally misleading.
False.
Take a look at the per capita data, so as to avoid statistical deception like the article you mistakenly believed. All of the trends show that the gap between Europe and America is growing.
Really. Go look for yourself if you don't believe me. But get the real data this time, instead of a deceptive piece of spin packaged by a news writer.
The 26% growth number is for the EU-25. Contact the EU.
That is not what the article you quoted says. Do you have any evidence that your claim is true?
Somewhere in my files is the EU report which showed a 22% increase for the EU-25 from 1990 to 2002 as per my initial comment. The article above is citing EU officials with updated numbers. They are for real. Sorry to burst your balloon and if I really have to I'll find a reference. At the moment, I'm a little exhausted after 3 hours spent, scraping and flooding the neighbourhood hockey rink.
As for the other matter regarding rates of increase per capita, you will find if you go to the road transport fuel section, at the site you provided, data for 1990 and 2001. You can get population data from the CIA handbook.
For the 8 countries you define as Western Europe, the population increased at an annualized rate of .32% per year from 1990 to 2001. Road transport fuel (not including diesel for tractors, trains and whatnot) for the 8 countries increased by 1.76% per year or 5.5 times the population growth rate. In the United States the population increased by 1.23% per year and the road transport fuel increased by 2.43% per year, or 1.97 times the population growth rate.
So 5.5 times the population growth rate in Western Europe and 1.97 the times the pop. growth rate in the US. I'm willing to wager that the trend hasn't changed by much if at all. We will have to wait for the data to be released however.
Upthread I didn't include Spain and Portugal in my definition of Western Europe as I consider them to be in Southern Europe. I did include the one southern nation that has a long history in the EU and a very industrialized northern region, Italy. I also included Belgium and Austria. If one was to consider my selection as a more appropriate comparison with the US, then the difference in the growth rates of road fuel consumption would narrow, but not by much.
EDIT: I still haven't located the actual report, but here is a link to a graph showing the growth rates from 1990 - 2003 in GHG for transport and other sectors in the EU-10, the EU-15 and the EU-25. You have to eyeball the percentage increases, but you can see that the numbers I cite upthread are right. You can also note that the rate of increase for EU-15 is the greatest of all.
http://dataservice.eea.europa.eu/atlas/viewdata/viewpub.asp?id=2165
good night and good luck
TFO, poor use of maths. Eg, 50% of 100 (=50) is still far less than 39% of 1000 (=390). Hence there is a lot Europeans can teach you Yanks about efficient car design. In fact we Aussies also ship far more efficent cars (we call them utes and Monaros) to the US for GM than your own American GM subsidiares can make.
If you are still around, you will have by now discerned that I'm a Canadian, though I'm not ashamed to be mistaken for an American. There are a lot of fine Americans; that is very apparent on this blog.
As for maths, I would suggest that in these matters it is what is happening at the margin which is important.
Dave, perhaps u missed my new graph. See the two gray lines? Those are mk hubbert's calls.
See the colours going up one-by-one-by-one? That is mr campbell's calls.
And what did mr michael lynch say back in 1996 about 2006? 84-mbd. And what did it end up? 85-mbd.
Dave et al, until the Peak Oil movement can forcast further than three quarters ahead and get it right, nobody is going to believe what u say. 90% of the posts at TOD say Peak was in 2005.
3/4 of them are trying to redefine what Peak is. What oil is. But then the last president they liked was clinton, right. "is"
TOD blowhards have no credibility. The ones that have got it right, like Rembrandt, are practically treated as if estranged.
Until u embrace the bottom up modelers, u will be dismissed. Life Rembrandt, Colin Campbell, Jean Laherrere & Chris Skrebowski do excellent work. Faults (or limits rather) in their methodology requires them to constantly upward revise. But rather than work with these gentlemen, Peaksters (esp at TOD) disown them cuz they have joined "the dark side" and foresee a post 2010 2011 or 2018 Decline.
Instead of respected oil sector stalwarts, most at TOD embrace the losers. the book merchants. the nihilists.
"U can't handle the truth"
eh.
And so your neighbours, ex friends, family, co-workers ... all ignore y'all. And they come to TOD ... the mutual admiration society!
freddy
No projection is the truth, they're all just guesses.
Lets talk about the truth...
Per eia, 06 is, at best, a tie with 05. What did your avg punter guess would be the increase in output over 05? I asked for this before, got no answer. IS it around 87Mb/d? (See below for comments on your graph.) If so, the missing barrels are enough to fill the planned SPR addition... Have you considered quizing them to find out where all this oil went?
What does your avg punter call for in 07? Write this avg guess down now, so later we can compare this guess with the truth as it arrives. I'm sure you will want us all to see how accurate your lot is. Is it around 89Mb/d?
I appreciate that you like all liquids, no doubt you realize traditional oil has been going down for some time, and meanwhile I agree that joe sixpack doesn't care what he is pumping into the tank as long as it works, and maybe he won't notice he has to fill up more often. So, by all means show us the all liquids numbers.
A little more truth... You keep talking about 85Mb/d... So far, 06 is nowhere near this value, 06 avg thru nov is 84.6Mb/d. We arrived on the 84Mb/d plateau in oct, 04, now into its third year, overall avg is 84.5Mb/d... Personally, I doubt we will ever get to 85, but maybe the wall of oil, due in 06, will arrive by and by and prove me wrong.
BTW, your graph is extremely hard to read, particularly for the period of greatest interest, 2000-2025. Why not show a blow up of just this period, and maybe a separate one that shows just the consensus? You are on the side of clarity, right?
Had a look at your ng graph, projecting a US peak in 2017... you didn't notice that both us and canada peaked in 01? Or that the number of rigs went up 3x during the decline? Shades of SA... You're still listening to your shining star buddies at cera, who predicted $2/mcf forever, starting in 02... Freddy, we've already produced the good stuff, that bulge you show for the gom seems unlikely with our rigs floating off to sa and the s. atlantic... my favorite ng producer is working the texan tight sands. There's money to be made, but the wells are playing out faster than ever...
On a minor note, individually Canada peaked in 2002.
JK, i did answer your question about the Average's at length. Please check your archives.
It is unfortunate that u are still in denial of the increase in Supply since 2004Q4. It was 84.3 at that time and rose to 85.4-mbd in 2006Q4.
Sorry that u find little resolution in the short and medium term. The purpose of this presentation has always been to illustrate that ample oil Supply will be available far into the Century. And to allow comparison of the long term Outlooks on a basis reconciles with URR. In 2004, many did not disclose URR and their projections were open ended and misleading. I do pay much attn to monthly/qtrly/annual stats to search for confirmations of trend, but the individual projections over the next five years have little interest to me and is paramount to navel gazing. Please remember that there have been seven negative growth sessions since 1975.
The nat'l gas graph is from Jean Laherrere. Methinx he got it from EnergyFiles. It is consistent with EIA representations.
Per IEA, 2006 was up 0.8 Mb/d over 2005.
IEA gives 2006 average daily production as 85.24 Mb/d.
The difference is presumably due to different definitions of what constitutes "oil" and is included in production figures.
When stuart was plotting the 'bumpy plateau', he noted that eia and iea are getting further and further apart, with iea routinely higher but more likely to subsequently revise down. So, we may well see iea with downward revisions. Stuart never noted that there was any difference in oil definition, and indeed seemed perplexed by the growing difference, which did not exist a few years ago. Personally, as eia seems subject to less revision, I use eia numbers, and these show 05/06 flat.
Freddy, I am more than a little sceptical of curve fitting. Having expressed that opinion, has the 1976 MKH projection actually been invalidated by subsequent events?
Couldn't the area under the MKH 1976 projection [peak at circa 110 mbd circa 1990 per your graph] and the actual production to date potentially be explained by surplus capacity, a reaction to mid and late 1970s prices, and the collapse of Russian and other FSU production after the communists went into hibernation?
Phrased another way, maybe the world did not experience the towering 1991 peak solely due to a flattening in the quantity demanded redrawing the curve. Given that wouldn't slower production prior to the peak change the shape of the upsloping portion of the curve while not significantly altering the area under the curve or the peak capacity for flat out production on the downslope?
