How much oil are we going to need? It might be more than you think.

[JohnyCanuck]

Economists, in general, seem to insist that there can be no viable economic system that can provide society an acceptable standard of living and full employment without continuous economic growth. When we stop having economic growth for more than short periods of time we have recessions and even, in the worst cases, economic depressions with all the human misery that entails, such as widespread unemployment, homelessness, family breakups, and malnourishment (or even in extreme cases starvation).

In tandem with continuous economic growth over the years we have had a continuous growth in oil consumption as well. This makes sense as oil is our civilizations prime source of energy and it takes vast amounts of energy to fuel modern industrial economies. Over the past 15 years or so world oil consumption has increased on average around 2% per year.

Now, on the surface, a 2% per annum growth in consumption doesn't seem like it would be that significant an amount.However there is one implication of exponential growth in consumption of a resource that most people are quite unaware of, and that is, starting at any point in time, if you have a continuous exponential growth in consumption of a resource you will reach a point in which consumption of that resource has doubled. Now here is the real kicker: for each doubling period, the amount of the resource consumed in that single doubling period is greater than all that resource consumed in history up to the start of the doubling time. So what is the doubling time in oil consumption with a 2% per annum growth pattern? It's easy enough to figure out. You divide the number 70 by the percent increase in consumption per year to get the number of years it would take for consumption to double. So 70/2 = 35. Therefore if we start today in April 2008 and world oil consumption continues to increase at 2% per year, world oil consumption would be twice what it is today by April 2043. Furthermore the amount of oil consumed in that single 35 year period from 2008 to 2043 would be more than all the oil consumed in history from the start of the oil age in the late 1800s to 2008.

If, due to the increasing demand for oil from China and India etc, world oil consumption increased from 2% to 3% per year, the doubling time would shrink to 23.3333 years (70/3).

If you think I've got to be kidding that in one 35 year doubling time we could consume more oil than we have consumed in history in the (approximately) 150 years between the start of the oil age (the first commercial oil wells came on stream in the early 1860s) to the current year 2008, you can easily verify for yourself how it works with a chess board and a few grains of rice. Put one grain of rice on the first square of a chessboard and then double the amount of grains on each succeeding square. Therefore, put 2 grains on the second square, 4 grains on the third square, 8 grains on the 4th square. 16 grains on the fifth square etc.

Now note that in the doubling from say square three to square four we went from 1+2+4 = 7 grains of rice on the chess board to 15 grains of rice on the chessboard as we added 8 grains to square 4. So in that one doubling we had to use more grains of rice than previously existed on the entire chessboard. So for those who assure us there is lots of oil, if only the oil companies and the OPEC countries would stop hoarding to jack up prices and stiff us, just be aware that you, by implication, must believe that there is enough oil available to easily provide the world for the next 35 years with more oil than it has consumed in the last 150 years. If you qualify the idea that there is lots of oil, by saying that there is lots of oil at current consumption rates, then explain how you are going to maintain economic growth and the continuing industrialization of China and the rest of Asia without growing oil supplies, or alternatively explain how world economies are going to be changed to a model that does not require continuous economic growth. Keep in the mind that the news making "big find" recently announced by a Brazilian oil company of a new deep water off-shore field was announced as up to 33 billion barrels. That is roughly the amount of oil, the world uses in slightly over 1 year, and it lies in very deep water and very deep underground, all of which will it make it difficult and very expensive to produce compared to traditional, shore based oil.

If you say that we will switch to alternates to take the place of oil, be aware that not only do we have to provide enough alternative energy sources to replace the current existing demand for oil, but also to provide for an overall per annum increase in world energy equivalent to a 2% per annum increase in energy that would normally be provided by oil (or switch our economies to a steady state model instead of a perpetual growth model).

Some more resources:

Watch the presentation by retired physics prof. Albert Bartlett on exponential growth and resource consumption here (Real Player format only, but audio only MP3 also available): http://globalpublicmedia.com/dr_albert_bartlett_arithmetic_population_and_energy

Here is a link to a paper prepared by Bartlett which covers much of the same ground as his lecture: Forgotten Fundamentals of the Energy Crisis.

