The Myth of "Peak Oil"
I am often asked about the "peak oil" theory. I've even had some people send me junk mail predicting when the date would come. Sometime in June, 2006, I recall. (Unsolicited investment advice: go very long!) I didn't really pay attention. And yet many do. There are websites, books, email lists, conferences, and tracts of every sort promoting this doomsday theory (here is a google of the subject, and, yes, the domain name peakoil.com is taken). In millennialist language, these people say that the human race is on the verge of a massive turning point because oil is nearly depleted. You can fill in the rest.
A contrary view: civilization as we know it will grind to a halt without the energy we derive today from crude oil, and that's in and of itself is motivation enough to make sure that future energy is widely available at prices people can afford. [Full Article]
Comments (86)
Charles: I enjoyed your very descriptive article on the realities of petroleum. I was surprised, however, that you did not mention the place of our Alaskan crude in your article. What place has it in all the strategies you mentioned? Sincerely from Guatemala, Joe Keckeissen
Published: January 12, 2005 8:53 AM
Charles: I enjoyed your very descriptive article on the realities of petroleum. I was surprised, however, that you did not mention the place of our Alaskan crude in your article. What place has it in all the strategies you mentioned? Sincerely from Guatemala, Joe Keckeissen
Published: January 12, 2005 8:54 AM
That was a fun read, thank you. I remember being flamed on Slashdot for stating that "price is an excellent motivator for conservation".
But as is pointed out, as supply is restricted prices rise. At some point, the price of oil crosses the price of some other energy medium, and the alternative is used instead.
Esterized veggie oil? Sure:
http://www.biodieselamerica.org
One point I'd like to make: The alternatives will be cheaper than oil, but there is no way to predict that they will be cheaper than oil now. But consider that a gallon of gasoline provides more service in a 40mpg car than it would at half the price in a 10mpg car.
Unless something fantastic like a Mr. Fusion comes along, incremental efficiency may be all "we" have. Where there are sufficient capital reserves, it is possible to build housing which, through solar, wind and whatever else is available, can be at least energy neutral. When my city-owned utility bill was $200+ last month, such an investment didn't seem like such a bad idea.
Let's get real: Human beings will adapt. Even without any petroleum at all "we" will find a way to get along. That is what the doom sayers cannot admit.
Published: January 12, 2005 9:31 AM
Good points, Curt! As economists have been saying all along, prices are information. Most consumers of oil and gas will change their behaviors when prices get high enough, not before. It's the job of entrepreneurs to try and figure out when consumers consider prices to be "too high" and to anticipate what changes consumers will prefer to make.
Like a certain book says, "Don't Panic!"
Published: January 12, 2005 10:09 AM
I'd like to address what I see as two errors.
First: "[The] People's Liberation Army cannot hope to match US military power, not now, and likely not in 20 years. If it comes to bullying for crude – high-stakes commodities extortion – China simply won't be able to compete." This strikes me as wishful thinking, and a bit of confusion with regard to time. Perhaps at this moment, the PLA cannot hope to match US military power in, as hypothetical, a set-piece tank battle in Utal, but to say it cannot "match" or compete with, or mitigate or frustrate, etc. etc. US military power anywhere from now until some vaguely re-assuringly long time from now is a confidence I don't share. To set off that comment against similarly catchy rhetoric, consider this quote: "If you think America's foreign affairs are a mess now, just wait. China will soon challenge America's ability to act in Asia. They will do it even while they continue to stock all the WalMarts with cheap consumer products. Remember, China is a lot closer to Central Asia and the Middle East than we are. They can actually walk into these places if they want to. And they have the largest army in the world. Do you think America wants to fight a land war in Asia against China?" That was James Howard Kunstler. Indeed, I am actually quite suprised to read this wishful thinking about US military power on a site associated with Lew Rockwell, who has done such a good job documenting the difficulties the US has had in pacifying Iraq and Afghanistan.
Second: '[W]hatever ends up replacing petroleum will come in its own good time, later than we'd like but probably sooner than we expect. It will come because it stores energy and power better than gasoline does and more cheaply to boot." This is, again, wishful thinking and quite vague, and perhaps childlike. Accordingly to the physics and chemistry I have read, specifically Goodstein's book "Out of Gas", gasoline and oil in fact store energy (calories, and hence power, or the ability to be used as fuel to do work) far better than anything else yet discovered. This point requires a little more explanation, perhaps beyond the confines of this entry. The expression "pound for pound" hints at it. The idea that "whatever" will replace it begs the question of what will replace it and avoids the issue of what, if anything, is to be done. So far nothing matches it, and, indeed, I am informed that oil and gas store energy orders of magnitude better than other fuels.
One can agree with criticisms of government intervention, etc., without agreeing with wishful projections.
Published: January 12, 2005 12:10 PM
Have a look at :
http://www.longbets.org
It is a charitable futures oriented org.
I offer a longbet to those who doubt that global economic growth will STOP due to energy shortasges within 10 years. The minimum is $US 200. My selected charity is Int'l Planned Parenthood.
Steve Kurtz
Published: January 12, 2005 12:49 PM
Mr. Featherstone is not entirely fair in his representation of the "peak oil" argument. While it is true that there are many hyperbolic interpretations of it by doomsayers and environmentalist/anti-capitalist wackos, the basic thesis cannot be dismissed so easily, at least not on the grounds of economic theory.
The peak oil thesis derives from the work of a private-sector petroleum researcher of the mid-20th century, Marion King Hubbert of Shell Research Labs. Hubbert came up with a model describing the relationship between oil field sizes and production over time. In 1956, Hubbert made a controversial prediction that U.S. crude oil production would peak in the early 1970's--a prediction that turned out to be correct.
The current controversy about "peak oil" is based on an extension of Hubbert's model to global oil and natural gas production. Basically, those who follow Hubbert's methodology challenge the mainstream consensus by arguing that the world will reach a peak in oil production (and overall hydrocarbon production) much sooner than is implied by the official reserve figures published by OPEC governments.
Some Hubbertites suggest that a change in OPEC cartel rules a number of years ago created an incentive to overstate reserves, and that we haven't been getting accurate numbers from the OPEC's state-run oil operations ever since then. They are particularly concerned that the Saudis are the worst offenders in overstating reserves, and that near-term Saudi production is in far greater jeopardy of significant declines than is generally realized.
If this were true, why should it be a cause for alarm? Mr. Featherstone is correct in stating that the real issue is: "how can we best use the petroleum we have until other economically viable alternatives present themselves?" Naturally, we would expect the market's pricing system to give us the incentive to achieve this best use. However, his analysis overlooks an important Austrian insight, namely that price adjustments are not automatic; they require entrepreneurial foresight.
The problem posed by a sudden and largely unanticipated onset of peak oil is that much of the past pricing of oil is revealed to be an entrepreunerial error; speculators have failed to stockpile sufficient quantities of oil to get us comfortably through the transition from a hydrocarbon to a post-hydrocarbon economy. There would be far greater dislocations than would have been the case had energy speculators and innovators been able to act on better information and allocate finite oil resources over time in accordance with market time preferences, etc.
Politicians, of course, would only make such a temporal misallocation problem worse. As oil prices spike, oil producers, speculators, and foreigners would be offered up as scapegoats. Politicians won't mind using coercion to redirect oil from its best uses to those uses that generate the most "political capital" for themselves, and dramatic price spikes would give these predators a golden opportunity to do so.
On the domestic front, we would probably see rationing and price controls with preferential access to oil by the well-connected; internationally, preferential access will be enforced through warfare and a brutal revival of imperialism (many Hubbertites, looking at Bush's military moves around the world, think this is happening already).
So is peak oil a myth? For any finite resource, there is always going to be some maximum in its production at some point in time. The debate is not over whether or not there is going to be a peak; the debate is over the timing of the peak and over how well we will be able to recognize and prepare for it.
The wacko anti-capitalist interpretation of peak oil is based on the old Club of Rome fallacy that market actors are never able to anticipate resource shortages and react to them in time to prevent a catastrophic collapse in the production of goods essential to human survival. It makes a lot of sense for Austrian School economists to refute this nonsense and to point out the dangers of oil-oriented interventionism and imperialism as a political response to rising oil prices.
However, it is far more problematic for Austrian economists to dismiss concerns about the sudden onset of an oil production peak as a myth. Whether it is a myth or not is an empirical question, not an issue to be settled by an appeal to a priori economic theory.
While the political and economic agenda of the people promoting peak oil ideas are bound to raise a lot of suspicion, we shouldn't underestimate the myth-making propensities of socialist enterprises like those of OPEC. Maybe the "spare capacity" of Saudi production is the real myth--and if it is, Austrians would need to point out how property rights, free markets, and sound money are essential to solving the problems created by sudden oil production declines, not deny that the problems exist.
Published: January 12, 2005 4:00 PM
Steve, there is no "energy" shortage, and certainly not in only 10 years. Not even 20 years. Consumption of oil could double and still last many times that time frame.
The only cause of energy shortages is government. Government intrudes and interferes in the pricing of commodities. Government prevents power plants being built, government is why there have been no new oil refineries in the United States in 20 years.
That is the reason your prediction of economic growth stopping will come true, and therefore the cause will not be energy shortages, rather an excess of regulation.
Published: January 12, 2005 4:05 PM
Mr Featherstone's article is intelligent and well informed, but lopsidedly unscientific--just like the responses I've read above. People seem generally clueless about such concepts as the Third Law of Thermodynamics, ERoEI (energy returned on energy invested), and the Exponential Function. For those of you who think "club of Rome" people and "anti-capitalists" are "wacko," let me remind you that one of Prez Bush's own energy advisors, investment banker Matthew Simmons, has actually re-read the Limits of Growth and decided they are right. Please view the following short lecture by Mathematics Professor Al Bartlett and then tell me Peak Oil is a myth.
Bartlett Lecture - Real Player stream [edison.ncssm.edu]
Bartlett Lecture MP4 @ Quicktime [news.globalfreepress.com]
or read this paper:
Forgotten Fundamentals of the Energy Crisis [www.npg.org] also by Professor Albert Bartlett.
