Wednesday, September 26, 2012

Peak Energy

It is human nature to expect that things will continue on as they have been. As such, most people direct their life in a way that is similar to driving a car by looking in the rear view mirror. They see where they've been and expect the same in the future. The past 100 years have seen enormous increases in both technology and prosperity. Some believe this rate of growth is eternal and inexorable. In the previous post I mentioned how Moore's Law is bumping up against physical limits and how this will likely leave many expectations unfulfilled. In this post I will discuss an even more important physical limit we are about to run into. Peak Energy.

The Issue is Cheap Oil
Most everyone knows that the increase in technology has increased demand for energy, but few realize that the increase in the availability of cheap energy makes the increase in technology possible and that our current level of prosperity is completely and solely dependent on it. In fact the reality is that without abundant, easy to harvest and use energy none of the technological advances and high standard of living enjoyed in developed lands would be possible.

When it comes to cheap and easy to use energy its hard to beat hydrocarbons. They are energy dense, easy to store or transport and abundantly available. Chief among these so called fossil fuels is oil. For some uses there simply is no better alternative than liquid petroleum distillates. For example can you imagine a battery powered airliner?

If you were to overlay a graph of the worlds technological progress or gross product with the amount of oil consumed you would see a distinct correlation. The standard of living is directly tied to the availability of energy. Yes, its true the amount of oil consumed would increase with a booming economy, but its also true that you can't have a booming economy without cheap, abundant energy. The oil shocks of the 1970's and the recent peak of $147/barrel in 2008 should have made that clear. So the bottom line is the more oil there is for businesses to use the more business gets done.

How much of a difference does cheap energy make in the average persons life? Well this article indicates that the average Canadian employs about 204 energy slaves. That is to say each Canadian uses the energy equivalent of 204 people working full time to supply them with the energy they need for everything they do each day. That's a level only matched by royalty in pre-industrial times. One wonders what happens when a society accustomed to that level of power and prosperity, and further more a future that has always been more prosperous than the past, begins to slip backwards.

Its no coincidence that conventional oil production plateaued about 2005/2006 and the global economy collapsed just a few years latter. Yes, its also true that financial malfeasance and foolish lending/borrowing had a hand in disrupting the economy, but remember money is just a claim on goods and services: if there is less oil there is less everything and that has big consequences for an economy build on debt. Debt really is just paying for today with the produce of tomorrow. That works fine if tomorrow is always more productive than today.

One thing that happens when expectations aren't met is denial. I see this quite frequently especially from main stream media and those that still trust them. They like to excitedly announce huge new oil discoveries like the Bakken Shale or the Canadian Tar Sands. Sometimes they herald new techniques like fracking or horizontal drilling. These deposits and methods for extracting oil aren't new. Its just that now, due to the high cost of oil, they are profitable. This highlights the point that peak oil doesn't mean the oil is all used up, it doesn't even mean its half used up, it just means the high quality, easy to get at oil is gone.

To illustrate the problem of increasing cost lets use a common expression: Low Hanging Fruit. Imagine a tree filled with your favorite fruit. Naturally you will want to pick the fruit that requires the least amount of effort first. Once this is used up you'll reach even higher to get the next easiest. Eventually after you've exhausted most of the supply you are out on a ladder with a fruit picker reaching for those last few fruits and may eventually determine it isn't even worth the effort anymore. That aptly illustrates the situation with global oil supply. The easy oil is just about gone, so now other supplies that require elaborate techniques to recover or process are being used.

To give you an idea of how far we've come down that road; when oil was first extracted it took one barrel of oil to recover 100. Now we are averaging around 1:12. Oil shale is only 1:4. You can see where this is leading. Energy is no longer going to be cheap and when that happens the economic boom of the industrial revolution will go into reverse.

What About Alternatives?
Some claim that alternative energy sources will be ready in time to make up for the decline in hydrocarbons. They claim that wind, solar and nuclear power could replace the need for oil. Setting aside the improbability of a solar powered airliner or nuclear powered helicopters even basic electrical generation for the grid from these sources has problems.

