Home > Economics - General > Peak oil point falls flat

Peak oil point falls flat

August 5th, 2011

That’s the title of my piece in the Fin yesterday, reproduced over the fold. Feel free to discuss, but please take anything related to nuclear power straight to the sandpit, and even there, try to avoid repeating the same old points.

One of the more intriguing sidelights to debates over climate change and energy policy is the idea of Peak Oil. On the face of it, the Peak Oil hypothesis is a straightforward claim. The amount of oil generated by any given field follows a bell-shaped curve, first rising as the field is developed and then declining as the oil becomes harder and harder to pump.

The curve is referred to as the Hubbert curve, after US geologist M King Hubbert[1] who used it to predict the peak of US oil output around 1970. Applying Hubbert’s analysis to the world as a whole yielded the prediction that the global peak in oil production should be happening around now.

On the evidence available, the predictions of the Peak Oil hypothesis don’t look too bad. Despite near-record prices for oil, the output of crude oil has remained broadly constant for the last seven years. Such an apparent plateau is exactly what the Hubbert curve would predict, bearing in mind that commercial production began 150 years ago.

The economic effects of the depletion of oil resources will be mixed. Clearly, since underlying demand is rising with population and income growth, the price of oil must rise to clear the market. That’s good for suppliers of oil, as well as competing energy sources, and bad for consumers. Overall because of the unpriced negative effects of burning oil, the most important of which is the release of carbon dioxide, a reduction in oil output is beneficial for the planet as a whole.

This is all straightforward: economists have been analysing markets for exhaustible resources ever since the pioneering work of Harold Hotelling in the 1930s. The observed outcomes fit Hotelling’s model pretty well – rising real prices are needed to sustain an optimal extraction path.

But discussions around Peak Oil are dominated, not by economic analysis, but by a range of more or less apocalyptic scenarios. In these scenarios, an end to ever-growing output of oil means an end to industrial civilisation as we know it.

There are a number of misunderstandings here. A lot of discussion seems to assume that Peak Oil means an immediate end to oil production, when the Hubbert curve implies a gradual decline over 100 years or more.

More importantly, though, the Peak Oil story is about production. But, if oil is essential to modern civilisation, what matters is not production but consumption.

The Oil Peak that actually mattered was the peak in consumption per person, which took place back in 1980 at 5.3 barrels per person per year. Since then, consumption per person has dropped to 4.4 barrels per person per year. Given the growth of demand in Asia, consumption per person in the countries that were already rich in 1980 has fallen much faster. Meanwhile living standards have risen substantially[2], unconstrained by declining consumption per person of oil, and of energy more generally.

Oddly enough, most people who worry about Peak Oil are also environmentalists concerned about climate change. From this viewpoint, which I share, Peak Oil looks like good news rather than bad. But the optimistic interpretation is trumped by the spurious idea that there is a 1-1 relationship between oil (or energy) and economic activity. This fallacious idea is held both by Peak Oil fans and by the rightwing doomsayers who suggest that reducing emissions of CO2 will destroy the economy.

A particularly interesting subgroup of Peak Oil fans are those who see nuclear energy as the only possible solution, a view that was mooted by Hubbert himself. This part of the discussion is dominated by a belief in something called ‘baseload power demand’ which must be met at all times if disaster is to be avoided. The idea that demand responds to prices and market structures seems entirely foreign to this discussion.

One of the few upsides of the disastrous Fukushima meltdown is that it has allowed a perfect test of this theory. Following the meltdown, Japan has taken 38 of its 54 reactors offline. It’s now midsummer there, and the blackouts predicted by the scaremongers have not occurred. Instead, the reduction in supply has been handled by (mostly voluntary) efficiency measures.

Energy is important, but it is no more ‘essential’ or ‘special’ than many other goods and services in a modern economy. If the supply is reduced, the market will respond to bring demand into line, especially if this response is facilitated by sensible government policy. No single source or technology, such as oil, nuclear or solar is essential, although none should be dismissed out of hand.

fn1. A fascinating guy, by the way. He was associated with the Technocracy movement, which briefly in the 1930s looked like a serious contender as an alternative form of government for the US. Wikipedia has lots on this.

fn2. In the rich world as a whole, and in most of Asia. Those in the bottom half of the US income distribution and in some very poor countries haven’t done so well, but that has nothing to do with oil.

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  1. sam
    August 5th, 2011 at 18:00 | #1

    I’m in the “moderate disaster” camp. I agree that markets can respond to reduced supply by reducing demand, or bringing new technologies to bear, but these things take time. In the long run we can all live in more compact cities and commute by train, but for the moment residents in outer-suburbs will be in trouble. We can all eventually transition to electric cars, but we can’t replace a $20 trillion vehicle fleet over night.

    One of the good effects of the Great Recession has been to flatten out the peak, meaning people have reduced their driving simply by being too poor. This would have been a good time to invest in petrol-displacing infrastructure, like fast trains. Unfortunately, most governments have passed up this opportunity.

  2. Hermit
    August 5th, 2011 at 18:05 | #2

    If we are on the Peak Oil plateau we may be having an easy time of it by trimming the fat. When the PO downslope occurs, perhaps as early as 2015, we will eating into muscle. The possible good/bad news is that reduced oil supply may reduce coal demand since making stuff complements movement. Some peakists with access to climate models say this will limit AGW to under 3C and definitely not the IPCC high emissions scenarios that see man made CO2 increasing beyond 2050.

    There seems to be little acknowledgement of Peak Oil by the government, other perhaps than to hint increasing coal exports will pay for increasing oil imports. Our currently abundant natural gas and coal seam gas could be used as diesel fuel replacement in heavier vehicles. However the government wants to both export gas and use it to replace coal fired powers stations. In that case it won’t seem so abundant by 2030 or so.

  3. TerjeP
    August 5th, 2011 at 18:30 | #3

    Oil might be running short but new technology seems to be making gas more plentiful.

    In terms of dooms day stuff I’m in the camp that believes that peak oil won’t end civilization, global warming won’t end civilization and a carbon tax, whilst a bit dopey but less dopey than nearly all the competing public policy initiatives also won’t end civilization. An overnight ban on fossil fuels as proposed by the Greens would however come close to ending things if it were actually achieved. It would certainly be far more catastrophic than for instance the US defaulting on it’s debts. That people vote for such utter stupidity is sad.

    In terms of base load power I think we could live without it but we would be at a huge invonvenience if we had to live without dispatchable power. Solar and wind electricity is a tragically inferior product.

  4. sam
    August 5th, 2011 at 18:50 | #4

    I think on balance the Greens have fewer economically stupid policies than the major parties.

  5. fred
    August 5th, 2011 at 18:52 | #5

    “One of the few upsides of the disastrous Fukushima meltdown is that it has allowed a perfect test of this theory. Following the meltdown, Japan has taken 38 of its 54 reactors offline. It’s now midsummer there, and the blackouts predicted by the scaremongers have not occurred. Instead, the reduction in supply has been handled by (mostly voluntary) efficiency measures”

    That is an extremely interesting observation.
    I’d be ineterested in more detail.