Here is a presentation on Peak Oil from www.theoildrum.com :

Peak Oil Overview - March 2008 (Pdf and Powerpoint available)

Posted by Gail the Actuary on March 13, 2008 - 10:57am
Topic: Supply/Production
Tags: eia, eor, FSU, introduction, oil reserves, opec, overview, peak oil, peak oil presentation

Preliminary data regarding oil production through December 2007 is now available from the US Energy Information Administration, so it is a good time to put together an updated summary of where we are now with respect to peak oil. The major themes of this presentation are

The US oil story
The world oil story
Five myths

SNIP

Comment: If one analyzes the reserves for OPEC countries, one very quickly comes to the conclusion that the published numbers are unreasonably high. This is the story: In the early 1980s, OPEC oil countries were all vying for high quotas. To get those high quotas, they believed that publishing high reserves would be helpful. One by one, OPEC oil countries raised their reserve estimates, in an attempt to make it look like they had more oil, so deserved higher quotas. To further this illusion, they kept the reserve numbers at the new high level, even when oil had been pumped out, and no new oil had been found.

The practice has continued for years. OPEC leaders found that by overstating their reserves, they gained new respect, both within their own countries and abroad. They also found that the practice was very easy to do, since no one is auditing the reserve numbers they provide.

SNIP

Somehow, US textbooks and newspapers have not figured out the problem with OPEC reserves. They continue to quote huge "proven reserves" for most of the OPEC countries. The word proven adds credibility to the numbers, suggesting that somehow, the reserves have been proven to some authority, when nothing could be further from the truth.

The United States Geological Service (USGS) has added further to the confusion. It has taken the absurd reserves published by OPEC, and made calculations based on US development patterns suggesting that OPEC reserves may, in fact, be low. USGS publishes its even higher estimates, confusing the situation further.

http://www.theoildrum.com/node/3726#more

Blogger John Micheal Greer's blog, (http://thearchdruidreport.blogspot.com">The Archdruid Report) deals with peak oil and its implications for our way of life.

Business As Usual

By John Michael Greer

SNIP

What we most need to realize at this juncture is that the way things have been in the world’s industrial societies over the last century or so is in no way normal. It’s precisely equivalent to the new lifestyle adopted by winners of a lottery whose very modest income has suddenly leapt upward by $1 million a year or so. After a few years, the lottery winners might well become accustomed to the privileges and possessions that influx of wealth made possible, and children growing up in such a family might never realize that life could be any other way. The hard fact remains, though, that when the lottery money runs out, it runs out, and if no provision has been made for the future, the transition from a million dollars a year to the much more modest income available from an ordinary job can be very, very rough.

The huge distortions imposed on the modern industrial nations by the flood of cheap abundant energy that washed over them in the 20th century can be measured readily enough by a simple statistic. In America today, our current energy use works out to around 1000 megajoules per capita, or the rough equivalent of 100 human laborers working 24-hour days for each man, woman, and child in the country. The total direct cost for all this energy came to around $500 billion a year in 2005, the last year for which I was able to find statistics, or about $1667 per person per year.

SNIP

All this has a pressing relevance to the present situation, because we’re running out of the energy resources that make it possible for every man, woman and child in America to dispose of the equivalent of $512,811 in labor every year. It’s as though the 30 billion invisible guest workers whose sweat powers the American economy are quitting their jobs one by one, and moving back home to the Paleozoic. When the process completes itself, and the long curve of depletion finally sinks low enough that it’s no longer economically worthwhile to extract the remaining dregs of fossil fuel from the ground, the amount of labor each of us will have at our disposal will be much, much less than it is today.