Published: January 12, 2005 5:13 PM
I didn't have enough spare time to wade through such verbosity. Funny how journalists, when they write about economics, often have no concept of the term "economy of prose."
My opinion after reading many other articles that jumped on the bandwagon of this catchy "Peak Oil" headline: Economists should not even be weighing in yet on this issue.
Sure oil will run out (or at least be priced out of practical existence for humans). Sure other forms of energy will replace oil. So what? Come talk to me when the markets start to demonstrate their demand for alternatives, because until then I won't allow myself to become defensive about my "special understanding" of the present situation.
One last thought: Can we trust any claims that come from "Washington-based" people who claim to be experts on "Energy, the Middle East and Islam?" Seems to me that by-and-large such people have proven to be consistent f*ck-ups.
Published: January 12, 2005 5:55 PM
An article titled "The Myth of Peak Oil", based solely on economic principles that came into being during a golden age of growth in all its forms (energy, population, etc), and which fails to even address a single point of the Peak Oil "Myth".
Charles, you've done a great job... in showing why economics is not, and never will be, a science.
Published: January 12, 2005 7:11 PM
Well, put Vincent. Extrapolating from World Oil data it appears that world oil will peak in the 2004-2005 time frame. While the current decrease in production may be due to a global recession resulting from the Iraq war disrupting supplies, even the most extreme estimate of the date of world oil production peaking is 2037.
One salient (correct) argument of the Hubberites that was not addressed by this piece is that it is irrelevant how much petroleum is available in the world. What matters in determining whether petroleum will be extracted as an energy source is whether the energy required to extract a certain quantity of petroleum exceeds the energy content in that oil. This is an analogous production limit to the economic limit of the market price being below the production cost. The economic limit is soft because the marginal value of petroleum as a scarce resource is much higher than that of it as a plentiful resource. The physical limit, by contrast, is quite hard: Only more efficient extraction technologies would then open up the remaining crude to rational exploitation. (Government subsidies, of course, could result in economically disasterous exploitation.)
Fortunately, the energy return on investment of wood, coal, nuclear are all greater than 1. And, at least wood is renewable. Recent improvements in the efficiency of methanol/ethanol production also give this an EROI of somewhat better than 1. Thus substitution *will* occur, but the price (Joule/hour of labor) will rise from the historic low we have now.
Published: January 12, 2005 7:38 PM
Great article - thank you for such an informative and fun read.
Published: January 12, 2005 8:14 PM
My criticism of the Club of Rome doesn't seem to sit to well with Mr. Bendzela; I think a response is in order.
First, let me digress a bit to clarify who I am, since Mr. Bendzela seems to think I am ignorant of the Club of Rome's position. My academic background is in biophysics (which included graduate-level courses in non-equilibrium thermodynamics and population dynamics, as well as courses in ecology), I have read the original Limits to Growth, I have read much of the literature of Austrian economics, and I have not now nor have ever been a supporter of the Republican Party or any Republican front organization.
Now to the issue at hand. The Club of Rome's basic "overshoot and collapse" model is not just an expression of the laws of thermodynamics, it also conceals in its feedback equations false assumptions about how humans respond to impending resource exhaustion.
Specifically, it is assumed that market actors take no heed of the future; we supposedly just keep binging on finite resources and keep growing at the same exponential rate until the resources are all gone, much like bacteria colonies growing on a Petri dish.
It is clear enough that the increasing consumption of finite fossil energy resources is not something that can be sustained indefinitely; at some point we are going to have to cut back and eventually make do with whatever renewable energy is at hand. This in turn may well entail significant reductions in human populations and/or per capita energy consumption from their current levels.
However, this doesn't necessarily imply that there will be a massive human die-off due to an overshoot-and-collapse. The incentives of the marketplace are to stockpile finite resources, giving up less urgent needs now to satisfy more urgent needs later. As prices increase, one can profit by stockpiling to the extent that such increases exceed the costs of time preference, storage, insurance, etc.
Not only does the market promote conservation of resources nearing exhaustion, the associated price signals will also encourage other critical changes needed for a sustainable future, including adjustments to population size and lifestyles as well as shifts to substitute energy sources. It simply is not true that free market growth continues to the point where it endangers civilization's future viability; our time preferences are never that high.
Of course, any gradual, spontaneous adjustment of population levels and per capital energy consumption requires that entrepreneurs are correctly anticipating impending resource exhaustion and are able to profit from this knowledge. If there are to be major dislocations, or even a die-off, it will be because entrepreneurs aren't able to perform their essential function.
The twin threats to such a gradual adjustment are ignorance and coercion. When the peak happens, our well-being will depend on entrepreneurs having sufficient foreknowledge and enough freedom to act.
While I am critical of Mr. Featherstone for being too quick to dismiss the Hubbert model-based predictions of an oil peak in the near future, there is no denying that many followers of Hubbert hate free markets and yearn for government coercion.
I don't think they are wacko for bringing the laws of thermodynamics into the discussion, or even for discussing peak oil as such. I think they are wacko because of their childish faith in politics, believing that political domination somehow yields better solutions to our energy problems than profit-driven markets.
Mr. Bendzela may find it worthwhile to study the Austrian literature on central planning and on entrepreneurship; Mises's classic essay on socialist calculation would be a good place to start.
Published: January 12, 2005 8:23 PM
Peak Oil is not about running out of oil. It's about running out of CHEAP oil...
Global popluation is growing exponentially. We are currently at a point where we consume almost exactly as much oil as the globe's wells can pump out at maximum capacity.
We currently consume four barrels of oil for every one that we discover in new oil fields.
No other form of alternative energy or combination of forms of alternative energy can replace oil and allow our economy to continue to exist on the same scale as it does now. It doesn't matter what we may discover at some point down the road. It matters what we have available right now... It would take decades to transition the global economy to entirely new energy systems. If it doesn't exist in a tangeable way right now, it's a moot point. EROEI (energy return on energy invested) is a very important concept in the consideration of alternative energy and no other form of energy comes anywhere close to matching up with oil.
I could go on for days and days on the topic, but many before me have said it more clearly than I ever could.
Here are some books that offer irrefutable evidence that an economic crash due to the end of cheap oil is coming soon. Go read them and take this article for what it is--a very informative piece about the oil industry and the global economy that offers no insights into or arguments against what Peak Oil is really about...
"The Party's Over" Richard Heinberg
"Hubbert's Peak" Kenneth Deffeyes
"High Noon for Natural Gas" Julian Darley
Published: January 12, 2005 10:00 PM
Peak Oil is not about running out of oil. It's about running out of CHEAP oil...
Global popluation is growing exponentially. We are currently at a point where we consume almost exactly as much oil as the globe's wells can pump out at maximum capacity.
We currently consume four barrels of oil for every one that we discover in new oil fields.
No other form of alternative energy or combination of forms of alternative energy can replace oil and allow our economy to continue to exist on the same scale as it does now. It doesn't matter what we may discover at some point down the road. It matters what we have available right now... It would take decades to transition the global economy to entirely new energy systems. If it doesn't exist in a tangeable way right now, it's a moot point. EROEI (energy return on energy invested) is a very important concept in the consideration of alternative energy and no other form of energy comes anywhere close to matching up with oil.
I could go on for days and days on the topic, but many before me have said it more clearly than I ever could.
Here are some books that offer irrefutable evidence that an economic crash due to the end of cheap oil is coming soon. Go read them and take this article for what it is--a very informative piece about the oil industry and the global economy that offers no insights into or arguments against what Peak Oil is really about...
"The Party's Over" Richard Heinberg
"Hubbert's Peak" Kenneth Deffeyes
"High Noon for Natural Gas" Julian Darley
Published: January 12, 2005 10:01 PM
Mr. Cook, that is very well said. Thank you for making that posting.
I'm even getting email from the doom-sayers who believe everything in life revolves around oil.
They cannot grasp that "we" will never run out of oil, it will (as has been said) merely get expensive.
Personally, I think it's important that the price of oil be de-regulated completely. Let the price fall where it may, so that we actually CAN use the information feed back constructively.
These cargo ships that dwarf the Titanic, why are they using oil as fuel? Haven't the nuclear navies of the world demonstrated that atomics can be efficient for moving large ships? Guess what, atomics aren't as efficient as oil, by price. Yet.
So even without petroleum, shipping on a huge scale can continue.
Is it that the real alternatives, such as atomic, are just unthinkable? No, just expensive now compared to oil. I believe that the doom-sayers simply cannot grasp that prices can go up and life will not end.
Published: January 12, 2005 10:21 PM
I am a geologist and a conservative and I believe that peak oil is real. As I am not an economist I will not venture an opinion about the impact of peak oil on the economy.
The United States Geological Survey puts the peak oil date at about 2037. That may not be tomorrow, but I still hope to be alive in 2037. I hope the economists get it right.
Published: January 12, 2005 10:25 PM
"For the last year at least, virtually every nation that can produce crude oil has been producing flat out. Which left markets very uneasy."
I'm no English professor, but that looks to me like a sentence fragment. Who edits these articles, anyways?
Published: January 12, 2005 11:10 PM
Several of the posts here are misguided, especially the ones about energy return on energy investment... we don't primarily use oil for energy, per se, but for a fuel. The EROEI can be distinctly negative and still be economically viable given the right oil price conditions.
There's enough economically recoverable uranium and thorium to supply electricity close to todays prices for hundreds of millions of years at current demand. Given that diesel fuel is one of the most volumetrically energy dense fuels chemistry provides for, I see us making the stuff out of water and limestone after all the coal is gone.
Peak oil we may live to see, but it certainly has no bearing of the fall of liquid hydrocarbon fuels.
Published: January 13, 2005 12:24 AM
Dear Charles,
The other day, I had this guy remove a tumor from my brain.
He said, Heck I'm no certified neurologist. But I am a jouranlist who specializes in brain disorders. And I did stay at this good-name motel the other night. If you ask me, anyone who claims to know more about cranial pathology than me is full of hooey.
So that is why I chose him to do my frontal lobotomy. It just "felt" right. He had the answers I was looking for.