  6. Mulga Mumblebrain
    August 5th, 2011 at 19:11 | #6

    The more plentiful gas is, I assume, that produced by ‘fracking’. It is another environmental disaster for the cornutopian Right to deny. Not only does it apparently not actually represent an improvement on coal in greenhouse terms, but it also involves the great use of water resources, much of which becomes polluted with a range (many kept secret on the spurious ‘commercial confidentiality’ grounds)of toxic substances, and little of which seems to be recycled, but it also pollutes groundwater with these same toxic chemicals. And it is being used, in a lavishly financed PR disinformation campaign, to undermine real renewables. All of which, naturally, is simply denied.
    Just how ‘gradual’ the downward slope of oil production will be is contestable. The rate of depletion of giant fields like Cantarell in Mexico is pretty rapid, as the IEA admitted some time back. New resources are not being discovered, and if so, like the sub-salt Brazilian fields, are pretty hard to extract. Prices must rise, and efficiency efforts, particularly in vehicle fleets, have been long delayed particularly in the USA. Coping will for some time be essentially a matter of demand destruction, which means, yet again, that the poor will suffer the most.
    Efforts to replace the easy hydrocarbons will be tremendously destructive, as the oil sands monstrosity in Alberta shows, and other mad projects to turn oil into liquid fuels and mine submarine methane clathrates are becoming more economically feasible. Already the ethanol and other bio-fuel efforts have been tremendously detrimental, utilising food crops, adding to price pressures in the case of corn, and furthering rainforest destruction in regard to palm oil. While appealing to the iron laws of supply and demand might offer the prospect of a self-correction towards lower consumption and resource substitution, we, of course, do not live in a free market.
    We live in a capitalist market where the interests of the ruling pluto-kleptocrats come first. The fossil fuel business is worth trillions, and, when the Koch Brothers can spend chump change to create an army of Tea Party Mad Hatters and throw the US into a moronic inferno, every cent of those trillions will be extracted, come what may. The coal will be burned, the clathrates mined, and, if the Tea Party gains more ground, energy efficiency, greater fuel efficiency for vehicles, the EPA and more besides will be outlawed in the USA. Moreover, if the second leg of the debt deflation implosion brings Abbott to power, you can forget carbon taxes and renewable energy here. The real problem is that resource depletion, ecological collapse, financial implosion and the increasing mental and moral derangement of the Right are all synergistic. We must above all fear the unknown unknowns, the nasty surprises that the law of unintended consequences tells us must occur.

  7. Greg G
    August 5th, 2011 at 19:42 | #7

    Oil use is not just about energy. You need to factor in replacements for synthetic fertilisers, plastics, industrial petrochemicals, etc. Most of these will be very hard to replace.

    Dwindling oil supplies also have a significant negative impact on carbon emissions due to projected increase in use of dirty oil alternatives such as tar sands and brown coal during the post-oil interregnum.

  8. TerjeP
    August 5th, 2011 at 19:52 | #8

    @sam

    Perhaps but the stupid ideas from the Greens are stupid on a stupendous scale. As in monumentally dumb. It’s a good thing they are not running the country. Or are they?

  9. sam
    August 5th, 2011 at 19:57 | #9

    @TerjeP
    Which stupid ideas do you mean? Can you give more detail?

  10. John Quiggin
    August 5th, 2011 at 20:05 | #10

    To repeat myself, the peak in oil consumption per person was 30 years ago. We are well and truly on the downward part of the curve, with no obvious problems.

  11. Mulga Mumblebrain
    August 5th, 2011 at 20:20 | #11

    I meant to say ‘..mad projects to turn coal into liquid fuels..’. And TerjeP, your contribution looks a little on the insubstantial side. A couple of bland assertions with a little nice invective, then an excursion into paranoia. Is that the best you can manage?

  12. Mulga Mumblebrain
    August 5th, 2011 at 20:27 | #12

    Well, John, was the rise in oil prices to $147 a few years back not connected to the global financial crisis? A number of people have asserted that it was ‘the straw that broke the camel’s back’ when it came to sub-prime mortgage holders meeting their obligations. And the lethargic recovery in demand as the Western recovery gets lost in the sands of debt deflation is keeping demand subdued yet oil hovers around $100 a barrel, contributing to Tea Party angst (but not that of their creators, the Kochtopus, who are doing nicely, thank-you). By the by, do you think Saudi figures on their reserves are genuine?

  13. Freelander
    August 5th, 2011 at 20:46 | #13

    Relative to average incomes, I would think oil is probably still cheap compared with many decades far enough back. On top of that, miles per gallon, or kilometres per litre, have improved significantly. Maybe someone can find a graph. Given what is already known about substitutes, which have been demonstrated by use in various countries, in various times, peak oil is hardly a concern.

    The Saudi reserves may not be genuine. It is in their interests to lie because propagating the belief that they have large reserves dissuades exploration because the risk of Saudi Arabia cranking up production would make the exploration investment premature. However, also having those reserves would serve the same purpose, so who knows? If Saudi Arabia bluff’s successfully it could end up getting more revenue for its reserves. But anyway, technical change and improvements in being able to identify and access reserves, as well as increasing prices would all tend to make reserves larger.

  14. John Quiggin
    August 5th, 2011 at 21:00 | #14

    Oil price movements were a consequence, not a cause of the bubble and bust. The people who claim otherwise are making stuff up.

  15. Salient Green
    August 5th, 2011 at 21:15 | #15

    JQ, oil price movements must then be both a consequence and a cause of the bubble and bust. A consequence as a result of speculative trading, and a cause as a result of absorbing consumers funds as Mulga said.

  16. sam
    August 5th, 2011 at 21:21 | #16

    Krugman disagrees that the oil price high was a result of speculative trading. He thinks there wasn’t significant hording, and the $145 per barrel price was right given the underlying supply and demand pressures.

  17. Robert Merkel
    August 5th, 2011 at 23:31 | #17

    @Greg G

    At the risk of violating our host’s request to avoid going over old ground, making fertilizers, pesticides, and lubricants is the least of our concerns.

    You can get pretty much any hydrocarbon you want from any other, if you’re prepared to pay the costs. Whether this is going to make economic sense for transport fuel is unclear, particularly given emissions pricing.

    However, it’s going to be perfectly practical for non-energy uses.

    To take just one example, the “we need oil for fertilizer” argument seems to be based on the fact that the hydrogen for producing ammonia comes from natural gas. However, we can get hydrogen from electrolysis powered by renewable (or the n-word) energy. It’ll be a little more expensive, but not drastically so.

  18. Freelander
    August 6th, 2011 at 01:48 | #18

    @Salient Green

    The speculative trading stuff is pure bunk. “Hoarding” is not at all cheap and is easily detected and at best might be used very short-term to make a quick dollar, (best way is by slowing tankers in transit down), but even then is too easily detected, and entails large risks. Oil is not a commodity that lends itself to ready manipulation of the market by speculators. The producers can restrict supply; but they weren’t. The quantities supplied, delivered and so on, are not easily hidden. The reason the price went up is as JQ suggests, demand (with occasional supply problems like Libya also). And when the demand goes down, down the price goes.

  19. Anon
    August 6th, 2011 at 02:57 | #19

    I think the ecological economics insights are very valuable for the peak oil debate. The applicable one is that as you exploit more of a resource the quality goes down and the amount of waste generated by the resource extraction goes up. So as oil prices because the easy supplies run out yes there is a reduction in quantity demanded but the high price pushed exploration into more expensive and dangerous fields that generate much more waste which == environmental externalities. So the danger of peak oil isn’t running out and zombie apocalypse but that the higher prices will drive us to more and more environmentally costly extraction like the alberta oil fields etc.

    So peak oil is not the environmentalist’s friend because those high prices are going to lead to more externalities.

  20. Anon
    August 6th, 2011 at 02:58 | #20

    2nd post, Do you have a reference on the baseload power idea. I’ve run it by some utility types in the U.S. and they say you don’t understand the engineering requirements of the distribution system and that you really do need baseload. So I want a paper where your idea is worked out.

    thanks,

  21. John Quiggin
    August 6th, 2011 at 08:03 | #21

    http://johnquiggin.com/2009/07/22/the-myth-of-baseload-power-demand/

    I meant to add this link when I posted, and will do so now

  22. Greg
    August 6th, 2011 at 09:16 | #22

    A comment on the effects of the normal distribution.