With any luck, it’ll be more than 1/308th as much – we know more about collecting and using energy than the Romans or the Chinese did, and may well be able to get enough renewable energy sources up and running in time to matter. Still, it’s mere wishful thinking to assume that the universe is obliged to give us another vast windfall of cheap abundant energy to replace the one we’ve wasted so enthusiastically over the last few centuries, and none of the proposed replacements for fossil fuels seem likely to live up to their billing. On a finite planet subject to the laws of thermodynamics, claims that the trajectory of industrialism must inevitably continue into the future are statements of faith, not of fact. (emphasis added)

http://thearchdruidreport.blogspot.com/2008/04/business-as-usual.html

Centre for the Advancement of the Steady State Economy promotes the idea of moving to a steady state economy that does not require exponential growth, not only because of overconsumption of oil, but because of overconsumption of all other resources as well.

Why is economic growth a threat to the environment?

The economy exists within the ecosystem. This fact is overlooked in business and economics textbooks, where the ecosytem is viewed as a subsystem of the economy, and the economy itself is portrayed as a circular flow of money between firms and households. The production of goods and services entails the conversion of natural resources, or “natural capital,” into consumer goods and manufactured capital. This explains why there is a fundamental conflict between economic growth and biodiversity conservation. Furthermore, pollution is an inevitable byproduct of economic production. The degradation of the environment as a result of economic growth occurs in many ways, but in general, economic growth leaves a larger ecological footprint.

Why is economic growth a threat to economic sustainability, national security, and international stability?

To grow, an economy requires more natural capital, including soil, water, minerals, timber, other raw materials, and energy sources. When the economy grows too fast or gets too big, this natural capital is depleted, or "liquidated." To function smoothly, the economy also requires an environment that can absorb and recycle pollutants. When natural capital stocks are depleted, and/or the capacity of the environment to absorb pollutants is exceeded, the economy is forced to shrink.

National security, meanwhile, is a function of economic sustainability. The economic strife of a nation may result in insurrection or revolution, and eventually the nation-state may turn its aggressions outward. From the Nazi doctrine of Lebensraum to the 21st century powder kegs, war invariably involves, and often revolves around, struggles for resources by nations that have exceeded their ecological capacities - or have had their capacities impacted by other states.

SNIP

Remember: to think there is no limit to growth on a finite planet is precisely, mathematically equivalent to thinking that you may have a stabilized, steady state economy on a perpetually shrinking planet. Both claims are precisely, equally ludicrous! (emphasis added)

http://www.steadystate.org/CASSEFAQs.html

Watch the video Money as Debt as it helps explain how the current debt based/fractional reserve type monetary systems require a perpetually growing economy in order to stave off complete economic collapse for as long as possible. The video is available as a DVD from the link above or, if you have a high speed internet connection, you can watch it on line here:
http://video.google.com/videoplay?docid=5352106773770802849

Elizabeth Kucinich on "Money as Debt:

Elizabeth J. Kucinich, monetary reform activist partner of Congressman, and US Presidential aspirant, Dennis Kucinich (D-OH)

"I have worked for a long time looking into monetary reform and after 10 years, finally someone has produced a DVD entitled "Money as Debt". It is a fabulous fun yet powerful introduction to the issue of monetary reform. It's the best over view I have seen so far; the best by far. ESSENTIAL! Everyone should watch it!

The topic of DebtMoney is THE issue of our times. It forms the basis to every nation's areas of core material and spiritual concerns such as economic development, employment and environmental sustainability.

If only government officials, civil society organizations, environmental groups, unions and well meaning international development strategists trying to eradicate poverty really understood this topic... the world would be a much better place.

www.moneyasdebt.net (click on reviews)

[appal_jack]

1. true 'dat: K&R

The universal (i.e.- both Dem. & Repub.) embrace of economic growth is most definitely one of the elephants in the living room of our future. Meanwhile, venture capitalists are still demanding a 25% annual return on some "development" (read: destruction & extraction) projects.

Nature bats last. We may be in for a rough inning.

-app

[JohnyCanuck]

5. "The greatest shortcoming of the human race......

is our inability to understand the exponential function." Physics Professor Albert Bartlett

Apparently politicians, economists and business tycoons are not immune.