It's the same thing with oil. You've got a calm soothing manner about you. I want to believe the markets will provide optimizes solutions (whatever them things are). I want to believe that if we can get to the moon, why we can do anything. So that is why your smooth talking rational makes me feel so good. Thank you Mr. Feathers'n'stone.
Published: January 13, 2005 1:29 AM
I can cycle 40mi a day. I hope that's a good enough hedge...
The only thing about Peak Oil which increased my anxiety was the clear manipulation by OPEC members in stating reserves. If only there was a trustworthy 3rd party account of such reserves I wouldn't lose any sleep over this issue. Austrians are constantly griping about government manipulation over another commodity which is connected to every level of the economy. Why more concern over money price manipulation than oil?
Published: January 13, 2005 1:34 AM
Thanks for an interesting read. I have been reading a lot about the Peak Oil phenomenon, and have not seen a lot of articles expressing the opposite view. I think you are missing a couple of tricks here however :
1. The point is well made above - we will not run out of oil, but we will run out of CHEAP oil.
2. While this price hike WILL give impetus and economic drive to finding alternatives, the resultant social chaos will prevent scientific development, dissemination and implementation of those alternatives.
3. What are you going to build your new-fangled 'alternative power plant' out of when you can't afford plastics? How are you going to get the thing assembled when you have no fuel to transport components? How are you going to have enough energy to work on the problem when you haven't eaten for three days because all the shops have no food stock? That's what is worrying me.
Thanks for your article,
Dave
Published: January 13, 2005 5:29 AM
Let me contribute that wonderful quote from (I believe) Cheikh Yamani:
"The Stone Age did not end because of a shortage of stones"
Published: January 13, 2005 6:15 AM
Thanks to everyone who took the time to read the piece. I'm trying to set aside a couple of hours to write a more thorough response to all the questions, comments and complaints I've gotten.
But to Steve Kurtz -- all right, you're on. $200 is a lot of money for me right now, and it may be a lot more money in a decade, but I'm game. I will set mine aside for Lutheran World Relief.
CHF
Published: January 13, 2005 6:28 AM
Dave Moreman, you contradict yourself. Your statement number 1 is true, because it recognizes the reality that human actions take place over time.
Your declarations 2 and 3, however, both make grave assumptions about an instantaneous "lack" of oil, and therefore a "lack" of ability.
Remove all the petroleum, you still have steel, concrete, glass, and plastics, just not petroleum based plastics. Remove all the petroleum, you still have alcohol, veggie oil, atomics, solar, wind, hydrogen, and every other source of fuel except petroleum.
So go back to your statement number 1, and extrapolate based upon time. How long from the "peak" when petroleum is at its most plentiful and lowest price, to when it is so expensive that every alternative is cheaper to use? Hundreds of years. I expect that, during those hundreds of years, as the price of oil goes from practical to absurd, "we" will adjust.
That is why I cannot get all worked up about this "peak oil" thing. The world is not static, nothing stays the same no matter how much you may want it to. To expect disaster and react with fear and loathing just because things change is irrational.
As I wrote to someone who excoriated me in private email because of my postings here, famine due to overpopulation compared to food supply is natural and normal. It is no less normal merely because it happens to humans. Famine has happened many times, it will happen again. I look forward to making great profits attempting to minimize the effects, thereby doing good, just as has also been done throughout history.
Published: January 13, 2005 10:29 AM
If it is profitable in a monetary sense to
extract oil from the ground, why won't this be
done? What is the relevance of the fact that a
particular process may use more energy than the
products it extracts, if it is profitable
monetarily? It may be true empirically that
processes that are profitable monetarily are also
profitable energentically, but I don't see why
this *must* be the case. Is there something
obvious I am missing here? Why should there be a
correspondece between these two senses of
profitability?
Published: January 13, 2005 11:18 AM
First Mr. Featherstone does not make the connection that it is unlikely that current rates of production can be sustained. Even if they can, he admits a 50% increase in demand is possible. Econ 101 - supply vs. demand. He makes no argument from where that additional 50% demand will be met. Finally he acknowledges that (according to him) the price run up over $50/barrel was due to a lack of light sweet crude - which is what we need vs. all that sour crude out there that nobody wants or can use. But still, because the crappy crude is there we are "hardly empty".
I don't understand... In this article he actually makes the case for peak oil (good and easy stuff is gone, stuff nobody wants or can use is left + demand is set to rise). Then he does not tie the two together using simple logic.
As it has been stated several times here. Peak Oil is not about oil depletion, but rather the crossing of the supply/demand lines due to global production having maxed out.
Published: January 13, 2005 11:20 AM
Someone please explain why the pump price is so low and why gas is priced less than people are willing to pay?
Published: January 13, 2005 12:02 PM
Points have been made repeatedly, and ignored. Whether it's about running out of oil or just running out of *cheap* oil, economics still works. We won't wake up and find $40/barrel oil has jumped to $400 per barrel one day, the price will increase gradually over time, and as the price increases, people will adjust their usage of oil and gasoline accordingly. People will seek alternatives, businesses will seek to provide alternatives, and the problems that are nagging the doom-sayers will be taken care of, because people will know, by the increasing prices, that we're running out.
The only way the problems won't be solved is if people are even more stupid than I think they are, or if political coercion is used to prevent people from seeking alternatives
The "end of our lifestyle as we know it" is not necessarily disastrous or even as bad we might think. How can doomsayers complain that we need to change our ways, but be upset if the economy comfortably and gradually encourages us to change our ways? You'd almost think that they want society to crash and burn.
Published: January 13, 2005 12:24 PM
Michael Clem,
You claim that when/if oil becomes more scarce, that the price will increase gradually over time. I don't know whether or not that's true. Surely, there is the Hotelling argument -- is that your basis for your claim?
Published: January 13, 2005 12:39 PM
Gil, follow me on this one.
Let's say that the price oil does go up as it becomes harder and harder to extract usable oil, supply and demand and all that. At some point, esterized veggie oil becomes cheaper than petroleum for diesel fuel. There is now less demand for petroleum, the price rises slower.
Let's say that oil does continue to rise in price after that. Atomic electric power generation becomes cheaper compared to oil, and there is again a decrease in the demand for oil.
Repeat for plastics, as coal, natural gas, organic garbage, even potato(e) starch can all be used to make plastics, today. They're just more expensive than oil, today.
This is a continuous process, as the oil gets harder to extract and the price increases there will be less demand. The world will never, ever "run out of oil" so long as the price is allowed to change. It will simply, some day in the far future, be too expensive to bother with. Just like whale oil and obsidian knife blades.
Oh, and the "stone age" never ended, we never ran out of stone. Flaked obsidian is still used in occular surgery, because it is molecularly sharp. For other things, such as pocket knives and arrow heads, it is merely more expensive than steel. Same for marble blocks compared with concrete.
Imagine the Chicken Littles of the Greek Classical Age: Oh No! We will exhaust all the marble! There will be a "peak marble" and then no one will be able to build anything any more! There will be wars fought over what little remains in the quarries! Prepare now, or we'll all freeze to death!
Chortle.
Published: January 13, 2005 1:05 PM
"At some point, esterized veggie oil becomes cheaper than petroleum for diesel fuel." --C. Howland.
Not without land, sun, rain and....under current agricultural methods.... drum-roll please.... fertilizer.
Fertilizer? What's this guy talking about?
Seriously, "[a]t some point" and "cheaper" ignore the issue. Google "haber-bosch process". From what I've read, the green revolution pivoted on cheap fossil fuel. Might it not pivot back as the fuels used to produce the fertilizer become more dear? If so, what follows?
BTW, my compliments and thanks to Mr. Cook for his comments worth studying.
Published: January 13, 2005 2:38 PM
You claim that when/if oil becomes more scarce, that the price will increase gradually over time. I don't know whether or not that's true.
Do you think that as it becomes more scarce, the price could decrease? Or are you unsure about it being gradual? Gradual is relative, of course--I mean gradual over a long period of time--there's always short-term blips and aberrations.
Published: January 13, 2005 3:28 PM
Stratfor.com is reporting that the Saudis' drop in oil production from 9.5 mmbpd in December to 9.0 mmbpd in January is involuntary. Stratfor.com believes that the Saudis are incapable of maintaining the 9.5 mmbpd production level.
Stratfor.com also believes that the production decline is due to the loss of critical expatriates. This may be true, but then what does that tell you about the state of the Saudis' oil fields that they see an immediate production decline without aggressive ongoing engineering input?
Alternatively, the production drop may be due to the production decline that Matt Simmons has been warning about. Oman, which used a horizontal drilling program similar to what the Saudis have been doing, has seen an 80% drop in their production from the horizontally drilled wells (once the water hit the horizontal wells).
This may be the beginning of a long decline in world oil production, at the same time that world oil demand is exploding.
It may be that Mr. Featherstone published an essay on "The Myth of Peak Oil" precisely at the actual peak.
Published: January 13, 2005 3:43 PM
This may be the beginning of a long decline in world oil production,
If that is true, then we've plenty of notice, and the long decline will be evidenced by a continual increase of the price of oil. That's the irony of the peak oil theory. Far from being devastating, it would actually be reassuring. It would be much more chaotic and destabilizing to run out of oil with little or no warning.
Published: January 13, 2005 5:19 PM
Michael said: "...or if political coercion is used to prevent people from seeking alternatives."
Such things never happen, do they?
Jeffrey said: "It may be that Mr. Featherstone published an essay on "The Myth of Peak Oil" precisely at the actual peak."
If true, would anyone be surprised about yet another case of "let's claim the exact opposite of reality" coming from "Washington-based" people?
Published: January 13, 2005 5:22 PM
I believe Peak Oil can be simplified (if true) by simply stating that the amount of "work" that can be performed by energy derived from oil in the future will be diminishing due to available volume and increasing price. Unless another form of energy that returns the same amount of "work" for the same "price" becomes available, each and every one of us will have our "consumption power" reduced - our dollars will simply not buy as much and we won't be able to blame the Fed (for all of it anyway) - we will have to blame resource depletion or overpopulation depending on how one looks at it.