Phrased yet another way, if MKH was correct on the geology when the world did not reach a production / consumption peak of 110 mbd circa 1990 wouldn't the lower production push the peak to the right [and might not the resulting curve look like what we have seen to date]?
Bottoms up modeling makes a lot of sense, but I do not trust the KSA "royal" family and I have not seen the evidence for vast high flow rate developments elsewhere.
Belief in early peak [c+c] oil is IMO an excercise in scepticism. Belief in a ten to twenty year in the future peak s a leap of faith in untrustworthy players and for now I place CERA in the untrustworthy category. Neither the early or late peak contingents have sufficient factual basis to conclude with certainty.
Thoughts?
RWR, Hubbert's "1995" Peak was based on a URR of 2000-Gb. The volume that was "unused" between the '78 breakaway and today is 230-Gb and is available for the "future" after 2006.
If u want a comparison of what happens if we "shift it over to the right", the blue ASPO 2002 line is based on 2700-Gb and may be a good proxy.
OTOH, if u want to keep his 110-mbd Peak Rate, a good proxy is the aqua OPEC line on my Scenario graph. It has a very similar URR of 2246-Gb and Peak Rate of 106-mbd. U will notice that even tho it has a lower Peak Rate and higher URR, it has a very aggressive Decline Rate (6%) made necessary to exhaust the balance of the URR.
IHMO, the URR AVG (heavy blue line) of the models, 3025-Gb, is more likely and that would dampen the Decline Rate substantially.
Thanks. I the chart you included in your response was helpful.
"No one knows if some breakthrough in battery technology, fuel cells, cellulosic ethanol etc. will occur or not. "
Yes, we do, thanks to the laws of physics.
The answer is: "NO".
Perhaps you would explain yourself here. For example, how does physics preclude a more efficient energy storage device for use in electric cars?
It is even easier than that: many fuel efficient car designs cover the vast majority of user needs quite efficiently with enormous gains over the SUV concept. You have to keep in mind that the SUV is a design that sprung from the enormously insane idea of US lawmakers to put a tax on large vehicle that excludes trucks and semi-trucks! In other words: they created a monster. Of course, the marketing types were also eager to advertise that you could have a car that gets you to work, hauls your boat accross the rockies AND provides space for your family of eight (all of whome happen to be construction workers...). Truthfully: people don't use SUVs that way. They use them very much like regular cars. But instead of getting Mom and Dad to work for half a gallon to one gallon of gas, the family car now uses three (expecting that it is hauling a 15 foot boat accross the Rockies whole seating eight construction workers).
Physics is not the problem here. Stupidity is.
Re: Physics is not the problem here. Stupidity is.
I was just hoping when a person makes a statement that physics is the problem, they will back it up with a reasoned argument based in science. However, I think stupidiy is one of those "umbrella words" that encompasses a wide range of human traits — avarice, lack of intelligence, myopia ... many things.
To ask a doomer to back up a statement about energy with science is very much like asking a creationist to explain how God puts a new species on the planet. You are at best insulting their religion but you will never get an honest, well researched answer.
I agree, stupidity does encompass a whole range of human traits, but they are, in the end, all incompatible with reality. A stupid person, for all practical purposes, has to violate reality on some level. It may be intellectual, it may be practical or it simply may be religious/apologetic/ignorant. Sooner or later there is a conflict between such a persons ideas or actions and hard facts.
To continue driving SUVs, for example, will result in a supply/demand conflict which nobody, not even the SUV driver can escape.
To preach doom will, eventually, result in a lot of very quiet, deeply dissapointed people. A few thousand might take to the hills and await the second comming, but most of them will simply shut up.
I wonder how many of those who predicted the end of the world because of Y2K are still bragging about it? Y2K was an IT and social engineering problem (you had to get people to take it seriously, so they would spend the money to make the necessary IT changes). So is PO. It is an energy and social engineering problem. You have to get people to take it seriously and they will make the necessary lifestyle changes. In Europe that is being done with carrots and sticks and it is a success. In the US we will have to wait for supply and demand to hand out the beating that the politicians should have and could have handed out a decade (or two) ago. The results will be the same.
I agree with many of your comments.
I ought to inform the readership, as background, that I am a practicing physicist, and I am not a "doomer".
When it comes between fundamentalist cornucopican arguments and physical reality, I always choose physical reality.
For example, it is certainly true that communication technology has grown enormously. However, has any of it ever surpassed the fundamental limits set in 1905 by Einsteinian relativity applied to Maxwell's equations, and the limits set in 1949 by Shannon to information coding?
No, never.
Modern turbo codes for communication achieve in practice a slim dB or three away from ultimate limits of Shannon. We can modulate light on terahertz carriers (fiber optics) at multi GHz speeds, up to the amplification bandwidth line and physical transmission window. Are we going to do much better? Not really. Can we transmit information using much higher frequency x-rays and gamma rays? No, because they disrupt the atoms and molecules that we use for producing physical technological goods, as well as being hazardous to our health. Fiber optics can very well contain light, but the maximum frequencies they will transmit are limited by the specific nature and size of the atoms that stuff is made out of. Atoms will continue to be the same size as always.
Energy technology has equivalent limitations, and current practice is already much closer to immutable limitations than electronics were in 1960.
This is why oil depletion is qualitatively unlike other facts.
By the way, historically there were major cases of "peak wood" (major fuel available at the time) throught history which lead to multi-century long depressions.
"it is certainly true that communication technology has grown enormously. However, has any of it ever surpassed the fundamental limits set in 1905 by Einsteinian relativity applied to Maxwell's equations, and the limits set in 1949 by Shannon to information coding?
No, never."
Well yes, actually. The cube with a hinged gate at one end, used to ship goods around the world, has surpassed in economic and social impact all other communications changes of the last 100 years. To appreciate a part of the change you might rent and view "On the Waterfront" and then take a trip down to the docks in New York, LA, Rotterdam, Shanghai, or wherever is convenient.
To watch the impact of higher oil prices on the deployment of this revolutionary technology, you might keep an eye on the relative share of ton miles between rail and trucking over the next months and years.
You've misunderstood what he was saying.
He wasn't talking about economic or social impact at all. He was talking about the speed of light being the fundamental limit to how quickly information can travel, and Shannon's information-theoretic limits on how much can be conveyed across a communications medium of given bandwidth.
These are totally different things.
TFO, you deliberately misconstrue the point being made about the physical limits of technologies.
And the container is more important than the Internet? Bizarre.
The container is far more important than the Internet.
Shut down the internet and what do you have. An uptick in porn sales at magazine counters. A few other temporary inconviences, while the postal service adjusts.
Stop using containers tomorrow. Worldwide hardship and chaos.
I'm perfectly aware of the physical limits of technologies and recognize that the point being made was a good one.
I wish to draw attention to a tendency at TOD to talk of technology as though LED screens, etc., are a necessary and defining feature of same. A gadget fixation.
The most important communication technologies we have are identified by the wheel, and the box. Satellite based messenging helps, but the telegraph will do, when it comes to maximizing the efficient deployment of these technologies. When the wheel is made of steel and rolled on a steel rail then we're moving in a sustainable direction.
If we shut off the WEB, I wouldn't be able to work.
Emails with attachments, you know. Info in the blink of an eye.
Mmm.. International trade is now mainly centered around political comparative advantages (wage differences etc.) There is not so much trade that is a good idea because of geographical features such as sunlight, soil composition etc.
I would rather live in a world where information was easily exchanged worldwide, but the transport of goods and persons was difficult than vice versa. This way there would not be a monolithic global culture, but still enough contact to benefit from the differences. And all that with a material economy that is firmly locally rooted.
Well, we can all rather live in whatever type of world. Shut down the use of containers and the world in which we do live will experience hardship and chaos. Shut down the internet and a few people are temporarily out of work, while they learn morsecode or how to feed paper into a fax machine.
There is by the way a great deal of trade relating to geographical features, from tomatoes to teak to tourists. I'm not sure it is all particularly desirable, from the point of view of local social development or environmental impact. Of course, when ranking traded items by value, numero uno is oil, its source very much related to geography. Agriculture goods and forest products are huge. As is the aforementioned tourism with all its homogenizing and water vapour effects.