[JohnyCanuck]

8. "There's more to $120 oil than speculation"

There's more to $120 oil than speculation

By LOREN STEFFY

SNIP

"All the conventional wisdom about oil markets is wrong," said Jeffrey Brown, an independent geologist in Dallas who studies energy market data.

The idea that high oil prices are temporary is misleading, he added.

Don't let the pause in prices Thursday fool you. Brown sees a geometric progression of escalating prices, an upward spiral of devastating economic consequences.

SNIP

Here's what happens: as prices rise, oil-exporting countries benefit from an influx of petrodollars. That, in turn, spurs economic expansion, which in turn increases domestic oil consumption. As demand rises, more oil is devoted to meeting that domestic demand, leaving less oil to export.

As exports fall, worldwide prices rise even more.

What Brown finds scarier than $120 oil is the latest projections from the International Energy Agency that forecast a 4.4 percent rise in oil consumption this year from key emerging markets — China, India, Russia and the Middle East.

http://www.chron.com/disp/story.mpl/business/steffy/5729358.html

[arendt]

2. K&R, just for the MoneyAsDebt website. Good stuff there. n/t

[JohnyCanuck]

3. I like how Paul Grignon, the "Money As Debt" producer, explains his motivation

for making the video:

Money created as interest-bearing bank credit is a magic trick, a fraud - now 3 centuries old; one that very few people have seen through despite, or rather because of, its utter simplicity.

It is my intention to make this mysterious debt-money system comprehensible to everyone. It is also my intention to foster sufficient understanding of the problems with this money system that citizens will be motivated to join the monetary reform movement and/or create local alternatives to the global monetary system - a system in which most of the productive people of the world are collectively chained to an ever-increasing and perpetually unpayable debt.

This is a system designed for elite control of the people by those who have given themselves the privilege of creating money. It is also, I believe, a system that is designed for catastrophe. As the movie explains, there can be no sustainable civilization without a sustainable money system.

http://paulgrignon.netfirms.com/MoneyasDebt/ProducersComments.html

[wuushew]

4. kick

:kick:

[wuushew]

6. kick

:dem:

[JohnyCanuck]

7. Collectively we are no smarter than a bunch of bugs in a bottle

Here is another way to look at exponential growth and doubling times that helps drive home how the limits to growth really don't make themselves plainly evident until shortly before a growth induced crisis is almost inevitable.

This example is taken from the transcript of Professor Bartlett's speech linked above in the OP.

Bacteria grow by doubling. One bacterium divides to become two, the two divide to become 4, the 4 become 8, 16 and so on. Suppose we had bacteria that doubled in number this way every minute. Suppose we put one of these bacteria into an empty bottle at 11:00 in the morning, and then observe that the bottle is full at 12:00 noon. There's our case of just ordinary steady growth: it has a doubling time of one minute, it’s in the finite environment of one bottle.

I want to ask you three questions. Number one: at what time was the bottle half full? Well, would you believe 11:59, one minute before 12:00? Because they double in number every minute.

And the second question: if you were an average bacterium in that bottle, at what time would you first realise you were running out of space? Well, let’s just look at the last minutes in the bottle. At 12:00 noon, it’s full; one minute before, it’s half full; 2 minutes before, it’s a quarter full; then an 1/8th; then a 1/16th. Let me ask you, at 5 minutes before 12:00, when the bottle is only 3% full and is 97% open space just yearning for development, how many of you would realise there’s a problem?

SNIP

Well, suppose that at 2 minutes before 12:00, some of the bacteria realise they’re running out of space, so they launch a great search for new bottles. They search offshore on the outer continental shelf and in the overthrust belt and in the Arctic, and they find three new bottles. Now that’s an incredible discovery, that’s three times the total amount of resource they ever knew about before. They now have four bottles, before their discovery, there was only one. Now surely this will give them a sustainable society, won’t it?