    It is conjectured that median incomes in China are drawing near the point where car ownership becomes feasible. Japan in the 60s-80s and South Korea in the 80s- both experienced a very quick rise in the proportion of households operating a car, when median incomes rose to a certain point. China, it is asserted, is drawing near this point.

    If a Japan-style takeoff in car ownership occurs in China, and I can’t see why it wouldn’t, given the car’s social role as a status symbol, there will be increasing demand for oil and its nearby substitutes: tar-sands oil, LPG, CNG, and synfuel from coal gas. (Despite the hype, electric and plug-in hybrid vehicles are a negligible proportion of the new car fleet, and they won’t affect the situation for two or three decades – at best.)

    This demand will call forth supply.

    Won’t efficiency improvements save us? No. It seems that current best practice in car-making is within tens of percent of feasible aerodynamic and thermodynamic limits. Efficiency improvements have to stop.

    And after China, there is the rest of the developing world.

    Without brisk government action, the medium term outlook for carbon emissions from transport is for continued increase, irrespective of peak oil.

  23. PB
    August 6th, 2011 at 09:28 | #23

    @TerjeP
    I’m curious. When / where have The Greens advocated “An overnight ban on fossil fuels”? I’ve had a look at their energy policy (here http://greens.org.au/policies/climate-change-and-energy/climate-change-and-energy) and can’t see anything that looks like an overnight ban.

    Have I misread their policy? Is there some other document that I’m unaware of? Are you referring to Green parties in other countries?

  24. Ikonoclast
    August 6th, 2011 at 09:30 | #24

    Ah, the ever sanguine Prof. John Quiggin! Well, I hope you are right but I fear you are wrong. The claim that energy is not a special resource is empirically/thermodynamically wrong and demonstrably so. I wrote and posted a long piece a while back on thermoeconomics. I won’t rehash everything here.

    I did say that the one resource needed to utilise to every other resource is energy. Thus it is a crucial resource. What will really count is peak energy not peak oil. Nevertheless, oil as a convenient to handle and high energy density fuel is very important and currently crucial to transport and agriculture.

    Claiming correctly that energy does not have a precise 1 to 1 relationship with economic activity (measured by Gross Income I assume) is not the same as establishing energy has a 0 to 1 relationship with economic activity. You cannot say that energy (abundance or scarcity) has no impact on economic activity. In plain terms, it is clear that energy and lots of it (namely 475 exajoules per annum) is now still essential to a modern industrial and high tech economy.

    Hermit made a good starvation analogy. Yes, it is ok while we are trimming fat but once we start to catabalise muscle we are in trouble.

    The key points for successful civilization survival are;

    1. Can we stabilise population before natural world events do it for us?
    2. Can we prevent catastrophic* global warming?
    3. Can we prevent catastrophic* species extinction rates?
    4. Can we transition from non-renewables to renewables (including energy sources)?
    5. Can we avoid destructive competition (wars)?

    My predictions for these questions are five noes unfortunately.

    * By catastrophic, I mean catastrophic to human global civilization. The earth itself will likely recover from both of these events as it has done so several times before. However, the recovery timscale is of the order of 100,000′s to millions of years. This is a not a recovery rate that will save human global civilization.

  25. quokka
    August 6th, 2011 at 09:54 | #25

    According to IEA Monthly Electricity Stats, electricity supplied in April 2011 in Japan was just 6% down on April 2010. Baseload demand is not dead and buried yet. Production from combustible fuels was up 6.6% and I’d bet that the latter will rise further as gas turbines are installed.

    http://www.iea.org/stats/surveys/mes.pdf

  26. John Quiggin
    August 6th, 2011 at 10:02 | #26

    @quokka
    As I understand it, they’ve taken more nuclear plants off-line since then

  27. Hermit
    August 6th, 2011 at 10:15 | #27

    Japanese demand for LNG has helped drive up the spot price up towards $1000 a tonne up from $400 a year ago. It seems ironic that the country that includes Kyoto the birthplace of the climate change movement will most likely increase emissions.

  28. Dan
    August 6th, 2011 at 13:30 | #28

    “the peak in oil consumption per person was 30 years ago”

    Well that would explain the huge rise in debt then. ah well might as well keep going into more debt and pretend the problem will sort itself out. nothing like borrowing from the future to offset declines. win win.

    “If the supply is reduced, the market will respond to bring demand into line”
    yer nothing like shrinking demand (less growth) to help with all that debt servicing. it should be fun watching markets bringing demand into line. i should avoid mentioning EROI here and just stick with the cornucopian theme. :)

  29. may
    August 6th, 2011 at 14:22 | #29

    surprised i am.

    the proponents of the inevitability of nuclear steam kettles are not lining up to book their tickets to Fukushima to help with the clean up.

    maybe they can’t find the queue.

  30. kika
    August 6th, 2011 at 14:28 | #30

    the greens have no intention of cutting fossil fuels “overnight”. they do advocate a gradual transition towards renewables over the next 50 years.

    please read their policies direct from their website. it seems likely that you have been manipulated by the murdoch press.

  31. August 6th, 2011 at 15:11 | #31

    Does that “peak in consumption per person” in 1980 include the entire population of the planet? If so, the “per person” fall disappears with the additional 3 billion people, doesn’t it?

    I fully understand Peak Oil and I can’t comprehend how anyone could claim not to. I don’t accept the terms ‘hypothesis’ or ‘fan’, if they are intended to imply that oil production might increase indefinitely or never decline.

    The best place for anyone to hear the people in the oil industry talk about it is:

    http://www.theoildrum.com/

  32. August 6th, 2011 at 15:15 | #32

    Here is part 2 of a great analysis of the economic questions being discussed here,

    http://www.theoildrum.com/node/8185

  33. Hermit
    August 6th, 2011 at 16:52 | #33

    Recent articles in The Oil Drum have argued that a high debt economy merely requires a prolonged non-increase (ie not necessarily a decline) in oil supply to run into problems
    The Link Between Peak Oil and Peak Debt

  34. TerjeP
    August 6th, 2011 at 17:44 | #34

    PB – in an interview with Fran Kelly the leader of the Greens, Bob Brown, said we urgently need to close down the coal industry. He said to her it was a critical issue and the sort of thing that should be completed in the single term of a government. He also wrote an opinion piece for one of the major newspapers (The Australian I believe) in which he said much the same thing. Most of the media has let it slide although he was grilled on the point in a recent 7:30 interview.

  35. TerjeP
    August 6th, 2011 at 17:56 | #35

    http://www.crikey.com.au/2007/02/09/bob-browns-coal-stance-sends-politicians-into-a-panic/

    BROWN: To suddenly ban coal exports would be massively dislocating [KELLY: Absolutely]… but we have to do it.. and we have to do it within a period of a government… [KELLY: within a period of one government?] …that should be the sort of aim we’re looking at…

    The man is a raving lunatic. And he fronts a party of even bigger lunatics. If we abolished the coal industry within three years the disruption to our energy supplies and to our economy would be catastrophic.

  36. John Quiggin
    August 6th, 2011 at 17:57 | #36

    @Megan
    Well, yes. That’s what “per person” means. So, if you take out all the extra people (100 million more Americans for example), but leave in the oil they consume, you are back with production.

  37. Sam
    August 6th, 2011 at 18:59 | #37

    @TerjeP
    Well, he’s talking about coal *exports* TerjeP, not consumption. He’s not advocating the immediate shutting down of all domestic coal power plants. I imagine that could wait quite a bit longer and be in step with the scaling up of other sources.

    Also, he probably doesn’t mean coking coal, which doesn’t have high emissions associated. Just thermal coal. The industry doesn’t employ that many people, and most of the capital is from overseas. It would certainly worsen our balance of payments but a floating exchange rate would work that out. Plenty of other countries get along OK without a coal export industry. It certainly isn’t politically practical of course, but only because of attitudes like yours.