Think about it - where do we get all the "work" to sustain the type of societies we have built? Could we maintain/sustain the society without as much "work" via energy? What percent decrease per capita in the amount of "work" available via energy could the U.S. sustain before society began to have problems? Destroy or disrupt 10% of any system (this is just my peronal theory based on real world observation) for a prolonged time and that system has a very good chance of collapsing and will not function correctly or efficiently without the disrupted 10%.
It is said that the average US energy consumption per capita is the equivalent in "work" (Kcal)as we would get from having approx. 20 human slaves. Not true you think - try cutting that dead tree in your backyard into logs with a hand saw. Try building a shed in your backyard from the trees you cut in your yard while not using ANY power tools. Try excavating a basement with only strong backs and shovels. Try living with NO energy consumption and you will become aware of just how addicted we are to using energy. It becomes easy to see very quickly that all of us have very many "energy slaves" available to us 24/7. Under Peak theory, we will loose many of those "energy slaves" until a comparable or better energy production and distribution system becomes available - maybe not all of them, but a bunch.
I have not seen anyone here claim that they believe a better (more Kcal/unit) or cheaper energy supply will materialize overnight - more importantly that it will be priced the same or less than oil is now or has been in the last 10 years - everyone seems to agree that it will cost more. It's possible we will make a breakthrough in an efficent and inexpensive energy supply, but I don't really believe it will happen within the next 5-10 years.
So, I am still left thinking, higher prices=lower consumption power, and I don't see any wage increases offsetting the rising prices with the amount of skilled and unskilled workers available in Chindia.
Also, there can indeed be extreme volatility in the price of a commodity like oil contrary to what was stated by a few of those posting above - you may not see oil go from 45$ to 100$ in a day, but it could happen in a month or less and it could go back down just as quickly, but overall we know it is on a trend line to steadily increase. When running at full capacity, the smallest of problems or technological advancements can send the price all over the place.
Published: January 13, 2005 5:48 PM
Micheal Clem,
That "Little or no warning" scenario is exactly why Matthew Simmons is so worried about Ghawar - it's the worlds main field, and it's had water pumped into it for a long time, and sooner or later you're going to stop getting oil and start getting water.
Curt,
Information about oil reserves is scarce and expensive. Getting substantial new oil fields takes time, and is uncertain.
Lets take, for example ANWR. Me, I think Alaska in general and ANWR in particular are over-rated - Prudhoe Bay did 300 000 bopd at maximum, and they never found a second field to back ANWR up.
But in any case, if ANWR was explored today, I believe it would take 5 years to get that oil into a gas pump in Boise, Idaho.
Oman saw a terrifying decline in oil production, after their "Christmas Tree" wells sucked all the oil out of thier main field with great rapidity. It took about 2 years to decline by a factor of ten.
So if Simmons is right, we could find the "tacit information" we all hold about Middle East reserves (ie the Arabs have lots of ol) to be wrong.
And even with the market signalling correctly, there will still be major time lags and major transaction costs to pay.
Ian Whitchurch
Published: January 13, 2005 6:00 PM
I was appaled by the conclusion of this article:
"I don't necessarily trust technology, but I do trust human ingenuity. Civilization as we know it will grind to a halt without the energy we derive today from crude oil, and that's in and of itself is motivation enough to make sure that future energy is widely available at prices people can afford."
The best wat to demonstrate that it is such an atrocity to logical thinking might be to paraphrase it like this:
"Life as we know it will grind to a halt without the blood flow we get pumped today by the heart, and that in and of itself is motivation enough to make sure that future heart pumping is available."
If people can still do nothing about the fact that they eventually die (and most probably will never be able to overcome that reality), why on earth will they be able to do anything about the fact that industrial civilization is bound to die ?
Published: January 13, 2005 7:13 PM
A few responses.
First, about supply and demand. News of new discoveries and developments cross my desk nearly every day, some big and some small, from just about every corner of the world (For example, on Thursday, Chevron made a fairly significant find offshore Cambodia, light crude). THAT'S where a good portion of that new demand will be met, all of those new discoveries/developments the continue to come in. I said in the piece there is probably a lot left to develop, such as offshore southern Africa (Angola specifically, but also Equatorial Guinea and Sao Tome) as well as in Russia, though most of the major discoveries and developments in Russia in the last few years have been natural gas. More importantly, the world's oil companies believe that (what I believe is irrelevent). There is still the deepwater Gulf of Mexico from the Mexico side, which may yeild a significant amount of oil. And recovery rates improve as well as methods to inject CO2, Nitrogen, stranded natural gas, water, improve and as reservoir management techniques improve. All of this will take time and a more stable environment and likely higher prices, as everything I've seen from the majors and independents suggest that crude prices are not high enough right now to sustain the massive exploration and development costs needed to make deep offshore plays work. Oil companies have plowed capital into higher return activies -- acquisitions, share buybacks -- and have had to pedal hard just to keep up with rising rates for drilling rigs (especially offshore rigs) and the global steel shortage.
I made no suggestion to deal with the problem because I am not a policy person. If the market works right, and prices can adequately reflect the costs involved, then individuals and companies will make choices based on that. That's what markets do. Outside of waging war to capture resources, I don't much care what the choice or choices are. Yeah, it would probably be wiser to move away from gasoline as a main fuel, to diesel (which has non-petroleum alternatives), but that's not my call. We can, however, watch over the next what happens to those societies and economies which made that switch and which ones did not, and see if it makes a difference.
If oil is significantly finite, that is biomass, then eventually demand will outstrip supply, at least for a short time. If it is not, then the only thing standing between us and crude oil is the cash needed to poke really deep holes. But guess what? When the cost of oil and refined products goes up, then other things will become competitive, and less oil will be used. If the price of diesel distilled from crude oil becomes too expensive, then bio-diesel becomes more than a boutique option. It becomes a real economic choice, enough for people to invest in its mass production. Even with all of the investment made in petroleum, there will be a price at which it makes no sense to burn the stuff as fuel anymore. By that time, other fuels will have presented themselves. Of that I am certain. I don't have to know what they are to know they will. Whether we are talking soybean diesel or sugar cane ethanol or animal dung or something else entirely, it will be more efficient economically than gasoline distilled from $150 per bbl crude. Bet on it.
I understand that as prices rise, there will be problems, and not just economic ones. As natural gas prices spiked into the $8 and even $9 per million Btu last year, power generators that had invested heavily in natural gas turbines when gas was $2.50-$3 per MMBtu were suddenly faced with the problem of gas simply being too expensive to burn. A number of US chemical companies have already relocated chemical operations to place where natural gas is cheaper -- like Europe -- in order to beat the cost.
(You want a looming crisis to worry about, then worry about the natural gas situation. There's a lot of investment going on in LNG in North America right now, but nothing will be up and running until 2008 at the earliest. Between here and there, with declining production across North America, prices are expected to remain fairly high as demand strains and eventually outstrips domestic supply. There have been some significant discoveries in North America, and the development of coalbed methane -- with its attached environmental problems -- are helping. But there are alternatives evolving as well. Coal gassification can provide gas for power turbines that cannot otherwise find its way into gas network for quality reasons. And people will use less for heating and cooling if retail prices are allowed to reflect wholesale energy costs. A big if, given the regulated nature of retail power.)
About Alaska: The GOP Congress is set to approve drilling in ANWR. It probably won't make much difference. Thursday, Chevron pulled its financial support from the organization lobbying for ANWR drilling, and ConocoPhillips and BP have already said they aren't so keen on the whole matter. Only ExxonMobil continues to remain interested. Now, why have these companies pulled? They have global constituencies and public images to care about. BP in particular has carefully crafted an image as a very green oil company. (Y'all remember Chevron's "people do" campaign?) I'm guessing no one (aside from Exxon, which deosn't care about its image) wants the PR headache of drilling in ANWR. Especially if there's not much return on the investment. As it is, the oil companies in Alaska are going to have their hands full fighting Murkowski's decision to administratively alter the tax structure of the Prudhoe Bay satellite fields and raise everyone's royalty payments.
There may be significant oil and gas offshore California and Florida. Absent the technical considerations, both states are governed by Republicans who understand that offshore drilling is political suicide. No one wants it. Therefore, however much oil and gas may lie under those continental shelves is moot.
(However, I relish the prospect of a significant crude oil find in Cuba because it would serve a whole lot of people right. A couple of tiny Canadian firms, and Spanish-Argentine Repsol YPF have Cuba all to themselves. The country produces about 18,000 b/d of really awful crude oil useful only for burning in power plants. For whatever it is worth, Castro claims that two Canadian firms made a significant discovery offshore in the Cuban Gulf of Mexico that could yield 60,000 b/d. Maybe. Repsol sank a lot of money into a deep, dry hole in Cuba earlier this year, Petrobras has sniffed around the place and not been terribly interested. However, it would be amusing to see what would happen here if a major reservoir of crude oil was found in Cuba. If Halliburton can work in Iran, I suppose they can work in Cuba too.)
Water is a problem in old fields too. Most of the big onshore fields in Southern California are 100 years old or close, and most have water cuts of 75% or more. One reports a water cut of 95% (for every 100 barrels of liquid, you get 95 barrels of water and five barrels of crude). Yet they are still producing, and producing far longer than people 40 years ago thought they might.
"Life as we know it will grind to a halt without the blood flow we get pumped today by the heart, and that in and of itself is motivation enough to make sure that future heart pumping is available."
That's why I ride my bicycle 15 miles every day. I don't know if industrial civilization will die; it may just fade away, it may evolve to become something else. I may or may not be around that long. I know I will die, but until then, I am doing everything I can to make sure that future heart pumping is available.
Which reminds me, I have got a bicycle to fix.
Published: January 13, 2005 10:17 PM
Curt Howland, follow me on this one:
How much petroleum based energy subsidy is hidden within all of the energy replacement options you have nominated? How do you fertilise and cultivate your broad acres for massive scales of oil seed production? How do you mine, process and put in place the concrete for your nuclear reactors?