You know what the third question is: how long can the growth continue as a result of this magnificent discovery? Well, look at the score: at 12:00 noon, one bottle is filled, there are three to go; 12:01, two bottles are filled, there are two to go; and at 12:02, all four are filled and that’s the end of the line.

Now, you don't need any more arithmetic than this to evaluate the absolutely contradictory statements that we’ve all heard and read from experts who tell us in one breath we can go on increasing our rates of consumption of fossil fuels, in the next breath they say “Don't worry, we will always be able to make the discoveries of new resources that we need to meet the requirements of that growth.”

http://globalpublicmedia.com/transcripts/645

[JohnyCanuck]

9. NY Times: "Amid High Oil Prices, Danger Signs in Production"

As oil prices soared to record levels in recent years, basic economics suggested that consumption would fall and supply would rise as producers opened the taps to pump more.

But as prices flirt with $120 a barrel, many energy specialists are becoming worried that neither seems to be happening. Higher prices have done little to attract new production or to suppress global demand, and the resulting mismatch has sent oil prices spiraling upward.

“According to normal economic theory, and the history of oil, rising prices have two major effects,” said Fatih Birol, the chief economist at the International Energy Agency, which advises industrialized countries. “They reduce demand and they induce oil supplies. Not this time.”

A key reason that supply is not rising to meet demand is that producers outside of the OPEC cartel — countries like Russia, Mexico and Norway — have been showing troubling signs of sluggishness. Unlike the Organization of the Petroleum Exporting Countries, whose explicit goal is to regulate supply to keep prices up, the other countries are the free traders of the international market, with every incentive to produce flat-out at a time of high prices.

SNIP

Recently, the case that has attracted the most attention is Mexico, the second-biggest exporter to the United States, which seems increasingly helpless to stem the collapse of its largest oil field, Cantarell. Last week, the country’s state-owned oil company, Pemex, said that production had fallen 300,000 barrels a day so far this year to 2.9 million barrels a day, a stunning drop from its peak production of 3.4 million in 2004.

A combination of falling production and rising domestic consumption could wipe out Mexico’s exports within five years, including the 1.5 million barrels it sends to the United States each day.

http://www.nytimes.com/2008/04/28/business/worldbusiness/28oil-WEB.html?_r=2&hp=&pagewanted=all&oref=slogin&oref=slogin

[JohnyCanuck]

10. "The most basic ingredient in economic growth is energy - without it nothing happens"

It's the oil crisis of the Seventies back to haunt us

By Eddie Hobbs The Independent, Ireland

Sunday May 04 2008


THERE'S been a lot of bull talked about a temporary little problem with oil. That's why the OPEC president's prediction last week that oil prices will rise to $200 a barrel especially if the dollar stays weak, will stun the Department of Finance. The piston in the National Development Plan is the assumption that oil would be $100 per barrel (42 gallons) by 2020. The Government's big strategy, so clearly priced on pre-peak oil economics is already bog-roll, but, officially, the Government is sticking to the daft idea that our energy input costs will remain a constant for the next 12 years and plans to build an infrastructure for the oil age.

Think of home heating and petrol prices doubling and consider the effects on your own net take-home pay when energy and motoring costs rise to absorb a chunk somewhere between 15 per cent and 20 per cent of average wages. Now consider the effects on the world's fourth most dependent economy on imported oil and gas which already has a lousy record in integrated planning on everything from its health service, to decentralisation, to transport and tell me that the risk of the mother of all cock-ups isn't on the cards.

SNIP

The evidence that we are at the foot of a prolonged period of undulating high inflation and which will last until dense and scalable alternatives to oil and gas become widespread, is staring us in the face. At the time of Julius Caesar 400 million people lived on the planet. It took the next 17 centuries for the population to double. The injection of cheap energy 150 years ago from the exploitation of coal, oil and gas resources, fuelled industry, trade, transport and agriculture but also drove the population to over six billion. In more recent years the advent of globalisation, the internet, free trade and the collapse of communism, have created vast new markets and demand for natural resources from three billion new consumers who've emerged from fast-growing middle income economies, to claim their share of the pie.