Of interest to some, the countries experiencing the most rapid growth in the export of commercial services, often delivered by the world wide web, are China, India, Russia, Poland, Mexico, Brazil and a few smaller countries. These same countries are also a major source of the humans being transported in containers, it has to be said.
I discussed about communication technology and limits from physics, for the reason that there are analogous limits to energy technology from chemical and thermodynamic considerations.
Container shipping is a great idea.
Suppose some cornucopican proposed that in the future technology will be able to radically increase the space available inside each container by means of engineering the metric of Einsteinian space-time somehow.
"To watch the impact of higher oil prices on the deployment of this revolutionary technology, you might keep an eye on the relative share of ton miles between rail and trucking over the next months and years"
Right, rail and ship use much less oil per unit value. This is exactly why I do not believe in the alternative EarthMother and EarthFather future of idealistic rural and happy kibbutzim as a realistic future for most people. Rural living plus reasonable standard of living, when this needs manufactured goods, do not go together well.
Cities with rail links and ports will be increasingly economically preferred compared to areas which require more petroleum intensive transportation for economic survival. Certainly cities will use MORE oil on an absolute basis, but the real issue is oil used versus people's ability to pay. If you want to live in the boondocks, make sure you're on a rail line, like in 1880, and order stuff from Amazon, the new Sears catalog.
I'm sure we share many views. I would say that many rural areas off the rail-line (or shore-line) enjoy compensatory advantages such as locally sourced electricity, bioheat, food and suchlike. I think a reasonable standard of living may become more attainable in many rural areas post-peak oil/gas than it has been in recent times, recognizing, of course, that what is considered to be a reasonable standard of living is likely to be redefined.
Still, I agree with you that cities linked to energy efficient modes of transport will remain vibrant.
The same is true about fundamentalist doomer arguments, I hope?
True, but electronics were so amazingly far from their physical limits in 1960 that that's not saying much. The efficiency of photovoltaics is within an order of magnitude of 100%, which is surely a limit; that's probably much closer to immutable limitations than electronics are now.
That energy technology has limits and is sort of close to them doesn't make oil depletion "qualitatively unlike other facts". It makes finding effective substitutes for oil a hard problem, and perhaps even an impossible one.
So?
How is that "qualitatively unlike other facts"? There are plenty of hard-or-impossible problems, some of which bode poorly for humanity. How is oil depletion just oh-so-special?
It isn't. You agree with me. The cornucopian fundamentalists think energy progress will be like with Moore's law and there will be some utterly radical ideas out there that we have no clue about today.
There won't be, and so knowing what we know today we can already start planning. Things don't look wonderful, nor catastrophic. They will take work, and a hard-nosed balancing and choice between alternatives which all have major problems.
Dear Dave,
I think "economics" is also a giant umbrella word, covering or glossing over a lot of different "sins". As we're appear to be moving into the realm of gross generalization in this thread, something which is understandable, given time and space constaints, here's one of mine for what it's worth.
The ancient Eygptians, yes were are entering a timewarp tonight, the ancient Eygyptians had a very different level of technology to us, let's just call it far more primative for the sake of argument. Anyway they managed to create a formidable civilization without anything near our massive consumption of fossil fuels. There society flourished for thousands of years, making our civilization appear almost to be the twinkling of a eye. What did they have that we could learn from? Well, apart from a completely different concept of something as fundamental as Time, I would respectfully suggest was their level of social organization, which was superior to ours.
That's what we can learn from them and it may prove to be a positive lesson if we can really learn and understand it. Fundamentally it's possible to have a great civilization, complex and sophisticated, without oil. However, one does need a wholly different kind of social organization for it to succeed. I'm not saying that we should try to emulate Egyptian society, only that it's really/possibly the way we choose to organize ourselves going forward that is of fundamental and paramount importance. Whether it's possible to develop an alternative form of social organization, even if we agreed on it, given timescale and resource constrainsts is another question.
Thanks, writerman, this is interesting
"Anyway they managed to create a formidable civilization without anything near our massive consumption of fossil fuels."
I'm wondering how the size of the populations compare, and also what the energy inputs actually were over the lifespan of an individual, (esp. given such things as climate.) Lots of ways to go with this...
Thanks. Obviously the population of ancient Eygypt was tiny compared to ours. This whole population question is way complicated and enormous, a real can of worms theoretically and eventually morally. However, Eygypt's population in relation to the ability of Nile Delta to support a thriving agricultural sector is perhaps easier to understand and more relevant. Basically, it worked. The "state" controlled the market for grain and kept a stategic reserve for the lean years built-up during the years of the fatted cow!
Hech this is started to sound like Bible class or archeology for dummies, so I'll end the lesson here.
Oh I agree with you 100%.
But the question was whether there was going to be any scientific breakthrough, and I consider scientific breakthroughs as things that improve performance radically, a couple of orders of magnitude.
Have there been scientific breakthroughs in computing? Yes, certainly.
Have there been scientific breakthroughs in data communication?
Oh immensely. The erbium-doped fiber amplifier is a stupendously brilliant invention, thanks to clever physics.
Are we going to discover a new electrical power source much more dense than nuclear fission? Very very unlikely, as we know enough about the laws of physics to say no. A breakthrough would be a megawatt generator in every home for $500 with no fuel cost for a century.
Are we going to discover an electric battery with 50x the energy density of gasoline? No.
Why? Because we know enough about the laws of physics to say no.
We know what things are made out of (atoms and other particles) and what all the reasonable physical reactions are down to extreme reactions which are absurdly remote from physical practicality.
"But the question was whether there was going to be any scientific breakthrough..."
Please, everyone, take a look at this:
http://criepi.denken.or.jp/trilemma/en/tpx/tpx1.html
It is pretty obvious that we are not talking about an order of magnitude problem here. The difference between countries with limited life expectancy (which use less then 1kW/capita) and Europe (4kW/capita) is a factor of four. The US uses over twice as much energy and has a lower standard of living in many respects. In other words: more energy than 2-5kW/capita buys little to nothing. The authors claim that both, Europe and the US have another factor of two in savings potential (I believe it might actually be a little bit more), i.e. the ultimate numbers for what we NEED (vs. what some people want without reflecting about their true needs) should be lower, still.
"Are we going to discover an electric battery with 50x the energy density of gasoline? No."
It's called an RTG - radioisotope thermoelectric genrator. Great devices without which neither the Voyager nor the Cassini missions would have been possible. I wouldn't want any of them at home, though...
http://en.wikipedia.org/wiki/Radioisotope_thermoelectric_generator
PO has nothing to do with physical limits. It has everything to do with reasonable expectations. Anyone, at any time can ask for more. The only important question to answer is the one how we satisfy our real needs.
Forgot about the RTG! Good point. But will this be useful for anything for real?
Refined Pu-238 is extremely expensive, and a wonderful source of poison for gruesomely executing dissident intelligence agents, and leaving a radioactive corpse.
I agree that life and continued technological civilization is possible.
We first need society at least as energy efficient as Japan, and second enormous, and immediate construction of nuclear fission plants.
That was polonium 210. It has an incredibly high power output for its weight, but its lifetime is lamentably too short for most RTG applications.
Far cheaper RTG's would be powered by strontium 90 which are fine with the 30 year half life. Pu238 is superior of course and thus prefered considering the RTG market is quite low.
It seems you didn't get my point: WE DO NOT NEED MIRACLE TECHNOLOGIES. What we have will work just fine.
Look at it this way: with nitromethane you can build a draggster which goes from 0 to 150mph in three seconds for one mile... then you have to rebuild the engine. And every ten runs these things dissintegrate. Just because you can build them, does not mean draggsters are useful for anything but Rube Goldberg style suicide.
Same for SUVs. Just because you can tow that boat four hundred miles accross the mountains does not imply that you need to do it ALL the time. The one time a year you might need to do it, you can rent one. There will be plenty of heavy transport capacity in the future. What eats oil right now is that half of our transport capacity is way oversized.
Your nuclear fission idea is not going to fly. We do not have any political backing for it. Just another pipe dream. Get real, start conserving.