  38. Fran Barlow
    August 6th, 2011 at 19:01 | #38

    @TerjeP

    Did you read your own quote Terje?

    To suddenly ban coal exports {…} {Terje} If we abolished the coal industry within three years

    Abolishing coal exports would make no difference to local energy supply. Abolition of coal exports is a regular theme of those trolling the cap and trade policy from the right. We’re not serious unless we do it, they chant, disingenuously.

    The level of cognitive dissonance you show above is truly breathtaking. It underlines the point that mere facts are no antidote to those with a cultural fixation.

    NB: As I understand the original claim, Brown wanted to phase out coal exports, possibly by 2020, or by 2030. Some estimates by ABARE suggest that Australian coal, at 2% pa growth rates will be exhausted by 2040-2050, so one might argue the case on energy security grounds. Then there are the Dutch Disease grounds as well. An increasing tax on such exports -ne that took account of growth in sales) might well be a good idea.

  39. Ikonoclast
    August 6th, 2011 at 19:20 | #39

    Perhaps I ought to be more specific but brief about the energy problem facing us.

    In 2004, we got the following percentages of global energy use (by human civilization) from these sources;

    Oil 34.3%
    Coal 25.1%
    Natural gas 20.9%
    Biomass and waste 10.6%
    Nuclear 6.5%
    Hydro 2.2%
    Other 0.4%

    Since oil, coal, natural gas and nuclear are all non-renewable, only 13.2% of our current power sources can be relied on long term. Some estimates are that we only have until 2050 to fully transition away from fossiles to prevent dangerous and perhaps runaway climate change.

    On the other hand some estimates for the potential of renewables are very high.

    “In 2008, total worldwide energy consumption was 474 exajoules (474×1018 J=132,000 TWh). This is equivalent to an average energy consumption rate of 15 terawatts (1.504×1013 W)[1] The potential for renewable energy is: solar energy 1600 EJ (444,000 TWh), wind power 600 EJ (167,000 TWh), geothermal energy 500 EJ (139,000 TWh), biomass 250 EJ (70,000 TWh), hydropower 50 EJ (14,000 TWh) and ocean energy 1 EJ (280 TWh).” – Wikipedia.

    Most of these estimates seem reasonable to me but the biomass estimate i would mark as very dubious. I doubt it will be anywhere near as high in practical reality. The geothermal also seems much too high and ocean energy too low although ocean energy may simply prove too difficult to harness. The high estimates of solar and wind may well be reasonable if the extensive collection infrastructure can be built and not constrained by material resources.

    The issue is can we change over in the timespan, can all the bottle necks be oercome and can we meet the continuing needs of an exponentially increasing population?

    It is clear the world will be very different if we make these changes and a catstrophe if we don’t.

  40. Daniel
    August 6th, 2011 at 20:18 | #40

    People don’t realise the high cost of private transport. According to the RACV the average cost of running a car is about $10,000 per year. Melbourne has 3 million+ active cars, meaning the combined total is $30 billion a year. What sort of public transport could we get with that money?

    On the capital side, the train system could be completely grade separated for $20 billion. All bus systems could be replaced with electric trolley buses for about $20 billion ($7 million per km). On the operating side, Melbourne currently spends a half billion on buses (which have good coverage but lousy frequency) each year which run on average about every thirty minutes. So to increase that to every 4 minutes would cost an extra 3.5 billion per year. Throw in a billion a year for the train system to increase from 10-15 minute frequency to 4 minute frequency and a similar amount for the trams.

    Adding that all up and converting the capital costs to interest costs, we get the figure of $8 billion per year. So, by moving from mostly private transport to a state of the art, 4 minute frequency, public transport system, we save $22 billion per year.

    On a personal note, as a person who doesn’t drive, peak oil is already benefiting me. Trains and buses I use are running more frequently and some routes have been added. Roll on peak oil.

  41. Donald Oats
    August 6th, 2011 at 22:07 | #41

    I wouldn’t be surprised by either a peak oil scenario or by another humungous discovery (of oil) – just that this would be in the previously inaccessible polar regions; ironic, that.

    As for peak oil and/or climate change apocalyptics, one thing that some history shows is that humans adapt to changed circumstances quite rapidly, once a sustained price signal is present. Adapting rapidly does not necessarily mean adapting rapidly and pleasantly. A rough ride may well be expected in some cases – witness local retailers and their grappling with online competition; or, telegraph vs radio communication (or even just vs telephonic communication). In so far as climate change goes, oil is a significant but minor player; substitution of the easiest-to-substitute uses of oil may well draw out the oil resource for a long time to come.

  42. August 6th, 2011 at 22:17 | #42

    Excellent points Daniel,

    But who thinks that the industries who currently take that $20billion (oil, finance, insurance, road maintenance/construction, tolls and car sales) are going to give it up without a war?

    Presumably Murdoch with his stranglehold on Oz media would decide to take one side or the other in such a war, gee – wonder which side he’d go with?

    I’m a big fan of FREE public transport. No cash, no ticketing/enforcement, no road congestion for people who actually need to drive, lower polution/GHG, massive boost for all businesses which rely on incoming customers, great for tourists etc…

  43. Tim Macknay
    August 7th, 2011 at 00:14 | #43

    Regarding The Oil Drum, it’s worth noting that, while there are a handful of oil industry professionals who contribute to that site (mostly on technical issues like how tar sands are extracted, etc), there are virtually no contributors who are economists or people with expertise in energy other than oil. The one major exception, a finance expert who deals with wind energy in the European market, doesn’t share the apocalyptic views of the other contributors. The article about “peak oil and debt” linked to above was not written by an expert on the oil industry, or an economist, or an energy industry expert, or a finance expert, but by an actuary. The Oil Drum does contain some interesting information, but it’s not a source for unbiased expert information on peak oil. Most of the information is provided by non-experts peddling a belief system.

  44. BilB
    August 7th, 2011 at 07:26 | #44

    Personal attack deleted, nothing more like this please – JQ

  45. Hermit
    August 7th, 2011 at 07:32 | #45

    Could it be that academic economists are asleep at the wheel? Recall the 2008 GFC was accompanied (perhaps instigated) by $147 oil. In Australia only fringe academic Steve Keen predicted mayhem.

    I’ve flicked through economic texts that attribute growth solely to due the right fiscal and monetary policy without mentioning resource inputs. However since WW2 we’ve bred like rabbits, plundered mineral deposits, forests and rivers while paving over the best farmland. That has to have a limiting effect on our future prospects. If anything the natural world’s payback time seems overdue. I’d like mainstream economists to explain if it isn’t so.

  46. BilB
    August 7th, 2011 at 07:45 | #46

    Daniel @40,

    The basic cost for running a car is under $2000 per year. Re work your calculation on that figure, and see how public transport looks. Then you have to derate your outcome by the number of people whose interests are not able to be served by the public transport system. That is the problem. Our country is simply not suitable for the high efficiency London style public transport system. But,…..the looming world recession might just apply a very different value to the things that we currently take for granted.

  47. Salient Green
    August 7th, 2011 at 08:59 | #47

    I see upthread that I have short-circuited between the high oil prices being the cause of bursting the financial bubble and the different but connected subject of oil price movements. I claim end-of-week overload.

    BilB, if you included depreciation, even our little Getz costs $118 a week to run according to Cars Guide.