How do each of these alternatives get developed, operated and distributed without petroleum inputs? It would require a completely new technology matrix.
If this new matrix is not physically possible at a scale that can match and also continue to grow beyond today's levels, the price of all alternative energy products will also continue to escalate along with the spiralling price of the necessary petroleum inputs.
If de-coupling from petroleum were possible, what would be the stand-alone EROEI of these fully petroleum-free generation and distribution systems? It has to be better than 1, and with full life-cycle accounting many current options will prove to not make this cut, and is unlikely to be any better than 2. Compare that return to the EROEI of 4-6 that is reliably returned by petroleum by-products.
(Fundamental Peak Oil theory describes this petroleum energy yield as falling markedly into the future. The fact that this EROEI decline has already occurred across specific fields, national reserves (US, North Sea, etc) and is clearly evident as a progressive trend within the global production average clearly evidences progress toward Peak Oil and the implications it carries.)
As EROEI on all of your nominated energy replacement options is so much lower than the current supply, how have you factored the necessary expansion of generative installation to make up that drop in yield. Will we choose to grow motor and heating fuel instead of food? How many nuclear plants will we need and how long will it take to construct them all? Where will that initial energy bubble come from to furnish the system-wide refit construction. Where will they all go?
You will probalby simply defer to the notion tha the market will react to sugnals and provide. This is clearly a faith based outlook, not at all dis-similar to the notion that God will respond to our prayers and bless us.
The fact is that modern economics has developed in a uniquely energy rich world and its imaginings are only relevant to that world. The real bio-physical world, developed and maintained over a much longer period within the omni-present and fundamental principles of thermodynamics, is beyond the psyche of modern economics.The universe does not revolve around humanities whimsical desire. It is only abundant energy that enables modern society such extreme innovation and the consequent sense of invulnerable autonomy over natural process.
One further vital point not yet identified in the discussion thus far: If the energy supply does contract below the quantity needed to fuel continuing economic growth, how can the global debt structure then be maintained? If debt cannot be serviced and maintain its credibility, what happens to the physical sytems that have grown to unprecedented proportions and complexity upon its spectral framework. What is the plan to 'steady state' or contract these physical systems without the eruption of systemic chaos and/or collapse? Martial law springs readily to mind, but surely that avenue must frighten most contributors to this dialogue.
Published: January 13, 2005 10:38 PM
I've as yet only glossed over everyone's comments and the article itself thus far... I think most everything I meant to comment has already been said by Vincent Cook. (Thanks Vincent!)
But I wanted to say that I'm not sure what so many of you here reading mises.org or otherwise self-proclaimed Austrian economists have against the peak oil scenario, as it seems -- from Hubbert's geological studies -- a rational prediction that in the bell-curve of oil availablity, soon it will transition from increasingly available to increasingly scarce. In a price system this translates to oil prices increasing accordingly.
Think of the extremely simple physics problem of throwing a ball into the air and its return to earth due to gravity. In terms of height, at second "0" the ball is at distance "0". (Once upon a time, the earth's oil reserves were untapped, and limited by man's inability to access it.) One day man figured out how to tap into oil and increasingly got better at doing it. This can mirror the acceleration of using your arm muscles to throw a ball into the air. But at some point the gravity field of the earth overcomes your throw and the ball reaches its apex. This is "peak oil". After that, the ball accelerates back to earth due to gravity. This mirrors the availability of oil decreasing because only a finite amount exists on earth. (A throw escaping earth's gravity would be tantamount to colonizing other worlds for their oil supplies; yes, perhaps the universe itself has an unlimited amount of oil.)
At first oil was scarce because of man's limitations, but after "peak oil" oil becomes scarce because it exists in a finite quantity.
Oil costs will rise, and the relative value of oil to other energy sources, such as nuclear material, or solar, or wind turbines, or vegetable oil / biodiesel, will encourage energy consumers to develop more efficient alternative sources.
As Vincent said, when peak oil will happen -- in 5 years or 50 -- is an emperical, not economic, question.
-z
p.s. I'm not very happy with Tsakos Shipping and Trading.
Published: January 14, 2005 3:06 AM
Ok, so now I've earnestly read the article. Wow! What an informative treatment of a multitude of aspects in the oil industry. I give this article a gold star and then some.
But, I find the title terribly misleading. This seems to have little to nothing to do with the science of "peak oil", other than perhaps to say "there are various strata of complexities such that all oil is not extracted equal". That "peak oil" will occur over a range of oils in a range of dynamic markets...
It's always interesting to read about China competing with the U.S. as a superpower.
-z
Published: January 14, 2005 4:15 AM
I think Greg Wood (above) expressed what I wanted to say in a much more articulate fashion!
I think the belief that people will simply accept higher prices and go looking for alternatives is very naive. When the fuel prices go up, the truckers and farmers will blockade the fuel depots as they did in the UK in 2000. Nationwide chaos results in a VERY short space of time. "Even a relatively small number of people can cause widespread disruption"
http://news.bbc.co.uk/1/hi/uk/919852.stm
If the fuel prices can't fall because of supply constraint, the blockades continue and the disruption spreads. You cannot rely on people to all happily 'see the big picture' and troop off to start growing biomass to turn into ethanol.
Published: January 14, 2005 4:56 AM
If the fuel prices can't fall because of supply constraint, the blockades continue and the disruption spreads. You cannot rely on people to all happily 'see the big picture' and troop off to start growing biomass to turn into ethanol.
They may not like it, but isn't that exactly what people will eventually do? People also hate the gasoline prices which have doubled in the U.S., but they still drive (perhaps less or with other adjusted economics). Blockading the ports is like a union going on strike or protesters in the streets -- a war of attrition. Eventually people on both sides will have to go home and feed themselves and their families. Again, because this isn't an arugment over some interference policy that can be changed... it's the reality of nature. (I hear coal diggers in England were pissed when Thatcher closed down a government run mine that employed thousands, but there was no market for the coal they were digging and those thousands were essentially elaborate welfare check collectors.)
And again, that's supposedly one of the boons of a market, that we don't need to convince everyone that "hey, the world is running out of oil!!!" as earth day environmentalists and the planeteers have been doomsaying. Though the smart ones who've examined the science and concluded that investing their resources in alternatives may easily find themselves much more valuable once oil does run dry -- that's their risk to take (both for the alternative energy investors and those investing their resources elsewhere).
The disruption of oil due to high prices will just further increase scarcity and raise prices. At some point someone will be so cold and hungry as to either adapt or die.
-z
Published: January 14, 2005 3:16 PM
Economics and government budgeting have got to be the only places I’ve ever seen “dung� happens to be an optimistic concept. In engineering we take “dung� happens pessimistically and make every attempt to mitigate the effects of unknown events. What I’m writing of is this naïve notion that technology will bail the human race out of every trouble we might get ourselves into. One previous blogger noted that the human race will find some way to cope with declining petroleum resources. Sure we will. Just like the 50 million Chinese starved in the 1950’s, just like the famines in Ethiopia and other African nations. These African nations might actually benefit by the decline in oil resources. The rich nations will no longer have the excess resources to transport food grown with fertilizers derived from petroleum, farmed by tractors powered by petroleum, via semis and ships powered by petroleum products. Therefore, the indigenous species will no longer be waiting for their handouts and might actually breed according to the limitations on their resources. There is no question that the last 100 years have seen an explosion in technology. Unfortunately modern economists and journalists are lured into the panacea of something that is expected. As a generation, we are ignorant of technological stagnation. The explosion in technology also coincides with an exponential increase in oil consumption and a corresponding exponential increase in world population from about 300 million to 6 billion in about 150 years. Population projections indicate further exponential growth in the next century. The faith that technology will allow this population to expand consumption of our resource base is blind. Alternative energy? The only viable solution is currently nuclear, but even uranium has the same finite constraints as oil. Convert goat dung to fuel oil – sure? But, how are you going to get the fertilizer to achieve 4 times the production out of the grasslands that the goat is going to munch on? How much energy are you going to expend processing this dung and what is the net energy of the process? The biological decrease in energy for each cycle is probably not unlike the Keynesian government spending multiplier. Solar and wind are viable solutions – as long as the world population is probably about 500 million to about 1 billion. Realize that petroleum packs such an energy punch because it is the store of millennia of solar energy. One year’s worth of continual use of solar energy is not equal to barrels of petroleum that have taken 100’s of millions of years to be created. The only dispute in this theory is some Russian guys related to the Siberia oil fields. Environmentalists have recently become amusing to me. They seek to treat the symptom instead of the disease. If they had focused their attention on limiting world population the Earth would be much “greener.� This is something Libertarians and Austrians might want to think about too. As the population grows government intervention becomes ever necessary. Some restrictions I have experienced in the past decade that I didn’t have to when I was younger are the result of population growth and the ever present dogma of economic growth – which is even maintained in the face of overstretched resources such as water. The prudent thing to do in the face of all this is to prepare for the worst. Not hope for the best. What’s that Chinese proverb, pray, but prepare?
Published: January 14, 2005 11:37 PM
The foundation concept that remains completely beyond much of the articulated thought presented on this page is that energy cannot be conjured simply because the market escalates its buy price. In tandem to this thermodynamic fact we are looking at the imminent depletion of the most intense energy store ever to be exploited by humanity. This is a store that has, by its own intrinsically unique qualities of energy density and portability, enabled an unprecedented scale and complexity of socio-polical economy and now still continues to enable the maintenance of that economy's systemically necessary expansion
Yet this forum shows no useful regard or even reference to such fundamental physical definition within the developing scenario. Pundits are content to rest upon blithely uncalculated reference to growing what would need to be continents of bio-masse for diesel and constructing myriad nuclear power plants as required.
It is necessary to do some genuine calculation and extrapolate that to any particular level of depletion. The discussion has to stop dreaming in vague terms if it is to be useful and not simply palliative to a doctrine that is struggling against the tide of emerging reality.
How many acres of land and what industrial and natural resouce inputs would be required to supply X-proportion of the transport network with bio-fuels as the current supply of mineral oil depletes?