I agree that there are almost certainly upper bounds on what can be done. I also think that the word "breakthrough" needs to be defined.
In which case, you're almost certainly a computer or EE guy, and have rather a skewed view.
In most areas of science, a hundred-fold improvement is unexpected, unnecessary, and quite possibly not the point - discovering DNA, quantum theory, or even Turing machines weren't mere "couple of orders of magnitude" improvements.
You can estimate the amount of energy available per atom or molecule.
A reversible energy storage system might get "chemical energies" (energy of outer shell electrons which can result in reactions) but need hundreds of atoms of substrate and equipment per "active site". That's a battery.
Capacitors, even with exotic ferroelectrics barium titanite have similar energy limitations.
With liquid chemical storage (hydrocarbons) you have just about as good as you can get since nearly every single chemical bond you can get useful energy out of, you do. If an ET landed on Earth, armed with just the periodic table and physics, and was told to design a portable energy storage system for Earth environment and widely usable, it would come up with gasoline to kerosene. Even more convenient is that one major component of the system (oxygen) is plentiful and universally accessible.
Poorly reversible (strong bonds) give more energy too.
At an extreme, uranium fission gives extremely large amounts of energy, and how reversible is it? Not whatsoever. As far as I know there is no strong-force based practical reversible energy storage mechanism.
Batteries were invented decades before the transistor, and yet the improvement in them is pretty small compared to massive improvement in electronics.
Why? Because with electronics there were no fundamental laws of physics in the way---since there was "so much room down there", i.e. the scale difference between 1957 transistor technology and 2007 technology in terms of size vs how big individual atoms were, there were orders of magnitude of headroom to exploit.
I think that Lithium-Ion batteries are going to be at the minimum acceptable level of performance and plug-in hybrids (if we power them with lots of nukes and wind) will be a reasonable substitute. But let's not pretend it is anywhere near as good as liquid hydrocarbons, and there is no alternative solution whatsoever for aircraft.
"As far as I know there is no strong-force based practical reversible energy storage mechanism."
Nuclear isomers (spin traps) like Hafnium 178 might work.
http://www.globalsecurity.org/wmd/intro/hafnium.htm
I don't know if you want to call that storage based on strong force... but it is an excited state of a system that is stabilized by the strong force. Of course the main applications aim more at bombs and gamma ray lasers than at batteries... :-(
"But let's not pretend it is anywhere near as good as liquid hydrocarbons, and there is no alternative solution whatsoever for aircraft."
Nobody says we have to get rid of hydrocarbons, at all. All we need to do is to produce them using renewables sources and make sure that we keep most of the CO2 out of the atmosphere. Nobody says we need to get rid of alcohol, either, it is alcoholism that we need to get rid of.
The nuclear isomer storage hoax has all the trappings of the cold fusion hoax.
Except... that there is no hoax here. Just because it might not make a good bomb, does not mean that the basic idea is wrong (you can look up the properties of isomers in any isotope table). Nuclear isomers do store a lot of energy and, yes, there are plenty of ways to tickle spin systems to get the energy out. That is exactly what the NMR machine does to you before they do brain surgery. Ordinary nuclear spins are no different than these isomers, except that the field that separates the nuclear spin is weak because it is the external magnetic field applied to the nucleus, while in case of isomers it is an internal field.
By the way... I would be overly joyful if it would not work as a bomb or an x-ray laser. The last thing we need is another US administration like this with millions of dirt cheap 10kton handgrenades - just imagine carpet bombing from the air with a couple hundred of these... it would be vastly more effective than a 10Mton device. When I read the news about this I got really concerned. I am still concerned because there is nothing fundamental in physics that I see that could prevent sufficiently smart people from an exploit. I hope I am wrong.
I got one thing wrong, of course: the explosive yield of such a device would more likely be in the ton, not the kton range. The military interest is in minituarized "semi-conventional" bombs and pure radiation weapons which leave little residual radioactivity but will fry everyone exposed to the explosion, or shall we call it discharge? It is tragic that today the generals are looking for smaller, not larger weapons...
It doesn't work. It has been studied seriously, there isn't any evidence of over-unity energy release even remotely possible. The JASONs pretty much killed the notion; it was much more wishful thinking by some sloppy scientists and excessively eager program managers.
So far, no nuclear isomer or metastable process appears to be remotely feasible for reversible energy storage.
I need to read the papers on that. My main concern (and I have done absolutely no due dilligence as a physicist on this) is that this thing has, so far, been investigated by an idiot (Collins) and really smart people who are not keen on making it work (pretty much everyone else). As long as it is caught up as a farce between DOE and DOD, it might actually divert money from something else that could become a weapon. Which we might be thankful for. :-)
I sincerely hope this won't work. There are some things in Pandora's nuclear box we really don't need.
Simply considering the energy density of the storage medium is to only take account of one side of the equation. The other is how efficiently that energy is used. In the case of lithium ion batteries, the energy is outputed as electricity and can be converted to useful work at efficiencies greater than 90%. Liquid fuels, by contrast, are burnt in internal combustion engines and are limited by thermodynamics to efficiencies between 20-30%.
So it is overly simplistic to conclude that, because batteries or ultracapacitors cannot achieve the energy densities of gasoline or diesel, they are impractical for use in cars. The true question is whether they have high enough energy densities to power electric motors. The answer increasingly seems to be yes.
"Lithium-Ion batteries are going to be at the minimum acceptable level of performance and plug-in hybrids (if we power them with lots of nukes and wind) will be a reasonable substitute."
I would agree.
"But let's not pretend it is anywhere near as good as liquid hydrocarbons"
Why not? The Chevy Volt will be a very nice car, with good performance and a 650 mile range. GM has said that it's satisfied with the specs of the two batteries it's considering, and they're just waiting on battery pack design, and testing (primarily for liability reasons), which shouldn't be a problem as both batteries are in commercial use).
Chevy Volt (which I admire greatly if it is actually produced instead of being just another show car queen) gets its 650 mile range from liquid hydrocarbons.
Personally, I'd love to have one and it will help, but nevertheless it is a huge amount of technology and inconvenience to get back to performance qualities which liquid hydrocarbons gave us 50 years ago.
Now, how do you power a Boeing 777 from LA to Sydney with batteries?
"Chevy Volt (which I admire greatly if it is actually produced instead of being just another show car queen)"
It's extremely likely to be produced. GM knows how badly it's been hurt by the EV-1, and the Prius.
"gets its 650 mile range from liquid hydrocarbons. "
Yeah, I know, I just meant that I see no compromises in the design that make the car less attractive than an traditional ICE car.
"it is a huge amount of technology and inconvenience to get back to performance qualities which liquid hydrocarbons gave us 50 years ago"
What do you mean? First, for the most part it's less complicated than an ICE vehicle. Series hybrids have been around for at least 50 years - they just haven't had batteries that were good enough. 2nd, I see no inconvenience (plugging in is easier than gassing up) or design compromises - what are you referring to?
"how do you power a Boeing 777 from LA to Sydney with batteries?"
You don't, at least not with any battery in sight. But we'll have enough oil for that for another 50 years; we will have biofuels for limited use (jet fuel is perhaps 5% of oil consumption); and with renewable energy (wind, solar) you can synthesize liquid fuels.
How can it be LESS complicated? It has an ICE for electrical generation PLUS electric motor, battery pack & control electronics...
Furthermore... it tickled me when I read that it has a "small 1 litre ICE" just for electrical generation. In Japan a large percentage of vehicles are powered by a 600cc engine alone!
And despite reading all the US fanboys raving about the VOLT styling... it seems to me that GM still don't get it... I mean, look at the bloody wheels... weight matters on PHEV...
Yes, yes, I know how the Big Three think.... Americans won't buy it if it doesn't look like a Mustang/Camaro/Charger/F16 Starfighter..
Anyway, it's all academic... by 2010 when they hope to "find suitable batteries"... Toyota & Honda will have moved the goalposts to the next level... so it will never see production.
"How can it be LESS complicated? It has an ICE for electrical generation PLUS electric motor, battery pack & control electronics..."