  48. BilB
    August 7th, 2011 at 10:15 | #48

    SalientGreen,

    The cost of a vehicle does not come into the running cost mindset. Only an accountant thinks about the depreciation cost of a vehicle on a day by day basis. The cost of payments on >new< vehicles is important, but again this is claculated into the cost of "setting up" ones life rather than the daily running cost. The other basic flaw in Daniel's thinking is the notion that people will hand over that $10,000 a year budget to the government in return for "free" public transport. That was the premise of the evaluation

    "Melbourne has 3 million+ active cars, meaning the combined total is $30 billion a year. What sort of public transport could we get with that money?"

    …public transport in place of private transport paid for by shifting the private ownership budget to public ownership, while presuming that equal or better functionality would be achieved. This is just not realistic, however well intentioned. Melbourne has the best mix of public transport and private transport in Australia today, I believe. Melbourne's tram system is a real asset for that city, and I hope that they continue to build on it.

    The best future direction for transport is the electrification of personal transport. The second is the complete automation of this. California has just directed their road regulators to prepare for the arrival on their roads of autonomous vehicles (google those words to be brought up to date) and determine what the standards will be for AV's to obtain their road lisenses. I expect that during this process of vehicluar transition some unforeseen new realities will arise which very much support the primary features of public transport, albeit in very different ways.

    The beauty of all of the change under way is that it is appealing even if there was ultimately no peak oil threat. Electric vehicles are just far better and more satisfying. Cycling is a wonderful activity, and a far healthier exploit than the sedentiary life that we have drifted into. Solar power and the independence that it offers is very satisfying. There is an opportunity here to escape from being "battery humans" and become free range beings, at least as far as our energy consumption is concerned.

  49. rog
    August 7th, 2011 at 10:48 | #49

    I would say that the average cost of running a car pa is closer to $10K than $2K. When factoring in repairs, service, parking fees, tolls and the dreaded depreciation fuel costs become less significant.

  50. BilB
    August 7th, 2011 at 11:24 | #50

    Rog,

    I have 3 vehicles. I assure you that I do not spend anything like $10,000 pa running all of them. You can inflate the cost of operating a vehicle all you like, but that sort of costing is only relevent to governments who have to operate by strict rules or face the wrath of News Limited.

    If a person buys a new vehicle, uses it extensively, uses tollways and parks their vehicle in paid parking regualrly, and services the vehicle fastidiuosly, then yes $10,000, and perhaps more, is realistic during the payment period for that vehicle. But that represents only a small percentage of Australia’s national car fleet.

    If one is going to do a realistic comparison between private transport and public transport please use realistic figures, particularly when they are going to be multiplied out across the full spectrum of vehicular options.

  51. Fran Barlow
    August 7th, 2011 at 11:28 | #51

    @BilB

    I strongly sustect you’re right. Hardly anyone IMO, accounts vehicle depeciation in their running costs. In practice, if not in theory, it’s an invisible, odourless, tasteless, colourless and weightless cost essential to life which can’t be measured. ;-) (TM: Abbott inc.)

    That doesn’t mean people should ignore it of course. We can’t legislate that they do, and so we have a serious cultural obstacle to people acting rationally in their own interests. The only real way to fix the problem is to similarly ignore sunk cost losses on rolling stock upgrades when assessing feasibility of public transport, and to fund the cost of the system out of the marginal running cost of competing ad hoc transport — hence the idea of road usage charges rather than fuel excises, sales taxes and fixed costs like registration and CTP.

    If we shift the burdens away from sunk cost to marginal cost, then people will start to drive fewer miles as sole occupant in their vehicles.

  52. Tim Macknay
    August 7th, 2011 at 12:24 | #52

    I thought I had already deleted the comment to which this refers, but I’ve done so now, and am deleting this response since its now irrelevant. Could I remind everyone to read the comments policy from time to time, and particularly if you are engaged in a dispute with other commenters – JQ

  53. Ikonoclast
    August 7th, 2011 at 12:28 | #53

    The true average cost of owning a car is close to what rog says.

    http://www.investopedia.com/articles/pf/08/cost-car-ownership.asp#axzz1UJ1WtR6j

    This link gives US data.

    When you add on social and public costs (roads, accidents, mortalities etc etc) plus negative externalities and opportunity costs, the cost per car is high indeed, perhaps $20,000 per car per year to the nation.

    The automobile culture is like a cancer on our society.

  54. Christopher Dobbie
    August 7th, 2011 at 12:49 | #54

    “The Oil Peak that actually mattered was the peak in consumption per person, which took place back in 1980 at 5.3 barrels per person per year. Since then, consumption per person has dropped to 4.4 barrels per person per year.”

    But hasn’t the world population grown by 37% during this time frame?

  55. BilB
    August 7th, 2011 at 13:01 | #55

    Regarding 44 JQ

    I guess what I should have done in the face of an unwarranted attack on the professionalism of The Oil Drum, is counter with a vote of confidence for this site.

    The Oil Drum in my experience offers an unparalleled degree of professional comment on a broad spectrum of matters relating to energy, economics, politics, and life in an energy challenged world. I personally benefit greatly from the broad exposure to information that I would otherwise never encounter. The topics are presented faithfully and sincerely with full scope for those with other pespectives to challenge and comment. The technicla competence of the contributors is of the highest standard. in my opinion.

  56. BilB
    August 7th, 2011 at 13:34 | #56

    The problem with public transport, Fran, is that it is not overall time or cost efficient. It can be efficient but usually only in a narrow field of useage, usually the daily trip to work for those who work regular hours and live near to a trunk line which passes or terminates near their destination. For everyone else or most other situations PT is a huge failure.

    A friend, who has a farm management degree (I say this to indicate that he is constantly testing the efficiency of how things work around him) took his 4 kids on a public transport outing to Manly from the Blue Mountains. This trip was going to take all day no matter how it was done but the cost was over $150 for transport and some food along the way. By personal transport this cost would have been half and several hours at least shorter.

    In my one (so far) trip to China, every trip to and from the factory was shared with others. Even each trip in the car (saab) of the business owner. They are very good at trip sharing, it cost little extra time, and was socially interesting. The cell phone makes this work very well. Perhaps there is an app there to be done by some clever programmer. The Car Pool app.

  57. Salient Green
    August 7th, 2011 at 14:13 | #57

    I’ll second BilB’s vote of confidence in The Oil Drum. A quick search back reveals physics professors, engineers, a PhD in economics, a PhD in chemistry, a professor of energy economics and associate professor of computer science and systems.

    There is also a robust comments section from which you can often learn even more than the article.

  58. Salient Green
    August 7th, 2011 at 14:27 | #58

    An important point to make about peak oil, which I gleaned from Question Everything, is that if the extraction rate of oil is at its peak now, then the total net energy available to the economy to do work peaked 20 or 30 years before. The EROEI of oil has declined steadily, if not exponentially, from around 100:1 to 10:1 Saudi and 3:1 US.

  59. John Quiggin
    August 7th, 2011 at 14:44 | #59

    @Salient Green
    In which case, the peak in net oil energy per person was even further in the past, strengthening the conclusions of the original post

  60. John Quiggin
    August 7th, 2011 at 14:46 | #60

    @Christopher Dobbie
    Yes, that’s the point. Each of those people is making do with less oil, and, in most countries, doing a lot better than they were back in 1980 when everyone was consuming more oil. Conclusion: oil consumption is not a critical determinant of welfare

  61. Freelander
    August 7th, 2011 at 14:55 | #61

    Substitutes due to discovery and increasing knowledge and changes in relative prices, and productivity improvements and changes in relative pricing leading to more efficient use.

  62. Salient Green
    August 7th, 2011 at 15:00 | #62

    JQ, the extraction rate now is more or less steady but when it starts to decline the EROEI will be a multiplier for a faster decline in net energy. That could make things more difficult. Hopefully the extraction rate will not drop too quickly.