Factor this calculation by an estimate of how much less productive those rural acres might be without petrochemical inputs of fertiliser and pesticide? What is that land doing now? Can it even be allocated? Will food production also require more area without the 'green revolution' inputs being cheaply or even at all available? What is the net energy return on these productive acres if they each have to supply the energy for product processing and grid distribution rather than be subsidised by the embedded, petroleum fuelled grid as now occurs to the boutique initiatives that we are referencing in our little dream of the future.
Is then the arable land inventory even available to bridge this potential supply gap to both food and energy markets in the face of oil and gas depletion? Consider also the continuing loss of significant amounts of this arable land, as well as loss of supporting bio-physical system space and output, to urban development. Ironic also that the almost irreversible depletion of these vital resources was triggered and is still being maintained by price signals proclaimed by the market.
Given the laws of Thermodynamics, the naive assumption that there will just be enough energy as it might be needed is akin to the unsustainable absurdity of Treasury simply printing currency notes to fund its aspirational or politically expedient spending programs.
J.B.'s illustration above of energy as work is a very apt and useful description of the nature of change that lies ahead. Without a specified and reliable supply of that 'workforce', human innovatIon congruent to our current scale and form becomes an insolvent asset. It loses the means by which to become manifest. With enough energy the market can conjure industrial magic where and when necessary by catalyzing the subsitution of materials and motivating the evolution of processes. However what the market cannot inalienably conjure is that basic energy, even if dire need tags those precious joules with immensely expensive values.
The laws of Thermodynamics transcend the laws of the market. Without an adequacy of that most basic of feedstocks the whole modern economic game stops. Human innovation will then be forced to primarily focus away from technological expansion and toward cultural development that is appropriate to deal with those new, more meagre, but historically far more normal conditions. Austrian economics, along with myriad other socio-economic contrivances, will most likely no longer relate to the realities that press within such new conditions and will consequently be consigned to the dustbin of temporal progression. History may or may not remember these artifacts of human attitude, depending upon how much social composure is taken into the coming transition.
Correspondents here may not like that final prognosis. That's fine by me, but please have the intellectual integrity to DETAIL where the NET energy is coming from to fuel the world of your dreams. Otherwise you're simply in with advocates of the Rapture and such-like - clinging to a faith based outcome of limited probability.
Published: January 14, 2005 11:43 PM
Bret and Greg, thank you for articulating in detail the simple problem of "all resources are finite".
However, I don't have an answer for you about the problem of net energy. Tragically, I admit I'm one of those people with a faith in technological progress that I dream of the singularity and imagine a near future not unlike shirow masamune's ghost in the shell. Perhaps this betrays my relatively young age and enthusiasm.
Likewise, my wild imagination dares hope that humanity is not entirely so stupid that we shall cut the nose to spite the face, and rather insist on free market optimal use of resources to innovate a gateway to the next Kardaschev level of our civilization. As I warned, however, I am attracted to singularity / transhumanist philosophy of progress; and none of this can explain right now how humans will recognize an unrealized alternative energy resource. Maybe the answer will be found in superstrings or Kaluza-Klein space.
-z
Published: January 15, 2005 3:22 PM
So now economists are supposed to play scientist? I'm certainly glad to see some people who apparently have more expertise in petroleum and energy on this forum--they can supply scientific facts that are relevant to this problem. But scientists playing economists are almost as misguided as economists playing scientists.
Economic reality is as much a fact of life as the Law of Thermodynamics. Even if we accept the idea that tapping fossil fuels has given our society a boost that can't be replicated or replaced by other energy sources, the economics of the situation doesn't change. Prices still change to reflect supply and demand. Declining petroleum will cause increasing prices, and political aberrations and desires aside, people will respond to those prices accordingly.
It's possible that society will have to make drastic changes if human ingenuity is unable to come up with efficient alternative fuel and energy sources. This is what you're referring to when talking about the "modern economic game", and not economics itself (I hope). But change itself is a fact of life, only the degree of change has differed. It's quite unlikely, however, that we won't have warning and time for adapting, or that it necessarily has to be devastating to our civilization.
The main threat to realistically dealing with the problem remains the political restrictions that stifle research and development into alternative fuels and energy as the cost of fossil fuels increase. Political intervention distorts ecnomic information.
Alchemists used to search for the way to turn lead into gold, but in the process, they discovered basic facts of chemistry. Many mainstream economists and most politicians are still searching for that "free lunch", how to get something for nothing, but there are still basic economic truths that humans cannot ignore just because they wish to.
Published: January 15, 2005 4:36 PM
The EE Times reported in Nov that a company called Sterling Energy Systems has developed an 11 meter parabolic reflector that tracks the sun and focuses it's heat on a stirling engine that turns an A/C generator. A single dish generates 25kW, enough energy for 7 homes. A 100 mile by 100 mile farm would supply the needs of the entire country. I think this would make a good distributed energy system though. Neighborhoods could provide their own power, reducing the number of transmission lines needed. This could be the technology that steps in when oil prices start to rise.
--steve
Published: January 15, 2005 7:07 PM
Charles,
I probably scan the same data about discoveries that you do, and there are significant finds being made - but they tend to be in the hundreds of mmbls, rather than the old days of billion-barrel discoveries, and thats important when the world is using about 2 billion barrels a month.
A while ago, I did some modelling of Chinese energy demand, modelling it as a rural sector of 7* Bangladesh and an urban secotor of 4x South Korea circa 1980, and then plugged South Korean economic growth and per-capital oil demand into that.
Basically, I crunched out about a mmbl/day of extra Chinese demand, for each of the next ten years or so (South Korean per capita oil demand went up a lot in the 1980s).
A million barrels a day represents 20 decent offshore wells - and that just covers 'marginal' Chinese demand, over and above existing world demand.
Ian Whitchurch
Published: January 15, 2005 7:07 PM
Michael A. Clem,
perhaps you can tell this scientist exactly how the world economies will be capable of "business as usual" (ie. to "grow" exponentially, endlessly, to support out debt based money system) when the basic feedstock for economic output, energy, will be in decline?
Does the "change" to which you refer include the destruction of our debt based, fiat money, system? Is so, how will we avert the "devastating" effects of this?
Published: January 16, 2005 6:12 PM
First, I'll say "you're welcome" to everyone who has thanked me for my previous posts. I also appreciate all the interesting remarks that I have read here.
I wanted to briefly respond to a point that Greg and others have made. They stress that increasing energy prices won't bring forth energy substitutes in sufficient quantity to replace declining hydrocarbon production, let alone meet the growing energy demand from China, etc. They go on to accuse Austrian economists of being apostles of unsustainable growth and obscurantist opponents of physics.
The "thermodynamics" criticism misrepresents Austrianism. There is nothing in Austrian economic theory which says that the economy must grow forever in defiance of the physical availability of energy. Indeed, even Mises expressly acknowledged Malthusian population concepts in his work (see for example his discussion of the law of returns in Human Action); the idea of physical limits to production is an integral part of Austrian thinking.
For my part, I previously said that human population and/or per capita energy consumption might have to decline in a transition to a post-hydrocarbon world. This Hubbert-friendly statement is consistent with both economics and thermodynamics; it is not contradicted by anything I have found in the theoretical writings of Mises or other Austrian school economists.
Published: January 16, 2005 6:14 PM
Okay, I get angry sometimes, and don't make my points as well as I could. Vincent answered pretty well, already, but I guess I should still put in a word for myself.
I was trying to say that you're confusing the current economy with economics. The current economy is, obviously, the current market and business activity. Economics, however, is not tied into any particular economy and holds truths that would apply to any economy.
Since our current economy is unfortunately tied into various government interventions, including central banking, it cannot remain the same, even if a decline in petroleum doesn't occur.
The concept of "endless growth" is a concept of businessmen (or their critics), not economics. While the potential for wealth creation is infinite, at any particular point in time it is necessarily limited by available resources and productivity. And while control of the money supply is an important aspect of an economy, "wealth" is still goods and services, and money simply represents those goods and services. So, at least in one sense, money (fiat or otherwise) is secondary to actual goods and services, and thus, secondary to our concern about fuel and energy production.
Yes, our "economy" will change, and it could change drastically, I won't deny that. My main point is that it's not likely to happen suddenly, without sufficient warning for humans to adapt to the change, and I say this even granting that governments and politicians will likely try to deny the necessity of change. Economic consequences will be unavoidable.
As for Pollyann-ish faith in alternate energy development, I was reminded of Leonard Read's essay, "I, Pencil", (http://www.econlib.org/library/Essays/rdPncl1.html)
wherein he stresses not just the division of labor in the marketplace, but the division of knowledge, as well. While this view might scare some people about the helplessness of the individual, the decentralization of knowledge can also be viewed as reassuring.
If the handful of people who post on the Mises blog couldn't make a pencil, much less most of the other common goods and appliances we all have, it's not surprising that we few don't have the answer to the energy problem. And yet, pencils and all these other goods and such are made, in great quantities, every year. Is it "faith" to expect pencils to be available every year, at least as long as people want to buy them?
Who knows who will come up with efficient energy alternatives? Or how many people it will take? Or even what forms such alternative sources will take? Perhaps, as has already been suggested, we won't discover any radically new or efficient energy source, but will simply incrementally increase our efficient use of current sources. But we do know that, if petroleum declines, there will be ever-increasing economic incentives for efficiency and alternatives, and a ready market for them. If that's "faith", then make the most of it.
Published: January 17, 2005 1:34 PM
The myth of "peak oil" article discussed commodity markets, various grades of crude oil, markets, but did not prove that peak oil is a myth.
The peak oil thesis is that a finite resource being consumed at an exponentially increasing rate will reach a peak output and then decline until the resource is depleted.
The earth is a closed system with respect to mass. Oil combusted is not reusable. Exponentially increasing growth in burning oil means that every doubling time will consume more than had been used up until that time.
To prove that this is a myth the mathematics must be proven false or that the total mass of petroleum available is infinite. The article adresses neither issue.
Counter-myths of unknown sources of energy magically arriving just in time to replace oil as an energy source do not make peak oil a myth.