Yeah, it has a lot of parts. OTOH, many of them won't be moving that much. I think you'll agree that an electric drivetrain is much simpler than an ICE. Now, add a relatively much smaller ICE that gets used not that much...
It's likely to have much lower maintenance costs - one measure of complexity.
I haven't thought much about the styling - what's a "fanboy"?
Actually, weight matters less on a PHEV, cuz of 1)the regenerative braking which reduces the acceleration penalty and 2) the fact that electric engines have much more uniform efficiency under acceleration.
They've already found the batteries - A123systems and Saft.
GM knows that the goalposts are moving: that's why they have to do the Volt.
On a pedantic note, the energy released in a fission reaction is almost entirely due to the action of the Coulomb force between the like-charged fission fragments. It is just the usual electromagnetic interaction doing the work.
I second the pedantery. Shall we say fissionable and unstable nuclei are nature's smallest and most powerful capacitors?
How would you characterize anti-matter? What is the energy storage there? If I use an excitation model for the vacuum, there is an energy gap between particles, their anti-particles and the vacuum ground state. Where does the potential for that come from? I am asking seriously... QFT is not my strong side. I have seen the Lagrangians for the standard model, but they are phenomenological. I haven't been able to figure out how to derive them from first principles and I am not up to date about String theory and beyond. Any ideas, anyone?
I agree with Don's comments. I had an absolutely terrible time studying economics and fought like cats and dogs with my teachers, specifically over their almost blind acceptance of so many different assumptions, that I in my youthful glow, thought of as coming close to fantasies. Of course it was more complicated than that, but their was just os much dogma involved and politics too. I felt like we were involved in the study of a new kind of religion and that one had to have faith to make sense of it, and I was clearly regarded as a heretic worthy of being burnt at the stake! This was all in the late sixties early seventies, with the growth of the environmental movement and the beginnings of awareness of finite resources. Most of my teachers just didn't get the concept of finite resources at all, even on a global level. There was always going to be a substitute available if the price was right. I remember rashly commenting that we would soon need a substitute planet the way we were going, and the guy replied that at that point we'd start to seriously invest in rocket technology and develop the means to travel into outerspace. And let's not even start on the invisable hand! Oh, I forgot, I found that most of my teachers had never really studied the great classical economists in detail, or really read source texts. Heading for Adam Smith land, I felt like he'd turn in his grave if he found out how his words have been used and abused, trivialised and whored-out.
The sad part about your story is that there is a substitute. It's called the sun. All of the energy we can ever generate on Earth safely without completely screwing up the planet can come from the sun. More than that, actually, if we really did not care about ecology. If we do and if we want to work with energies greater than 1% of the flux we receive from the sun, we will have to go to outer space. Which one day we will. I don't dare to talk about the 26th or 32nd centuries here... they are of no relevance.
In effect, you are right and, to first order, your professors were right, too. There are limits and there are ways to transcend them (at a truly astronomical price tag!). But, as always in life, you got to give some to get some. It only depends how much you are willing to give.
Only now do I fully appriciate what you really mean by calling yourself Infinitepossibilities. Thank you for clarifying yourself.
I am calling myself InfinitePossibilities because every time I thought something non-trivial was impossible, some smarter guy proved to me that indeed it isn't.
The world as I experience it is a constant learning curve. We don't know where it will take us. I question even the things I strongly believe in, like energy conservation. Every new generation of physicists devises their own tests of energy conservation because there is absolutely no plausible reason why it should exist. The only reason we have that it does exist is because we keep testing it.
Once you have that kind of mindset, it is easy to ask why PO should be the end of the world, especially since solar flux on Earth is quite high and can be technologically accessed quite easily. They could have done it in the early 19th century with mirrors, copper pipes and steam engines... or a stirling engine design or two. Guess what? If nature hadn't given us coal and oil and natural gas, that is probably what would have happened...
It is thus easy for me to see that so many things we take for granted are mere conventions based on historical developments and are by no means limited by physics. SUVs are just one of those conventions. The depletion rate of oil at this time is thus driven by a convention, one that we can decide to replace with a new one any time we wish.
It is really that simple: you can go to car dealership today and dump your guzzler. We can all do that. A lot of people might not want to... but that is different from nature forcing us to accept some unalterable fate (although, there are those, too, but they are about as rare as supernova explosions...).
Doomerism is indeed doomed. It will fall to the axe of reality. What will emergy, I hope, is a world of people who will be slightly more aware of reality. If you want to call me a dreamer, go ahead. I still believe that people can learn. I know that sometimes they only learn the hard way. PO will be a hard lesson. No doubt about that. But it will be a lesson about growing up and about accepting responsibility, not about going hungry and being without transportation.
Where both cornucopian economists and doomers go wrong is in their belief that the production capacity of an economy is proportional to its energy input ALONE. In reality it is proportional to the product of energy input * efficiency. The second factor turns out to be very low and mostly neglected at this moment. Therefor, we can keep the product high and potentially even grow it SLIGHTLY, even with the first factor decreasing (which it inevitably will) as long as we manage to squeeze out efficiency gains fast enough.
And it is these efficiency gains that will save the worlds butt, to put it in mild language. If we did not have them, we would be in real trouble. But the very way we use energy, or, as I like to call it, waste energy, amounts to the equivalent of a vast energy reserve. This reserve will come from the waste heat of oversized engines, badly insulated homes and poorly designed fabrication processes.
This is not a cornucopian argument, by the way. This is an engineering argument. Power is an inherent concern in all of my engineering designs because it is either limited by the source or the sink (too much power in too small a space means temperatures beyond what silicon and plastics can endure) and I am sure it plays a significant role for most practicing design engineers. We are simply entering the phase of civilization where it starts to play a significant role for everyone.
I'm personally very interested in this topic and would like to see an article posted. I've been thinking lately that money is actually an abstraction of transformation potential, whether that potential comes from human labor, animal labor, slave labor, machines, etc...
Thanks for the article!
As a potato farmer I am faced with a dilemma. The higher price makes me plant all the land I have to the limit my resources (machinery and labour) allow. Just like producing more oil from existing wells and using existing refinery capacity. However, once I have done that I must contemplate increasing those resources and land in order to make more from the higher prices. Now, I believe in Economics 101. Most of us were lucky enough not to be exposed to more. I know that if I increase production the price will come down. If I invest a lot in increasing my resources the return on that investment will eventually fall. So maybe I rent the vacant land next door and higher Pete the Part Timer to work it.
If the prices still look good after the next crop I think about renting more but by this time I discover that the other potato guys have made the same decisions. Not only is there a lot less land available but it is very much more expensive. Even the rent on the land I have has gone up and Pete has been stolen by a guy paying a lot more and only Pete’s son is available and he is not trained. Now I have to either buy the land and more equipment paying higher wages to work it or stop expanding. Even the land that is available is in the next county, the potential labour force is busy doing telemarketing and John Deer can’t deliver for another crop season. I have a temporary surplus of cash but unfortunately I believe that all this will lower the prices. Ah, but if I buy out a competitor I get their resources and reserves and put my cash to work. As well my share holders (family) wants some of the dividends to take that trip to the tropics. Problem solved, I buy my neighbour out and send the family to Barbados. I get richer and the price of potatoes isn’t pushed back down because I didn’t expand production. It seems of little consequence to me that the next year they could not sell all the Golden Horseshoe French Fry franchises they wanted to due to lack of potato supply. The next year the price of potatoes edges up and I try planting them closer together. Only when I run my spread sheet in December do I notice that my yield per acre dropped and the tubers were smaller and fewer were suitable for fries. Hmmmmm maybe I should get some of that land in the next county and higher those telemarketers. Oops, now John Deer says three year delivery. I am really getting PO’d now ….
Luis,
Good post.
This is one of my favorite subjects --taking on the thought-tanking mumbo jumbo of the "economists".
So let's do that by stepping back and looking at the word "price" that you scribed so quickly onto your S-D graphs.
Economics is founded on the practice of "accounting". Accountants claim they account for everything. But they don't. They are brain-washed decepticons. Economists wash their hands of the low life accountants and pretend that they can simply take the word of the accountants as to what the costs and prices are that are paid by society. Alternatively, economists fabricate a thought-tanking, mumbo-jumbo word: "externalities". Then they run and hide under the rug.