  63. rog
    August 7th, 2011 at 15:17 | #63

    For those wanting to see Sydney, they are doing Sunday family deals $2.50 a head unlimited travel bus train light rail and ferry.

  64. August 7th, 2011 at 15:39 | #64

    Oddly enough, most people who worry about Peak Oil are also environmentalists concerned about climate change. From this viewpoint, which I share, Peak Oil looks like good news rather than bad.

    Neither good nor bad. The increasing price for oil doesn’t just fuel interest in renewable energy, it can also provide an impetus to go back to coal.

    Coals a lot less clean than oil, and there’s still enough of it in the ground to well and truly screw the climate.

  65. Ikonoclast
    August 7th, 2011 at 16:45 | #65

    The real and very considerable problem is that we need to transition from the current situation (87% of world power provided by non-renewables) to a situation where 100% of power is provided by renewables. The timeframe for doing this (to hopefully avoid catastrophic climate change and to stay ahead of economic contraction by energy scarcity) is about 40 years. That is by about 2050.

    In that time span, at current population and economic growth rates (assuming ongoing growth as Prof Quiggin does) the world will move from needing about 475 exajoules of energy per annum to needing to needing about double that or 950 exajoules. The IEA in 2008 predicted a 50% increase in world energy needs by 2030. A conservative estimate of another (non-compounding) 50% would equal 100% by 2050.

    Given that about 4/5 of our current energy production must be retired by then (in fact it is more but lets leave it at that) this means we must find and collect (380 + 475) = 855 exajoules of new renewable power by 2050.

    Intruigingly, this mob;

    http://www.fastcompany.com/1751784/for-12-trillion-everything-can-go-right

    reckon that we can build 400 exajoules renwable capacity by 2050 for $12 trillion. I have no idea how they costed this. However, on a quick read of the article they do not seem to factor in the imperatives to retire existing non-renewables. Thus we need more like 800 exajoules. Let’s assume another 55 exajoules saved by efficiencies. I had already allowed for some efficiencies above but lets allow for some more. 800 exajoules on these costings would cost $24 trillion of todays dollars.

    Perhaps, JQ could comment on the $24 trillion price tag and its feasibility. I suspect the price as such is feasible. I just wonder if all the raw materials are there to make the extensive infrastructure. Remember that solar and wind energy are large by very diffuse sources, requiring very extensive collection infrastructure. Plus we need to fund the changover in energy terms by using a good part of the remaining non-renewable endowment to build the renewables.

  66. Hermit
    August 7th, 2011 at 17:44 | #66

    @Ikonoclast
    This is why many think it can’t be done without fission energy based on E = mc^2. It’s hard to see a silicon panel factory being exclusively powered if not expanding by the same panels. The Chinese who must get the credit for recent PV price drops of course use all the coal they want. It’s a double whoopee because their customers in the West get subsidies.

    Current world energy use is both unsustainable and inequitable. To stay at our current total continuous energy use of 15 Tw a global frugal middle class of 8 bn would need to use less than 2 kw each. The West’s middle classes use about 5 kw now. That’s a future with no coal, gas or nukes. Goodbye cars, plasma TVs, high protein diets, plane travel and air conditioning. A fulfilling career will revolve around growing spuds.

    If somebody can explain how it can be done I’m all ears.

  67. sam
    August 7th, 2011 at 17:46 | #67

    I’ll just add my weight to the “cutting into the fat” theory. There are many oil consuming activities which could be quite easily replaced with substitutes for little cost. There are far fewer (but almost essential) activities which have only very poor substitutes. So oil consumption per capita could have declined from a peak 30 years ago without ill effects, but at some time in the future a lot of problems will emerge.

  68. sam
    August 7th, 2011 at 17:48 | #68

    @Hermit
    Solar panels have sufficient EROEI to reproduce themselves (and more) and you know it. You have brought this up before in earlier posts and were shown to be wrong.

  69. Mulga Mumblebrain
    August 7th, 2011 at 19:18 | #69

    I still believe that the total consumption of oil and other hydrocarbons remains the central problem. It may be true that average consumption has dipped without appreciable consequences, so far, but for how much longer? As population increases, as demand increases from wider use of automobiles and greater air travel and marine transport of goods, I think we will reach a point where efficiency increases are swamped by demand exceeding falling production. That must lead to higher prices, this demand destruction starting with the poor, increased agricultural input costs, thus increased food prices and increased greenhouse pollution as currently unprofitable enterprises like oil sands, coal to liquids, various projects with shale and keragens etc all become feasible. The cornutopians say that there are several trillion more barrels in these sources, and if they are touched, there goes climate stability. To make it even hairier, the dementors of the Tea Party tendency, in the US, are determined to revoke energy efficiency programs and standards and gut scientific budgets. Their fellow lunatics in the UK and here, are, reading between the lines, fervently expecting the times to suit them, and allow similar insanity to run amok here.

  70. Fran Barlow
    August 7th, 2011 at 20:21 | #70

    @BilB

    I’m largely sympathetic to your claims against public transport. In even the best designed conurbations, there will be times when sole occupant ad hoc car travel will be the least of all evils. I’ve also suggested (including at this place IIRC) that the idea of some sort of crowd-sourced WAP enabled car-pooling sounds plausible.

    Of course. no major Australian city would count as “the best designed conurbation” so there’s a long way to go before we start getting to that point.

    As to your travelling group, while I’m keen on the idea of intercity HSR, I’m samongst those who reagrd high speed rail within the major conurbations as very worthwhile. We really ought to have a system that would allow people to travel from the Blue Mountains to the city in about 40 minutes.

    As to the cost, I’d be very surprised if the true cost of a 200km round trip (plus parking) weren’t close to $100. People consider only fuel, but in practice, if you do your sums properly, the petrol is just the most obvious expense. You are at risk of a breakdown, and further expense (towing, new transport etc) and of course your depreciation and recurrent maintenance per km must be accounted.

  71. BilB
    August 7th, 2011 at 21:07 | #71

    Fran, vehicle depreciation depends entirely on the age of the vehicle. From taxation point of view you can only depreciate an asset once. For the young who use second hand vehicles more, deprecition is entirely different to the retired who are more likely to be driving new vehicles. The depreciation period is also an issue. I say again that most people do not consider depreciation into the daily running cost formula for their vehicles. The other reason for this is that even for those families who utilise public transport the ownership of a vehicle is seen, these days, as an essential family asset which they must afford regardless.

    Having said all of that, public transport is still an essential part of the mix of solutions. This is why a collapsible pushbike is one of my three personal projects. My design now largely framed up will collapse to 320 x 420 x 140 at about 7 kilogram (larger than I wanted but that is with the larger wheel size) with a 7 speed gear hub and fully internal drive (now exposed messy bits). Larger than I originally planned but that is with the larger wheel size. The idea is that one can have 6 of these in the boot of the car and have room for a picnic basket, or it is small enough to carry on public transport for extra range at the end of a PT commute. Another feature is that it can be converted to an electric bike in several minutes. But the point is that there are ultimately a variety of solutions to every problem, even if they have not yet been devised.

  72. BilB
    August 7th, 2011 at 21:34 | #72

    Ikonoclast@15,

    I calculate that the entire world’s current energy delivery can be converted to CSP for about 12 trillion dollars based on estimates from Europe of 7 billion dollars per gigawatt of baseload capacity, so the UN report is credible in my opinion. Asuming my figures are close that is, which I based it on global delivery of 1.71 x 10^16 watt hours.