The most basic ingredient in economic growth is energy -- without it nothing happens (my emphasis /GM). Global demand for energy is set to double over the next 20 years but already in the oil market, where 86 million barrels of oil a day are produced there is a growing problem in matching burgeoning demand with limited supply. Demand from non-members of the Organisation for Economic Co-operation and Development is growing at 4 per cent yearly, dwarfing OECD demand growth some eightfold. In a few years the biggest users will be the oil-producing nations themselves who, as a block, will replace the USA as the world's largest oil consumer.

http://www.independent.ie/opinion/analysis/its-the-oil-crisis-of-the-seventies-back-to-haunt-us-1366551.html

[JohnyCanuck]

11. Towards a Steady State Economy (article posted at theoildrum.com)

Sustainable Development Commission, UK (April 24, 2008)
A Steady-State Economy

(Editors note: underlined words are in original; bold, italicized, hyperlinks and images added)

A failed growth economy and a steady-state economy are not the same thing; they are the very different alternatives we face. The Earth as a whole is approximately a steady state. Neither the surface nor the mass of the earth is growing or shrinking; the inflow of radiant energy to the Earth is equal to the outflow; and material imports from space are roughly equal to exports (both negligible). None of this means that the earth is static—a great deal of qualitative change can happen inside a steady state, and certainly has happened on Earth. The most important change in recent times has been the enormous growth of one subsystem of the Earth, namely the economy, relative to the total system, the ecosphere. This huge shift from an “empty” to a “full” world is truly “something new under the sun” as historian J. R. McNeil calls it in his book of that title. The closer the economy approaches the scale of the whole Earth the more it will have to conform to the physical behavior mode of the Earth. That behavior mode is a steady state—a system that permits qualitative development but not aggregate quantitative growth. Growth is more of the same stuff; development is the same amount of better stuff (or at least different stuff). The remaining natural world no longer is able to provide the sources and sinks for the metabolic throughput necessary to sustain the existing oversized economy—much less a growing one.

Economists have focused too much on the economy’s circulatory system and have neglected to study its digestive tract. Throughput growth means pushing more of the same food through an ever larger digestive tract; development means eating better food and digesting it more thoroughly. Clearly the economy must conform to the rules of a steady state—seek qualitative development, but stop aggregate quantitative growth. GDP increase conflates these two very different things.

SNIP

Regardless of whether it will be hard or easy we have to attempt a SSE because we cannot continue growing, and in fact so-called “economic” growth already has become uneconomic. The growth economy is failing. In other words, the quantitative expansion of the economic subsystem increases environmental and social costs faster than production benefits, making us poorer not richer, at least in high consumption countries. Given the laws of diminishing marginal utility and increasing marginal costs this should not have been unexpected. And even new technology sometimes makes it worse. For example, tetraethyl lead provided the benefit of reducing engine knock, but at the cost spreading a toxic heavy metal into the biosphere; chlorofluorocarbons gave us the benefit of a nontoxic propellant and refrigerant, but at the cost of creating a hole in the ozone layer and a resulting increase in ultraviolet radiation. It is hard to know for sure that growth now increases costs faster than benefits since we do not bother to separate costs from benefits in our national accounts. Instead we lump them together as “activity” in the calculation of GDP.

Ecological economists have offered empirical evidence that growth is already uneconomic in high consumption countries (see ISEW, GPI, Ecological Footprint, Happy Planet Index). Since neoclassical economists are unable to demonstrate that growth, either in throughput or GDP, is currently making us better off rather than worse off, it is blind arrogance on their part to continue preaching aggregate growth as the solution to our problems. Yes, most of our problems (poverty, unemployment, environmental degradation) would be easier to solve if we were richer-- that is not the issue. The issue is: Does growth in GDP any longer really make us richer? Or is it now making us poorer?

http://www.theoildrum.com/node/3941#more