Toodles.
It is a sad state of affairs that people still have to explain that the "invisible hand" model is not an accurate depiction of how things work in the real world.
There are no prominent economists who believe this anymore. One of the last legs of the stool was knocked out decades ago by Joseph Stiglitz (for which he won the "Nobel" prize) when he showed that asymmetric access to information meant that both parties in a transaction were not equal.
In his latest book on globalization he shows how unregulated markets have failed to deliver promised improvements in the developing world for the past 30 years.
The fossil fuel markets are no different; the fact that the underlying commodity is becoming scarce is not unique. The same thing applies in many other areas - real estate being a common one.
The fix to scarcity is lowering demand, as well as finding substitutes. No one is seriously working on lowering demand at present.
"No one is seriously working on lowering demand at present."
That is a common misconception. Most EU countries have gas taxes on the order of 100%. Their demand per capita is half that of the US. The EU fuel economy guidelines are also MUCH more stringent than those in the US.
This is a purely American problem. It does not exist anywhere else in the world because EVERYONE else is working on lowering demand.
yes...No free market exists in the ‘west’ today, beyond my exchanging hair curlers for jam with my neighbor (we don’t pay VAT, are not taxed and don’t affect ‘the market’!) All is carefully regulated in favor of various parameters, many of them set by the voters. (National hegemony and ripping off others far away figures large.) The ‘invisible hand’ is an invention like N rays (a famous delusion in science), of the effectiveness of prayer, astrology, etc. It is really closely comparable to a religion and to superstitious beliefs. Cloaked in pseudo mathematical babble it provides blanket excuses for all kinds of sins, gangsterism, domineering posturing, etc. etc. One of the most horrible offshoots is that people measure in money what should be measured in energy, in the state of nature (eg. the wellbeing of humans, etc.), in produce, etc. etc. But the dollar! The glorious dollar! (or other currency.)
The markets care about price, not EROI. In many cases, it is possible to finesse the EROI issue by using a more abundant energy source such as coal to produce a more valuable form of energy. In the long run, EROI and price will move together, but that is a longer time frame than typical enonomic analysis can do--too many unknowns.
If you showed the supply line as a curve, you could make the point more easily. Eventually any supply curve does become vertical, and no further increase in supply is possible.
The comments about substitution are right on target. The boom in wind generation and the Chevy Volt are indications that the market is working to some extent. However, the war in Iraq indicates that our most critical economic decisions are made not by the inexorable logic of the market but by an irrational power elite.
This is obvious, but everyone ignores it. If you do energy accounting you can produce a much higher EROI fuel from nuclear hydrogen or even nuclear derived synfuel, but there are huge capital costs, labor costs, and opportunity cost in a set time period.
EROI is a magic term for people that dont understand economics it often seems. Notice that no one ever applies a discount rate to EROI.
Good EROEI is obviously not a guarantee of profitability, but poor EROEI is nearly a certain guarantee of unprofitability if you are intending to replace an energy source. Economic modeling of future depends on a large number of stochastic unknowns. One thing that scientists are sure about is that the laws of physics will be the same, and thermodynamic limitations have a discount rate of zero.
Look at the laws of thermodynamics. They set an upper bound on efficiency---but obviously the lower bound is zero, your engine can waste all its energy and produce no work if it's broken.
That's why EROEI can be important.
You're talking right past my point. We can say very obvious things like CO2 is unlikely to compete with graphite as an energy source, but little relevant to the debate.
Its never important enough in the scope of the discussions we're taking, especially when we're rarely even talking about the utility of oil as an energy source so much as an energy carrier.
EROI is just an excuse for people to make wrongheaded arguments that have little to do with economic reality.
"EROI is just an excuse for people to make wrongheaded arguments that have little to do with economic reality."
If physics upper bounds conceviably possible economic returns under any real-world situation, then EROEI is not at all useless economically.
And the historical evidence that high economic returns coincided with good EROEI for energy technology ought not be ignored.
It obviously isn't everything, but isn't nothing.
"when we're rarely even talking about the utility of oil as an energy source so much as an energy carrier."
What fraction of the current petroleum-based industry uses oil as a primary source whose energy was generated in geophysical past by non-human fossil-preserved processes, versus oil whose energy content was inserted contemporaneously by humans and was generated not thanks to fossilized hydrocarbons?
I'd say about 99.99%.
When people talk about the oil industry, that's what they mean.
Sure, in some distant future we will probably be forced to synthesize liquid hydrocarbons with high energy densities out of some other primary energy source, which will have to be truly titanic. That is entirely different from "petroleum" as it is known today. The amount this is put into practice is essentially nil.
Now why is that? EROEI is an excellent clue why the economics would be really bad.
You're missing my point to be argumentative. We're talking past each other here.
The whole topic of EROEI should be avoided. Its obvious that energy sources with very poor energy return will do poorer than energy sources with high energy return, but factors like labor, capital, discount rates, licensing and the like are much more important for decisions made today than energy return. Its why coal is still competitive with nuclear for generating electricity.
Its only useful to talk about when you're discussing technologies like archaic photovoltaics that consumed more energy in their manufacture than they yielded over their lifetime. In almost every instance there are other limiting factors besides energy.
Among the financial and economic communities there seems to exist a hidden belief that Oil Reserves are set by prices. If prices go up by growing Demand then Reserves should follow, in order to allow Supply to match it. Even if Reserves grew with prices, it’s the flow of Oil to the market that has to grow in order to meet Demand.
This is a mischaracterization. I have NEVER seen anyone argue that a rise in oil demand, which results in an increase in prices, results in an increase in supply AS LARGE AS the increase in demand such that prices return to their original level. That would be absurd.
But if prices rise, there will be an increase in profitably-recovered Reserves such that, while the increase will not be enough to satisfy the entire increase in demand, there will be more oil than before, so that prices do not rise as fast as they would in the absence of price-based "reserve growth".
What is overlooked by too many POers is that, because reserves ARE sensitive to price, future increases in price are NOT reflected in current reserve estimates, and therefore the amount of total oil actually recoverable for profitable sale will continue to rise slowly. An estimate of Reserves at $25 is smaller than an estimate of $40 Reserves, as the EIA chart shows.
If you want to ignore the price effects, you are implicitly saying that you are considering ALL oil that can EVER be extracted, at any price. At that point the only number you can really use is OIP - the total amount of oil in the ground. And that number is VERY large...
After all, if oil weren't an energy source, we would still extract it for other reasons - plastics, asphalt, sealing wooden ships, etc. And just like other non-energy resources, supply depends on price. When gold rises in price, old mines are reopened and existing mines are dug deeper and deeper - even though Gold has and EROEI of zero. That gold was always there, it just wasn't profitable to get it. Have we "run out" of gold yet?
If, instead, you want to talk about "cheap oil", you need to specify what "cheap" is. $20? The era of $20 bbl oil is over. But oil hit $60 and demand hasn't collapsed - is $60 the new "cheap?" Maybe - Europeans would LOVE to pay $3 / gal.
That's exactly what happened between 1985 and 2004.
I don't think you have responded to his key point, which is that oil reserves are defined as oil that is economically recoverable. By this definition, as prices rise, oil reserves do increase.
As he said, if you want to ignore this effect, you need to change the definition of oil reserves to include all oil regardless of whether it is economical at a given price to recover it. And that quantity of oil is enormous, so large that Peak Oil would be a non-issue if we had access to all that oil.
hmm... remain to be proven.
Halfin, for concearns on Reserves please check part II of this series.
Problem is that there are reserves and reserves. Official reserves that are available to the public are 1P reserves (or proven reserves). 1P reserves for the US were always grossly underestimated as you can see on the chart below. The red curve is what "true reserves" should look like and I don't see any major fluctuations (except for the jump cause by Prudhoe Bay) despite record prices in the 70s. In addition, 1P reserves are a poor predictor of peak production (see Stuart's story).