  73. Tim Macknay
    August 7th, 2011 at 22:29 | #73

    @BilB
    I must be getting cynical. I used to read The Oild Drum quite a bit, but I got tired of reading speculative pieces by people well outside their fields of expertise ‘proving’ yet again that renewable energy always has an EROEI of less than 1, based on the most pessimistic available assumptions, or that nuclear energy has an EROEI of less than 1, based on the most pessimistic available figures, and so forth. I haven’t been there in a while – maybe it’s improved. I haven’t disputed that the technical articles written by the experts in the relevant field are good quality. I admit I was a bit surprised that BilB is such a staunch defender of it, given the number of ‘renewable energy is a false hope’ type pieces it has published. Bit, as I said, maybe it’s improved lately.

  74. Tim Macknay
    August 7th, 2011 at 22:41 | #74

    The other thing that put me off The Oil Drum was the persistent adherence to several theories that are easily shown to be wrong, such as the ‘export land model’, which ignores the fact that consumption in importing countries can and does decline, and the theory that the collapse of the Soviet Union was caused by peak oil.

    I guess there’s something to be said for presenting a variety of views, but mixing actual expert opinion and crankery (which IMHO, was the mix at The Oil Drum) tends to make me doubt the value of information. The tendency of many commenters in the The Oil Drum comments threads to accuse people of malfeasance for simply expressing a divergent view from that of the author of a post was also a bit off-putting. Anyway, I hope that puts to rest any suspicions that I am a shill for big oil, or Murdoch, or something.

  75. BilB
    August 8th, 2011 at 02:35 | #75

    Tim Macknay,

    If you have a problem with particular Oil Drum articles or authors, take it up over there. It is inappropriate, in my opinion, for you to make the critical remarks that you are making here, implying that you have superior knowledge, without supplying links, so that others can evaluate your assertions on the specific articles that you are citing.

  76. John Quiggin
    August 8th, 2011 at 05:10 | #76

    @Ikonoclast
    I haven’t gone over this in detail, but $24 trillion over (to make things round) 24 years, sounds about right. World output is about $50 trillion, so $1tn/year is 2 per centl, which is the kind of value I would expect.

    To bring things back to the Australian economy, our share would be about $480 billion, or $20 billion a year. A 2GW coal-fired power station would cost around $5 billion, but given the absence of fuel costs, 2GW of (availability-adjusted) renewables would be competitive with coal at $10 billion or more. So, you would be adding/replacing a coal-fired power station every year or two.

  77. Ikonoclast
    August 8th, 2011 at 09:42 | #77

    Show me the visionary projects! (Apologies to Jerry Maguire.)

    If it is possible to replace all fossils with renewables why haven’t we started in earnest? That’s not a rhetorical question. I do genuinely wonder why we have not started in earnest. Though some may now point to evidence that we have started in earnest.

    It seems to me that renewable feasibility depends on a number of necessary conditions (the order of the points does not imply any order of precedence);

    1. Financial feasibility. (YES)
    2. Broad environmental availability of sufficient energy. (YES)
    3. Energy density sufficient for EROIE viability. (YES, probably)
    4. Sufficient space for required facilities. (YES on a global basis)
    5. Sufficient materials to build the infrastructure. (Unknown to me)
    6. Stabilisation of population and (ultimately) of energy demand. (Unknown).

    On that assessment, it looks more possible to me than it has ever looked before. JQ’s arguments have altered my views quite a bit. I am still firm on the issue of ultimate limits to growth. It is axiomatic that there are limits to growth on a finite earth.

    I still foresee very large transition problems. Oil, compressed gas and their products are energy dense, convenient to handle and convenient to combust for energy. Apart from discretionary and usually solo travel in automobiles (admittedly a big piece of the pie that we can economise on), our transport and agriculture system is completely reliant on oil and gas fuels. We also have all this existing plant, stock and infrastruture predicated on oil/gas use. In addition, the world economy depends heavily on automobile manufacture for economic activity.
    All of this investment must be retired or converted so it is not just about replacing the actual energy production side. Does anyone foresee problems on this side of the eqaution?

  78. Tim Macknay
    August 8th, 2011 at 10:35 | #78

    @BilB
    Others put it forward as a good source of information, and I expressed my doubts about it. Everyone is free to check the site out and make up their own mind. Frankly, I don’t know why you’re getting on such a high horse about it. Anyway, that’s all I have to say on the subject.

  79. August 8th, 2011 at 10:43 | #79

    I hope your peak oil denial works out for you on your planet.

    Over here on planet Earth, peak oil is going to be a real game-changer. Every dollar in capital investment since 1950 has been predicated on a crude oil price – $35/barrel. What that implies is all the capital investment made since 1950 or so is now ‘underwater’ and non- performing.

    Interestingly, all sorts of creditworthiness difficulties are emerging all over the surface of my planet. In our fiat money world, energy is rationed by access to credit, not by access to energy itself.

    The other problem we have to deal with here on planet Earth is the return on consumption activity has been below zero for decades … but the so-called ‘finance community’ has been able to use that credit I just mentioned to ‘bring forward’ funds from the future based on (fraudulent) collateral value of current consumption: a Ponzi scheme.

    The wheels are coming off the Ponzi and everyone is pointing the fingers at the credit purveyors, but what does ‘everyone’ know. The prob is not enough cheap fuel to support ‘growth’ whatever that is, and allow debt service to take place.

    Long story, short: the inhabitants of our planet are now being force to make choices from bad to worse: to drive a car (I’m sure you don’t have those) or enjoy retirement, to drive a car or live in a nice house. The choices are getting harder all the time: drive a car or have a job, drive a car or have something to eat.

    Drive a car or avoid getting killed by a militiaman.

    I suspect reading a newspaper is going to become very difficult if it hasn’t already done so.

  80. John Quiggin
    August 8th, 2011 at 11:08 | #80

    @steve from virginia
    I think this is the kind of comment (I’m guessing as a result of being linked by the Oil Drum) referred to by Tim Macknay.

  81. quokka
    August 8th, 2011 at 11:20 | #81

    @Ikonoclast

    On the issue of materials requirements, Barry Brook has some back of envelope calculations for build rates and materials in three limit cases – wind, CSP and nuclear. Electricity demand is assumed to grow five fold by 2050 which is not implausible given projected increase in energy demand and electricifcation of “everything”. If you think that growth is too high, then scale everything down a bit. Estimates are based on current technology. Here are the required build rates and materials requirements if the whole electricity supply was from each of the technologiesper day:

    Wind: 1,250,000 tonnes of concrete and 335,000 tonnes of steel and 340 sq km of land.

    CSP: 2,215,000 tonnes of concrete, 690,000 tonnes of steel and 45 sq km of land. (That’s 520 m^2 of mirror fields per second)

    Nuclear: 160,000 tonnes of concrete and 10,000 tonnes of steel and maybe a couple of sq kms for the site.

    These are for each and every day from 2010 to 2050. As the clock is ticking away and it’s now 2011, these figure have already gone up.

    But it gets worse. Wind turbines only have a service life of 20 years, so you would have to do it more than twice minus whatever part of the infrastructure can be reused.

    And worse still for renewables because the overbuild and/or storage required is not included.

    Are you feeling pessimistic yet?

    I have yet to see anybody refute these figures

    http://bravenewclimate.com/2009/10/18/tcase4/

  82. sam
    August 8th, 2011 at 11:27 | #82

    How about this for a proposition then JQ; “Peak oil could have quite mild effects given a desire by government to invest wisely in alternative infrastructure like trains. Given that this will does not exist, there will be a lot more pain.”

  83. BilB
    August 8th, 2011 at 14:02 | #83

    Tim Macknay, JQ, felt it necessary to belittle the authors of The Oil Drum because he took issue with his interpretation of their views on specific topics, not the commenters, is how I read his contribution.

  84. John Quiggin
    August 8th, 2011 at 14:27 | #84

    @quokka
    I don’t want to pull rank, but Barry Brook is neither an expert on energy economics nor an unbiased source, and the figures are expressed in a way that makes them almost impossible to interpret (land requirements in square meters per second, for example).