For the record I think solar and wind power are great ideas. I personally wish I could have at least some of my power generated this way. However the reality is these technologies are still very expensive and worse yet they rely on rare earth minerals. It just isn't possible to build enough of these devices to replace the massive amount of energy we need to sustain the level of consumption we currently have let alone the increasing demand that continuous compound economic growth would create.

Some point to nuclear as the answer. After all nothing is more energy dense than matter itself. One gram of uranium 235 can produce the same amount of energy as 3 tonnes of coal. Of coarse nuclear has many problems as well. Aside from the inherent danger in dealing with fission and the radioactive waste it produces there is also a limited supply or uranium available. The estimates on peak uranium range from 1980-2035. So nuclear power is also an unreliable substitute.

What about bio-fuels, are they the answer? Well, the run up in corm prices back in 2008 showed us there are some problems there too. Ethanol, especially when produced with food crops, is both inefficient and cruel. I say cruel because when you're using food to power your SUV to the lake while people in poor countries are starving because your actions increased the price of their dietary staple, well, what else could you call that. I'm sure many don't realize they are having this effect, but its really not that hard to understand. When good farm land is used to grow corps for fuel instead of food this removes food from the international market thus raising the price and causing poorer families to go hungry.

The best option I have seen for a successful bio-fuel is algae oil. Algae grows quickly and can grow on non arable land. It can even grow in water that is polluted or saline. It can then be processed into diesel, ethanol and fertilizer. Unfortunately, like all bio-fuels, even this option still fails to produce significant returns on investment. Perhaps some day the technology will be advanced enough to make it worth the money and energy invested, but a more likely scenario is that we will just have less and it will cost more.

The Long Slow Contraction

So what are the consequences of an energy supply that not only can't keep up with growing demand, but can't even produce what it used to? Basically the inverse of the economic conditions we've seen over the last 300 years. Instead of long periods of growth with brief recessions, we will have long periods of recession and stagnation with brief spurts of recovery and growth.This will mean a decreasing standard of living for the average person as they slowly loose energy slaves.

Because of human greed there will be resource wars between nations and, especially in large contractionary periods or during supply shocks, crime and exploitation. The excesses of modern life like gas guzzling muscle cars and consumerism will give way to frugal living and a focus on essentials. Another side effect will likely be an increasing dependence on ones neighbors and community.

Cheap energy not only gives us more stuff, but also allows us to live independently in far flung suburbs where we don't depend on others and often have very little interaction with them. When half your paycheck buys the fuel needed to get to work and you can't afford to feed your family on what's left, the suburbs will become dead zones. People will begin supplementing what they get at the market with what they can grow in their yard. And neighbors will be forced to work together to survive.

Something similar to what I describe has already taken place in Cuba. The Soviets supplied Cuba with all of their petroleum as well as much of their food and fertilizer. When the USSR collapsed they lost these resources very quickly. They have since recovered due to increased trading with the United States, but for years they were almost completely on their own. The people, out of necessity, began farming in their front yards, using horses for transportation and pulled together as a community to trade what they had. This is a likely scenario when supply shocks hit the global community and business as usual is no longer possible.

Though the people of Cuba suffered greatly due to this sudden loss of energy and other resources they have benefited in many ways as well. Since nearly 80% of the food is organically grown they are now actually eating better than they used to before the crisis. Additionally before the crisis they used cars for transportation where as now many walk or ride bicycles thus reducing rates of obesity and diabetes. Add to this the reduced pollution and increased cooperation among neighbors and you can see how its not all bad news.

Really peak oil wouldn't be such a quality of life cliff if society as a whole would deal with it in a mature and equitable fashion. Of course this will never happen. Imperfect human nature will see to that. Instead of accepting the finite nature of all our resources, most people in the west seem to have a childlike magical belief that human ingenuity will always overcome any obstacles. Apparently the lessons of history like Rome, Easter Island and the Mayans have been ignored in favor of a warm fuzzy exceptionalist ideology.

For further research visit these links:

Peak Oil





Protracted Economic Contraction

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