The EIA graph is very misleading because a third dimension about average flow rate is missing. Don't forget that peak oil is no so much about reserves but rather about maximum flow rates. Of course, as oil price is increasing, other non-conventional sources are becoming economical but they have very low flow rates compared to conventional oil and are generally exploiting immature oil sources (i.e. Kerogen) with low EROI.
"When gold rises in price, old mines are reopened and existing mines are dug deeper and deeper - even though Gold has and EROEI of zero. That gold was always there, it just wasn't profitable to get it. Have we "run out" of gold yet?"
This is an excellent time to instruct the readership about the profound differences between the gold economy and oil economy based on unchangable physical facts.
Gold is a stable atom and will always be gold. Its value to humans is related to the concentration (and implicit work involved) in concentrating many such atoms from the Earth's crust.
There is no shortage of raw gold atoms existing in the planetary crust and oceans of Earth.
When gold is refined and brought into the human economy, it is very infrequently diluted or consumed or destroyed in a way that fully eliminates its economic value---and when it does, large effort is devoted to recovering it. Much of the gold refined centuries ago continues to be useful to humans, and will continue to be so. The actions of gold mining companies increase the stock of economically available gold circulating in the human economy.
Most of the current value of oil, however, is based on its irreversible energetic potential energy, the oil molecules are consumed and have no economic value after use.
The actual physical amount of oil (as an economic product) does appear to be severely limited by immutable geological facts, unlike gold.
Think of it this way. Suppose instead of it being oil, humans could eat fossilized steak. And steak was geologically buried in the ground. Excellent, wonderful super-powerful vitamin-filled steaks which made people able to run very fast, calculte up a storm, and even fly. Human abilities were profoundly enhanced with these magic steaks.
And the enormous bulk of the food industry was devoted to extracting food this way, since it was far more profitable, and the results much tastier, than agriculture. The restauraunt and food business was fabulously wealthy and controlled a large fraction of the world economy.
And now suppose that the number of mouths being fed by fossil steak was enormously greater than the number which could survive if we had to grow our own food.
Remember, we eat steaks, but we can't eat shit.
Is it like gold? Or maybe it's quite different.
Or maybe you've just missed his point.
That part of the post was discussing how low EROEI does not prevent a substance from being usefully extracted, and how (total) reserves rise with price even for substances with zero EROEI, such as gold, so EROEI clearly cannot be the only important variable.
That's it - just that one simple point.
Yes it can, when considering energy sources.
Really?
Then you must agree that a source with EROEI of 10:1 is better than one with an EROEI of 5:1, yes?
Even though the 10:1 source can only scale up to producing 4kW globally, would take up most arable land, and causes cancer, while the 5:1 source can scale up to 10,000,000TW, occupies no land, and has no negative side effects?
Or maybe there are more factors to consider than EROEI? Just perhaps?
Of course there are other factors.
EROEI provides upper bounds on economic and practical feasibility, not lower bounds.
In this way, it is a good way, at a very gross level, to differentiate schemes (like corn ethanol) which will be poor energy or environmental investments, even before the capital is deployed.
High EROEI schemes hence deserve extra attention to see if it is feasible to ameliorate the externalities.
Yes, but knowing that anything with an EROEI of less than one cannot be an energy source, no matter how attractive its other characteristics are. I absolutely agree that those secondary factors can be sufficient reason not to implement it.
Very well said, Ethan. The trouble is that many refuse to study this sector. This is clearly a failure to differentiate between Reserves, Resource and OIIP. All very different. And each with its sub categories. Even reserves have 1P, 2P & 3P.
this was recently explained fully by rembrandt. a modeler. with help from euan. but until folks take the effort, then like Dave, they will not comprehend the value and insight of the IEA graphic.
OIIP never changes. Price is directly related to resource. With time, more of OIIP becomes Resource. In time, some Resource eventually becomes Reserve. And 3P may become 2P which may become 1P. Mostly determined by price. Somewhat by technology.
The current neo-classical economics ("Regular Economists") assumptions recognize no limits. Herman Daly has written extensively on this in his books; for an overview see http://www.amazon.com/Ecological-Economics-Applications-Joshua-Farley/dp...
"Ecological Economics: Principles And Applications"
Or go on his web site at http://www.publicpolicy.umd.edu/facstaff/faculty/Daly.html for an abundance of publications.
Even your potatoes example falls apart when the farmers are using all the land suitable for growing potatoes. The inability of neo-classical economists to grasp the concept of limits leads to their fighting any arguments citing limits with ridicule, invective, ignoring (out of ignorance?) and dismissal instead of using facts and logic. That's how they received "The Limits To Growth" in the '70s and that's how they react to peak oil - there are no physical limits in their analysis.
"The current neo-classical economics ("Regular Economists") assumptions recognize no limits."
Actually traditional economics is the study of how scarce resources are allocated in a society. Since human desires are unlimited, all resources are scarce. The concept of no limits is a strawman.
I think the notion that human desires are unlimited is part and parcel of the classical economics model and, equally, wrong. "Desire" for junk would go down about 99% if advertising was outlawed.
Human desires are unlimited. This is where we get into what I propose are the/some of the fundamental questions/assumptions underlying classical economics, which, let's face it, is the variant of economics most politicians understand and use/misuse in the public forum. There are just so many assumptions about socalled "human nature" in economics and how and why we do things. Classical economics is incredibly ideological and political. It also appears to be a way of justifying, explaining and excusing the rise of european capitalist expansionism and imperialism. It appears to explain the world, but really doesn't, rather it obscures the realities of the world, by pretending that its science and not primarily ideology. But one musn't be too hard on the great minds of the past because they were doing their best given the times they lived in. Karl Marx, dare one even mention him anymore? had a lot to say about classical economics, he was pretty critical, but none the less an interesting perspective, as he was actually around at the time of the industrial revolution. And one doesn't necessarily have to agree with his revolutionary political programme to appriciate elements of his analysis.
I see the Invisible Hand as a purely reactive agent. The invisible hand can't see future shocks to the economy and prepare us for them. Suppose that in 2001 you went to a bank and tell them you have a plan to manufacture an oil substitute called slurm. The problem is slurm will cost $50/bbl to manufacture. The banker looks at the oil futures market a few years out and tells you oil will only cost $35/bbl and turns you down. Hardly anybody saw the doubling of oil prices that happened and we ended up paying 50% more for fuel than if we had slurm in mass production. Even now some on Wall Street believe oil will be $35/bbl a few years from now.
Entrepreneurs are always making a living (or going broke) by predicting what the markets will be in five years and investing accordingly. Sometimes they predict wrong. As Feinman noted, imperfect knowledge is a weakness of the classical model.
One of the functions of TOD, and the web in general, is to help people predict future markets accurately.
I think the single most useful thing for TOD is to educate the small number of people with enormous amounts of money, who usually think similar to those bankers, about the reality of the physical world.
Hi mb,
What do you see as the outcome of doing this?
That I see some variant of this claim repeated here every day doesn't make it any less nonsensical.
Let's look at what "the Market" would say about scarcity and production:
Now let's apply that to energy:
i.e., market forces divert energy away from less-essential pursuits (such as SUVs, cooling huge houses, and weekend vacations to Hawai'i) into increasing the overall supply of energy to society, exactly like it's always done. Market forces don't suddenly "stop working" when a key good gets scarce.
Now, you might argue that producing new energy in a post-oil-peak world will be so hard that the economic equilibrium reached will be at a point where large numbers of people can't survive and society collapses. No problem - argue away. You might be right.
But the claim "and then it all goes Kablooie! because it's post-Peak and that means Kablooie!" is not an argument; it's a statement of belief, it ain't convincing, and it reduces any argument based on it to an unconvincing shambles.
-----
EDIT: more constructively, you would be better off saying at the end of the essay something akin to:
"Once energy scarcity unfolds, the cost to society of transitioning to new energy sources is magnified, due to the requirement that developing those new sources requires investment of substantial portions of the already-stretched energy supply. Depending on the parameters of the energy sources available and how early the society starts transitioning, the amount of energy available for non-energy-production tasks may drop sharply, potentially leading to significant hardship or societal instability, as we'll examine in a future installment."