    The fact that the leading experts in the field have reached the opposite conclusion (that 80 per cent renewable is feasible by 2050) impresses me more than the fact that they have not bothered to refute Barry’s figures.

  85. John Quiggin
    August 8th, 2011 at 14:29 | #85

    @sam
    That’s pretty much right, I think. However, i have sufficient faith in democracy to think that governments will have to do better on this issue sooner or later if they want to stay in office.

  86. John Quiggin
    August 8th, 2011 at 14:31 | #86

    @BilB
    For the record, I don’t think I mentioned the Oil Drum except to suggest that “Steve from Virginia” appeared to represent the more apocalyptic and ill-informed section of its readership.

  87. Hermit
    August 8th, 2011 at 14:47 | #87

    @John Quiggin
    The good news is that we won’t have long to wait to see if this is plausible. Both Germany’s Merkel and Japan’s Kan want to go all out on renewables. To get from say 15% to 80% of a static energy use total in 39 years means the displacement must average 1-2% a year. By 2015 we would expect at least 6% more renewables. In Germany’s case I believe the solar subsidy expires in 2013. If such countries are not ‘on track’ in the early years then we must question whether 80% by 2050 is possible.

  88. Freelander
    August 8th, 2011 at 15:09 | #88

    The concern over peak oil is as well placed as concern over peak steam (as used in transportation). That peak was passed some time ago. And except for aficionados without many tears.

  89. August 8th, 2011 at 15:11 | #89

    Quokka, if you live near a wind turbine it’s pretty easy to repudiate Barry Brook’s figures yourself. If you go to one you’ll probably find that the pylons, due to the tragic shortage of dirt in Australia, are stuck in bedrock. This dramatically limits the amount of concrete required. Now Barry Brook lives in South Australia and could have at any time gone to an actual wind turbine and checked its foundation, but apparently hasn’t. I know he’s busy and all, but the fact that he hasn’t done this kind of makes it seem like he just doesn’t care.

  90. Mulga Mumblebrain
    August 8th, 2011 at 15:30 | #90

    quokka, and what are the numbers of years that the toxic waste from wind and solar-thermal need to be safely stored away, lest they kill people? I believe that nuclear waste needs to be kept safe for hundreds, if not thousands of years, unless there is some ‘unforeseen’ event, like an earthquake and tsunami, in Japan of all places (who could have predicted it?) that solves the problem by scattering the waste over the countryside.

  91. Dan
    August 8th, 2011 at 16:13 | #91

    @John Quiggin
    Your point seems to hang on the idea that “spurious idea that there is a 1-1 relationship between oil (or energy) and economic activity.” What is the relationship if its not 1-1? sure you can squeeze efficiency in energy use and use debt to offset anything else, but for how long? Would love to see a paper on this, any links?

    can economic growth continue forever? you seem to be saying yes to this.

  92. August 8th, 2011 at 16:42 | #92

    Dan, think of it this way: I with my trusty pen knife or a trained neurosurgeon could spend the same amount of energy removing a tumour from someone’s brain, however the service provided by the trained neurosurgeon is likely to be worth considerably more in economic terms than my own work. In fact, my own attempt would be likely to result in a dead loss, both in economic terms and in its actual effect.

  93. Freelander
    August 8th, 2011 at 16:52 | #93

    @Ronald Brak

    Clearly you are not a member of the ‘self-esteem’ generation to have such a low opinion of your own neurosurgical skills!

  94. Dan
    August 8th, 2011 at 17:12 | #94

    @Ronald Brak
    Thanks Ronald, but I must be still missing something, hasn’t a lot of energy gone into training that neurosurgeon and none to training you? From what I understand specialisation could not occur without surplus energy. If 2 people on an island had to fish all day just to catch enough fish to survive there could be no specialisation. What I am trying to work out is what would happen in a declining net energy economy. The idea that our economic growth has been on the back of easy energy growth and easy debt growth (future energy) is very widespread. I am not ready to chuck that idea out the window, but I am always happy to review my understanding.

  95. August 8th, 2011 at 17:16 | #95

    Actually I have an implausibly high opinion of my neurosurgical skills given that I’ve never actually received any training in the area. I just didn’t mention my irrational overconfidence on account of how I am a member of the ‘self-effacing’ generation.

  96. John Quiggin
    August 8th, 2011 at 17:33 | #96

    Dan, in a standard representation of technology all inputs (land, water, labor, capital, energy, information and so on) are essential. But you can substitute one for another. For example, with an irrigation and water storage system (which makes use of capital and energy) you can get the same output from less land and water. Or, with better information, you can reduce the energy requirements to operate your irrigation system.

    The general idea is called substitutability in production, and can be found in any good micro-economics textbook.

    For some kinds of activities, opportunities for substitution are limited. But for the economy as a whole, there are plenty of opportunities to expand output of things like brain surgery without any significant addition to the use of energy.

    You can see this easily enough by comparing countries. Developed countries all maintain roughly the same living standard despite massive differences in energy use per person.

  97. August 8th, 2011 at 17:59 | #97

    Dan, it takes about 100,000,000,000 joules to train a neurosurgeon. That’s about how much energy there is in about $110 worth of oil. If you had a pair of twins who were identical except that one had just completed six years of training to become a neurosurgeon and the other had no training of any kind but owned 14 barrels of oil, you probably wouldn’t consider them to be on equal economic footing.

  98. quokka
    August 8th, 2011 at 18:13 | #98

    I honestly find the responses to the figures for material requirements and build rates that I reproduced above to be jaw dropping.

    1. Whatever the material requirements are to build wind turbines, they are as far as I can reasonably determine completely orthogonal to any issues that may or may not be involved in dealing with n* waste.

    2. I fail to see how wandering around paddocks in SA staring at wind turbines is a more rigorous approach than for example referring to the University of Sydney ISA study which found an an average requirement of 433 tonnes of concrete and 116 tonnes of steel per MW wind capacity which form the empirical basis for the final figures for wind. The figures do add up.

    3. I also fail to see how one needs to be an “energy expert” – whatever that is – to make such calculations. Just go to credible and preferably authoritative sources for the raw data and exercise some rather basic arithmetic skills. Not only is this not that hard to do – it is something that should be strongly encouraged lest there be over consumption of the energy kool-aid that James Hansen has recently sharply criticized. Hansen keeps emphasizing this point over and over again – young people MUST be sceptical (in the true sense) of “solutions”. Scenarios with numbers attached are one of the best ways of going about that.

    It seems to me that scepticism has left the room. If the build rate/material requirements are wrong by a lot, eg by an order of magnitude, then show they are wrong and include working and sources. If there is a slight of hand misrepresenting the issues involved, then demonstrate it.

  99. Mulga Mumblebrain
    August 8th, 2011 at 19:07 | #99

    Ronald Brak, your analogy regarding trained neuro-surgeon delivering more value than untrained, if enthusiastic, amateur, depends, I would say, on the identity of the patient. If the ‘client’ was, say, GW Bush, an unfortunate early demise would save trilllions in wasted resources. And quokka, thanks for ‘othogonal’ but could you expand on its meaning in this context? As for constructions costs etc, certainly they might be greater for wind and solar, but their de-commissioning costs are surely some orders of magnitude less than those for nuclear. And, remind me, has any nuclear plant ever been successfully de-commissioned. And that still does not consider the costs of storing nuclear waste for centuries and the horrendous costs if an accident occurs.

  100. Salient Green
    August 8th, 2011 at 19:16 | #100

    And why would you want to de-commission a wind or solar plant in under 100 years. Replace mirrors, PV panels, nacelles and blades but the concrete is very long lasting as is the steel supporting structures with proper maintenance.

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