Biomass "oil" will be faced with the problem that the amount of land avilable is finite and food and fodder will compete with biomass for land available. Agriculture has been described as a process which turns petroleum into food.I have read that it requires 8 oil BTUs to capture 1 solar BTU. Oil is also used as the feedstock to produce fertilizer for growing biomass.
The author says that scientists and government are incapable of contributing to solving the energy problem. Nuclear energy, the only new source of energy developed in the past 100 years, was produced by the Manhattan Project during WW II. This was a collaborative effort between government and scientists.
Deregulation, building more refineries, more oil burning power plants, will not solve the energy crisis but will only hasten the arrival of the oil peak.
Published: January 17, 2005 1:52 PM
The myth of "peak oil" article discussed commodity markets, various grades of crude oil, markets, but did not prove that peak oil is a myth.
The peak oil thesis is that a finite resource being consumed at an exponentially increasing rate will reach a peak output and then decline until the resource is depleted.
The earth is a closed system with respect to mass. Oil combusted is not reusable. Exponentially increasing growth in burning oil means that every doubling time will consume more than had been used up until that time.
To prove that this is a myth the mathematics must be proven false or that the total mass of petroleum available is infinite. The article adresses neither issue.
Counter-myths of unknown sources of energy magically arriving just in time to replace oil as an energy source do not make peak oil a myth.
Biomass "oil" will be faced with the problem that the amount of land avilable is finite and food and fodder will compete with biomass for land available. Agriculture has been described as a process which turns petroleum into food.I have read that it requires 8 oil BTUs to capture 1 solar BTU. Oil is also used as the feedstock to produce fertilizer for growing biomass.
The author says that scientists and government are incapable of contributing to solving the energy problem. Nuclear energy, the only new source of energy developed in the past 100 years, was produced by the Manhattan Project during WW II. This was a collaborative effort between government and scientists.
Deregulation, building more refineries, more oil burning power plants, will not solve the energy crisis but will only hasten the arrival of the oil peak.
Published: January 17, 2005 2:07 PM
yes
Published: January 17, 2005 2:25 PM
Exponentially increasing growth in burning oil means that every doubling time will consume more than had been used up until that time.
But as has already been pointed out, the cost of oil would increase, reflecting the decline of available oil, so an exponential increase in the consumption of oil won't occur. It wouldn't be economically sustainable. People simply couldn't afford it.
Inevitably, at some point, the cost of oil would be higher than the cost of alternative fuels, and consumption of oil would be dramatically decreased.
Published: January 17, 2005 2:33 PM
Oh this is just silly. Oil is a renewable resource; the unrenewable part is energy. You can make any hydrocarbon product from any hydrogen and carbon source given energy, and we know how to do that today... When oil itself becomes too expensive, we'll use coal and methane for diesel (Sasol does this today) and gasoline synthesis. When coal becomes too expensive, we'll use methane hydrates. When thats not appropriate we can use limestone and water, if we're still sold on hydrocarbons then.
The energy is avaliable in our time horizon... because really it doesn't make sense to talk about economies thousands of years in the future when the entire world is unrecognizable in every possible way. There is enough nuclear fuel for millions of years, and sometime before the thorium is gone we'll figure out nuclear fusion and cheap solar power.
Oh sure, eventually we run out of energy and materials, but from all the idle commentary here, you would think its sometime in the next century or perhaps next millinium.
Not a chance. It will take more than a thousand years to suck the galaxy dry. Maybe we'll figure something else out before all the juice is gone, but we won't be eating soylent green in the next thousand years.
Published: January 17, 2005 5:01 PM
The article on the myth of peak oil did not disprove the thesis.
Peak oil is based upon three concepts:
1 The amount of oil available is finite
2 After combustion oil is not recyclable
3 A resource being used up at an exponentially increasing rate will reach a peak output and afterwards the supply will decrease to ultimate depletion.This is the mathematics of compounding.
The article discussed commodity trading, grades of crude oil, markets, but did not address any of the basic concepts of peak oil. Instead there is an appeal to the magical appearance of substitute sources of energy just in time to replace oil.
The blanket statement that scientists or government cannot contribute to development of new energy sources is refutable. Nuclear energy, the only new energy source developed in the last hundred years, was a product of the Manhattan project in WW II. This was a collaborative effort between scientists and government.
Biomass as an energy source will pit land area used to grow food and fodder against land used for biomass. Land is a finite resource. Modern agriculture is described as the process of turning petroleum into food. I have read that it requires 8 oil based BTUs to produce 1 BTU of food. The objective of biomass fuels would require 1 oil BTU to capture 8 solar BTUs.Part of the oil input is in the form of fertilizer.
Appeal to water and limestone as an energy source is naive or disengenuous.
Deregulation, building more oil refineries, or power plants will hasten the arrival of the peak oil point.
Published: January 18, 2005 8:22 AM
The article on the myth of peak oil did not disprove the thesis.
Peak oil is based upon three concepts:
1 The amount of oil available is finite
2 After combustion oil is not recyclable
3 A resource being used up at an exponentially increasing rate will reach a peak output and afterwards the supply will decrease to ultimate depletion.This is the mathematics of compounding.
The article discussed commodity trading, grades of crude oil, markets, but did not address any of the basic concepts of peak oil. Instead there is an appeal to the magical appearance of substitute sources of energy just in time to replace oil.
The blanket statement that scientists or government cannot contribute to development of new energy sources is refutable. Nuclear energy, the only new energy source developed in the last hundred years, was a product of the Manhattan project in WW II. This was a collaborative effort between scientists and government.
Biomass as an energy source will pit land area used to grow food and fodder against land used for biomass. Land is a finite resource. Modern agriculture is described as the process of turning petroleum into food. I have read that it requires 8 oil based BTUs to produce 1 BTU of food. The objective of biomass fuels would require 1 oil BTU to capture 8 solar BTUs.Part of the oil input is in the form of fertilizer.
Appeal to water and limestone as an energy source is naive or disengenuous.
Deregulation, building more oil refineries, or power plants will hasten the arrival of the peak oil point.
Published: January 18, 2005 8:22 AM
The article discussed commodity trading, grades of crude oil, markets, but did not address any of the basic concepts of peak oil. Instead there is an appeal to the magical appearance of substitute sources of energy just in time to replace oil.
The substitute energy source is nuclear. Theres enough economically recoverable uranium and thorium to run the global demand for energy for nearly a quarter billion years.
Appeal to water and limestone as an energy source is naive or disengenuous.
I never suggested water and limestone are energy sources; They are raw materials for hydrocarbon products in the absense of fossil fuels. The energy source is nuclear. You crack the carbon out of the limestone, as CO if you can, and hydrogen out of the water for synthesis gas, pass this gunk over catalysts and you get diesel fuel. It takes energy to crack, but I in no way assumed it was magically coming from nowehre.
Published: January 18, 2005 2:44 PM
"The substitute energy source is nuclear."
--Dezakin
Caltech vice provost and professor of physics and applied physics David Goodstein agrees, but he doesn't seem as optimistic as Dezakin:
"As things stand today, the only possible substitutes for our fossil-fuel dependency are light from the sun and nuclear energy. Developing a way of running a civilization like ours on those resources is an enormous challenge. A great deal of it is social and political...But there are also huge technical problems to be solved."
http://pr.caltech.edu/periodicals/CaltechNews/articles/v38/oil.html, see also http://pr.caltech.edu/periodicals/CaltechNews/articles/v38/sage.html
Published: January 18, 2005 4:19 PM
"Theres enough economically recoverable uranium and thorium to run the global demand for energy for nearly a quarter billion years."
I'm not sure about thorium, but other estimates that I've seen put uranium supply--if used to fuel current energy demands as a complete replacement for oil & gas--at between 50-75 years.
Perhaps more uranium exists further beneath the Earth's crust. I would imagine that such areas will be about as economical to tap as the last drops of oil will be.
Published: January 18, 2005 4:58 PM
Simply saying that a resource will be used up at an exponentially increasing rate doesn't make it true. What part of "increasing cost" do you not understand? How much are you, personally, willing to pay for a gallon of gasoline? $5? $10? $25? $100? At what point does the cost of gasoline get expensive enough for you to stop buying and using so much of it and start conserving or seeking transportation alternatives? Prices change to reflect both demand and supply, therefore, "the mathematics of compounding" cannot remain constant, especially once the supply of the resource starts declining.
Published: January 18, 2005 8:23 PM
I'm not sure about thorium, but other estimates that I've seen put uranium supply--if used to fuel current energy demands as a complete replacement for oil & gas--at between 50-75 years.
Thats very true: for light water reactors using the once through fuel cycle with uranium recoverable from known high grade ore bodies at todays price of uranium.
(Oh, thorium is about three times as plentiful as uranium in the earths crust.)
Perhaps more uranium exists further beneath the Earth's crust. I would imagine that such areas will be about as economical to tap as the last drops of oil will be.
Indeed the imagination runs wild then:
http://www.world-nuclear.org/info/inf75.htm
http://www.uic.com.au/nip75.htm
http://www.world-nuclear.org/sym/2001/delfrari.htm
Nuclear energy's price is gated not on fuel, but on infrastructure. A tenfold price hike in uranium only marginally effects the price of electricity. Indeed, uranium is economically recoverable from granite and even seawater at modestly more expensive electricity prices.
"At ten times the current price, seawater becomes a potential source of vast amounts of uranium"
Indeed, even sedimentary rock is a source of uranium and thorium. It is not analagous to petroleum.
Caltech vice provost and professor of physics and applied physics David Goodstein agrees, but he doesn't seem as optimistic
Someone else who wants to bet against Simon. There are no technical issues preventing using entirely nuclear power for the energy needs of man. All fuel can be synthesized at an expensive premium, though not a crippling one.
Though it is almost a foregone conclusion there will be technological developments that extend the time horizon of civilization further still than my quarter billion years.
Published: January 19, 2005 12:17 AM
Good points, thanks for the info.
Published: January 19, 2005 12:30 AM
This dialogue just gets curiouser and curiouser.