A statement like that would provide some idea of why serious problems can happen while not (incorrectly) suggesting that they must happen. It also promises a more careful look at the situation in the future, which I think would do a great many people a great deal of good, provided it was done carefully.
"Now, you might argue that producing new energy in a post-oil-peak world will be so hard that the economic equilibrium reached will be at a point where large numbers of people can't survive and society collapses. No problem - argue away. You might be right."
That is indeed what doomers like to do. They are wrong with that argument just as well. Wind and solar energy can be ubiquitously produced at prices which are quite acceptable. The one key difference between wind and solar and oil is that they are MORE intermittent and require different storage mechanisms than oil (which does require storage tanks and geological storage sites, a key issue many like to overlook). And as the world winds down its carbon based energy economy, it will have to develop extensive transmission and medium term storage capacity for electricity. This is no different in scope to the 21st century than having to develope power grids and off-shore oil drilling was to the 20th. It probably is not even much different in terms of relative income our parents and grandparents had to pay to build the power nets and oil riggs that power our economy. It just seems harder for us to accept that we will have to invest in our children's future than it was for our parents.
Always wondered how to spell kablooie, but envisioned it as kablooey or maybe ka-Blooeeeee. Now I know. With a Kapital K.
Explosions happen when processes become exponentially reinforcing, - like population. For every action....
Newton is still my favorite economist.
The rate of world population increase is not merely sub-exponential, it's sub-linear; you may need to find a new bogeyman.
Population growth looks a lot different if you extend your timeline back 1,000 years.
Sure, we had exponential growth in population until recently. No question. That's one reason why so many people are still concerned about it: they're working with outdated information, like Bartlett's writings on exponential growth.
No it doesn't - current growth is still sub-linear.
All looking back 1,000 years does is make it clear quite how foolish it is to assume that anything which has increased exponentially in the past must necessarily do so in the future. Indeed, it points out the importance of logistic curves for more than just HL - many things, such as the adoption of new technologies, typically follow the "exponential early increase followed by increasingly slower rate of increase until saturation is reached" S-curve, as current models suggest population is likely to do.
Hi Pitt, and Nick,
Thanks and qs:
"..."exponential early increase followed by increasingly slower rate of increase until saturation is reached" S-curve, as current models suggest population is likely to do."
Do the models give an explanation for *why* the "S-curve"?
"....how foolish it is to assume that anything which has increased exponentially in the past must necessarily do so in the future."
I had the impression the issue is what is the cause-and-effect connection underlying the shape of the curve; i.e, for example: less food, no exponential growth. What's your take on it?
Aniya, there is a fundamental mistake which is confusing a lot of people. They use animal models of population explosion, peak and decline which are irrelevant to people.
In the animal model population rises to the limit of food, starvation hits, births fall and deaths rise, and population collapses.
In the human Demographic Transition population growth first sharply increases: the death rate falls (especially the newborn death rate) due to increased affluence/food (so far similar to the animal model) and due to improved civilization & technology (nutrition, sanitation, medicine, more attentive child raising). Later contraception, education, delayed child-bearing cause birth rates to fall to the low level of death rates. This is the crucial difference with the animal model: population stabilizes for good reasons, not resource limits.
Hi Nick,
Thanks. Just to continue the discussion, though not sure if people read previous "logs"...
When you say: "This is the crucial difference with the animal model: population stabilizes for good reasons, not resource limits."
It seems, though... that there must be some overlap: some resource limit causes and some not. It seems to me that one must be able to have some way to distinguish between the two. Then, also, if we look at either 1) current reality, e.g. Zimbawbwe, or 2) place or places impacted by the impending/current decline in FF availability...we're looking at a whole new situation.
Does this make sense? In other words, how does resources limits enter into the human pop. equation? It must in some way. How to analyze this? Then, we are here considering a new situation of falling energy inputs. Yes? What effect will that have?
For the most part, women are having fewer children because they have contraception and have better alternatives. Now, resources do factor in a bit. For instance, Japanese women might have more children if housing gave better privacy, and if new couples lived on their own more often. OTOH, the biggest contribution to low fertility in Japan and Italy (two countries with the very lowest fertility) is slow cultural change: the men just aren't ready to relate to women in new ways, and so women are choosing not to have children. Both countries are pretty affluent....
Zimbabwe's problems started long before high oil prices. High oil prices certainly make things a bit worse, but fuel and electricity shortages are almost entirely a symptom of other problems, not primary causes. I'm quite puzzled that anyone suggests that we might learn anything about our future from Zimbabwe, or any other african country, except perhaps South Africa, with it's CTL.
Don't forget: there's no reason to assume that we will have falling energy inputs, especially in the US (with which I'm most familiar). Renewables (wind, solar) nuclear and coal (unfortunately, from the point of view of GW concerns) can provide essentially unlimited electricity at only slightly higher prices. Now, we may have something of a transportation problem with Peak Oil - it all depends on how fast depletion hits, and how quickly EV's and PHEV's scale up.
Population growth looks a lot different if you extend your timeline back 1,000 years.
Hi Pitt,
Thanks for the discussion:
"...parameters of the energy sources available..."
This seems to be the $64K question (or some other suitable metaphor)- isn't it? ; i.e.,
--the parameters are determined...by what?
--the analysis is done...how?
--it seems at some level, we also need to take into account, not simply the flip side of "...the amount of energy available for non-energy-production tasks...", namely the amount of energy available for *energy production (tasks)*, but the other factors and resources necessary for channeling the available energy inputs into the physical means to produce energy (from the "new" sources), as well. (Raw matrerials>windmill>installation>upkeep>repeat without FF inputs at some point). As has been discussed previously.
--Some way to organize the accounting of this in a way that makes sense in terms of transition time.
So, when you write: "...producing new energy in a post-oil-peak world will be so hard...", perhaps another way to say it is: what is the degree of difficulty, expressed in what terms, for what length of time, which makes the prospect of transition a feasible one?
Actually, you don't have to do anything that complicated.
We know that wind and solar have good E-ROI's. Given that is the case, we can just use cost accounting. Energy accounting is only necessary where subsidies distort the market and where E-ROI is very low.
If the price of energy rises, the $ROI will rise for energy investments, and they will attract the investments (both $ and energy) needed. If there is an energy shortage, high energy prices will reduce consumption elsewhere.
I am HUGELY skeptical of any "invisible hand" claims.
Remember, Adam Smith was a philosopher steeped in Enlightenment Deism. That "invisible hand" is the hand of a Watchmaker Deist God perfectly winding up the universe to run like clockwork.
Well, it just ain't so.
Adam Smith's theories, like Isaac Newton's, have flaws and are not universally applicable. But they were not based on superstion. His concept of competition was more like economic Darwinism.
The difference between the theories of Adam Smith and those of Isaac Newton is that Newton's theory of gravity is correct to better than one part in a billion in the solar system. It is (according to all we know) correct to the same amount around any sun-like star in any part of the universe. In comparison the theories of Adam Smith apply, at best, for economies sufficiently similar to the type of economy he wrote about. They have no universal validity because many different types of economies are conceivable (whereas there is only one gravitational force) and they are certainly not numerically tested to such high precision.
Economic Darwinism is a concept that makes me uneasy. I always feel that the next step is the discussion of social Darwinism, and that makes me feel even worse, as that has historically proven to be a really slippery slope to start down.
Since my youth I've always felt that the "invisible hand" was a neat trick or sleight of hand, enabling one to "explain" what one could not, so one constructs a sort of psuedo answer. There is an invisible power that will make everything alright in the end. You just need to have faith my son. But forgive me for all my generalisations and simplifications this evening, because I don't have time right now to write a book, anyway I'm trying to write a thriller about Peak Oil.
Yes, I agree with that.
At the same time this can also be said:
Once energy scarcity unfolds there’s little the Government can do about it, for to generate a higher supply of energy more of it has to be invested.
And if it were up to me, I would advocate having millions of free, thinking individuals living under capitalism to solve the upcoming energy problem, rather than leaving it in the hands of government bureaucrats. For government planners, using regulation and taxation, it would simply be too overwhelming a problem. As history has shown, governments applying hard limitations on individual liberty were even unable to produce an adequate supply of wheat or nails.