Dezakin
Can you please enrol with the majority of the other economists for a quick class in physics 101. The session will define the fundamental difference between energy profit and financial profit. It is clear this professional group have not yet noticed and are not at all fluent with this vital distinction.
Mr. Clem
You are quite probably right that energy units will not be bought at prices that people cannot afford, therefore causing those units to experience a reduced consumption rate (although some players consume at any price - ie expanding military acting to secure wider dominion over shrinking resource bases. Please don't call that a public policy externality to your economics. such 'service delivery' haunts the core of such economics - ie seeing all things only as a measurable extrinsic value destined for privatised profit making)
Those output units most certainly will not be produced at energy input levels that outstrip the energy return. It will become impossible as energy becomes too physically scarce to continue to provide hidden production subsidies, REGARDLESS OF MARKET PRICE
Without this expanding energy supply either available or affordable in volumes that can furnish growth, can you please outline your plan for avoiding global debt collapse and the concomitant end of the world as we know it?
You say the market gives good warning. Can you please estimate how long it will take to get your plan into place ahead of that debt collapse? Is there anything I can do to help? I am sure the deadline will be tight as I can see these signals now, but funnily enough, economists can't. They are arguing that the rising price of oil is not permanent and has no connection to the geological fundamentals of depletion that have been found to be sound in on ground application so far without exception. Perhaps you might outline what a price signal does in fact look like such that it does trigger remedial market response rather than bland denial
Pedant
Thankyou for sharply distinguishing the fundamental flaws in the article itself. Possibly it was a good article that had been given the wrong title. Taken as a response to the title as a set exam question I 'm afraid it has to be given a fail grade.
Thankyou for also so succinctly summarising the resource improbabilities facing these common aspirations for energy system evolution. Similar basic arithmetic can also be executed upon the nuclear dream, illustrating it has no hope of getting the necessarily enormous and ever-expanding capacity roll-out onto the ground, either in time, or within the investment bounds of the energy supply.
Published: January 19, 2005 8:50 AM
Can you please enrol with the majority of the other economists for a quick class in physics 101. The session will define the fundamental difference between energy profit and financial profit. It is clear this professional group have not yet noticed and are not at all fluent with this vital distinction.
I guess in your great wisdom you see it fit to revoke my degree. I've detailed where the energy comes from. There isn't an energy loss in extracting uranium from low grade ores. You presume I don't know what I'm talking about? Did you even check the citations?
Published: January 19, 2005 10:30 AM
“Oh sure, eventually we run out of energy and materials, but from all the idle commentary here, you would think its sometime in the next century or perhaps next millinium.� -Desakin.
Dezakin, thank you for the citations.
What about this one: http://www.world-nuclear.org/opinion/mcnamara.pdf (from the World Nuclear Assocation used in 2/3 cites you gave)?
From the section, “Getting through the Winter:�
“The effects of political instability are clearly seen in the historical parts of Fig 2. [The Association for the Study of Peak Oil (ASPO) 2004 chart for oil and gas liquids, captioned, “The peak of conventional oil supply is now predicted to be at 2008. The US, EU, Indonesia, and many others will be almost out of oil by 2020.� Cited with approval by McNamara. -C] The energy supply and economic variations in decline will be far more extreme without a huge political effort. Conservation is the only way to reduce the impact of the decline and extend supplies while new energy systems are put in place. Transport policies must recognise the Energy Winter: Cancel all new roads and airports, stop production of SUVs and their spares, encourage virtual travel by internet wherever possible, electrify all railways, and eliminate non-essential world trade in favour of local independence. Investors should avoid unsustainable enterprises. Natural gas should be reserved by policy and legislation, for transport, not for electricity. Building and zoning regulations must focus on conservation and minimum travel. Manufacturers should be penalized for designing goods to fail quickly. Change is good for business, though not for sustainability. Scrapping SUVs in favour of safer, more efficient vehicles will be good for GM, and what is good for GM ….� [ellipsis in original -C] --The Coming Energy Winter and the Future of Fusion, Brendan McNamara, Leabrook Computing, Bournemouth brendan@leabrook.co.uk
Goodstein, ASPO, and others are practically ringing alarm bells. Now your own man McNamara writes of a significant “impact� and of the need for some drastic responses. And yet you answer that the conversation is “silly� and “idle�; that technological developments are “almost a foregone conclusion� (there’s that inevitability again); and, by your tone, you imply that those developments will be rapid enough to seamlessly bridge any unfortunate energy shortages during the transition to nuclear.
Why not even concede the possibility of a difficult transition?
Published: January 19, 2005 3:12 PM
Now your own man McNamara writes of a significant “impact� and of the need for some drastic responses.
McNamera isn't 'my' man. The links I posted were demonstrative of the supply of nuclear fuel, and not necisarilly because I share policy objectives in the opinion section. Lets not reduce the debate to tribalism.
And yet you answer that the conversation is “silly� and “idle�; that technological developments are “almost a foregone conclusion� (there’s that inevitability again);
It is inevitable, but for the sake of argument I assume that technological development has stopped. I honestly don't believe that nuclear fission will be the primary source of energy 300 years from now. I only use nuclear energy to demonstrate that even if technological progress halts completely, human civilization has enough energy for the furthest foreseeable future.
But do you honestly believe we're near the apex of human knowledge? Humanity will tear out the heart of the sun before its cards are spent.
and, by your tone, you imply that those developments will be rapid enough to seamlessly bridge any unfortunate energy shortages during the transition to nuclear.
Because they've allready happened. We know how to turn coal into diesel fuel and gasoline. We have the technological ability to turn limestone, water, and nuclear energy into diesel fuel and gasoline to fuel our transportation infrastructure when the coal is gone. These are solved technologies.
Why not even concede the possibility of a difficult transition?
Now, I dont assume such transitions would be painless. If oil shot to 300 dollars per barrel because suddenly the oil wells ran very dry, it would likely trigger a global depression lasting at least five years, because the infrastructure for coal liquifaction and nuclear energy takes time and energy to build.
But whether the transition will come suddenly or gradually is a different subject altogether. My vote is on the gradual drift towards nuclear and solar energy.
Published: January 19, 2005 4:53 PM
Dezakin
The only degree of yours I am aware of through this forum is the degree of your misunderstanding regarding the fundamentals of energy.
You say there is no energy loss in extracting uranium from its ore. Really. What do you call the energy inputs that are committed to the mining, processing, distribution, generation, plant construction and decomissioning and waste handling phases of the process? Externalities?
Of course the energy cost of waste handling is hard to assess because we are not yet even close to an adequate answer to the issue. The inadequate methods available though are all highly energy intensive and, adding to their inadequacy, only deal with end of chain waste. No-one is yet remotely interested in residual mine site contamination. Can this continue to be ignored if primary extraction is ratcheted up exponentially as you would have it be? Or do we just cram our closet full of externalities so that our world view can continue to look plausible?
Like many people, you do not recognise the categorical differences between uranium ore and liquid hydrocarbons in regard to their readiness to work, and thus their overall efficiency in yielding quantities of NET energy. You are effectively equating a banana with a pomegranite in the ease and efficiency of sustaining oneself. (If you don't know what a pomegranite is, it is because they do not work well as food for a fat, frantic and rapacious culture and have not been widely commerialised.) You rate the power potential of Uranium without any calculation of the substantive energy costs necessary to squeeze its economic lifeblood from the stone (now being masked by abundant cheap oil inputs).
With regard to the economist's Rapture, that human innovation will invariably lift us up above this and any future problem, it is pertinent to note that both nuclear and modern-scale 'renewable' processes have developed and remain utterly dependant within the fossil fuel envelope. There has been zero discovery or development that has yet de-coupled or even explicitly sought to decouple that nexus. Oh that's right. The market signals aren't there yet.
Net energy accounting is the challenge that stands ahead of understanding the situation and the reality of future options. Why are economists so bad at it? When this profession finally wakes up to how fundamental and precious energy actually is within productive systems they will hopefully shift to base their economic modelling around a ledgering and auditing of the energy units moving through and between those systems and measure profit in terms of net energy positions and dividends. This can only occur though if their current mad advice doesn't prevail long enough to kill us all first
Published: January 19, 2005 6:55 PM
Greg Wood, you asked, "How do each of these alternatives get developed, operated and distributed without petroleum inputs? It would require a completely new technology matrix."
That is completely incorrect, because it assumes that at that point there would be no petroleum.
There will never be "no petroleum", just as there is now "whale oil" although no one uses it. Yet 150+ years ago, "whale oil" was considered a critical resource.
Petroleum will not vanish, it will simply slowly rise in price until its price crosses the price of alternatives. Whatever those alternatives are. And when petroleum isn't being used for motor fuel, there is all that much more left for fertilizer.
You can discuss the petroleum higher order goods that go into the "alternatives" to motor fuel all you want, I don't mind. Yes, if petroleum supplies decrease the prices of those higher order goods will increase too. But for every use of petroleum there are alternatives that, today, cost more. As I said before, as each of these uses of petroleum are priced out of use, there will be that much more petroleum left over for the uses for which petroleum is still less expensive than any alternatives.
And because of this decreasing use, even though the price for petroleum will be higher than it's "peak" supply price, what is left will last longer, and longer, until there is no use left for which petroleum is worth extracting.
That's it.
Published: January 19, 2005 9:18 PM
RE: "First, whatever ends up replacing petroleum will come in its own good time, later than we'd like but probably sooner than we expect. It will come because it stores energy and power better than gasoline does and more cheaply to boot..."
This is an incredibly asinine statement. First up, energy has to exist before it can be stored. The energy stored in petroleum ultimately comes from the sun and required millions of years to finally end up there. Energy sources have to get their energy from some where and the facts are that there are no other energy sources on this planet that have a fraction as much extractable energy as petroleum does. Not nuclear, nor solar, nor wind, etc. When the oil runs out we, the human race, are basically screwed. The only choice will be to figure out how to live with orders of magnitude less working energy available per person, period. All this talk about economically motivated discovery of new energy sources is pure stupidity on the part of people that have no concept of science and what is physically possible... and this is the real danger and tragedy of the situation.
Published: January 19, 2005 9:26 PM
The only degree o