Another encouraging graph

Wandering around the web, I found this OECD graph on per-capita oil use in residential/commercial/agricultural uses reproduced here

45-Per-capita-oil-use-in-residential-commercial-agriculture-1971-2009-OPEC-WOO2012

It raises some interesting points

Most importantly, in sense that is actually relevant to most of the arguments on this topic, peak oil happened before most of us (not me, sadly) were born[1]. That is, on average, people in our parents’ generation used twice as much oil each year, in residential, commercial and agricultural uses, as we are using today. The turnaround took a bit longer for motor fuel, but the basic patterns is the same. Looking at this graph, the idea that ever-increasing use of oil is necessary to modern life is obviously false. Extrapolation is dangerous, but the graph implies that OECD consumption of oil is converging to the LDC level, and not, as most peak oil analyses assume, vice versa

This outcome is mainly the result of the fourfold increase in the price of oil in 1973. Prices have fluctuated since then, but on average the 1973 increase has been sustained. In addition, the oil shock led to the adoption of a variety of policies aimed at reducing reliance on oil. As with the price increase, these policies haven’t been pursued consistently, but the general tendency has been to discourage oil use. Together, over four decades, prices and policies have reduced consumption per person by half. We’ll need more vigorous measures to reduce carbon emissions per person by 80 per cent, but there’s no reason it can’t be done.

Oil was mostly replaced by gas and coal-fired electricity, so there wasn’t a big reduction in carbon emissions. But there’s a strong similarity between arguments about the special properties of oil (easy storage and transport, energy density and so on) that made it the preferred fuel in nearly all uses in 1973, and arguments about the various inconveniences of renewables (intermittency and storage problems). The example of oil shows that if the price signals are right, people will find a way to switch from one energy source to another, regardless of the convenient properties of the original source.

The other source of reduction in oil use was increased energy efficiency. Again the graph above is a convenient refutation of claims about an inevitable ‘rebound’ effect. If increased energy efficiency is a response to a higher prices, there will be no such effect.

fn.1 BTW, it was my birthday yesterday – thanks to Megan (who dug this fact out of the archives) and others for birthday wishes

90 thoughts on “Another encouraging graph

  1. @Hermit
    A dollar-to-dollar comparison of purchase prices of EV and IC cars is inaccurate, in the same way as a dollar-to-dollar comparison of the costs of renewable vs. fossil generating capacity. The running costs of the EV are much, much lower. The total cost of ownership is still higher, but by much less than appears at first sight. Renault have the right idea: with their latest offering in Europe (the Zoe), you buy the body and lease the battery, so the running costs look similar to the IC we are used to. The Zoe sells for €20,000 before subsidy (<€14,000 net in France), so it's only twice a comparable IC car.

  2. As an aside, the world consumes as much oil every single day as the volume of water that flows over Niagara falls in 8 hours. That’s an awful lot of oil.

    There are a lot of people on the planet.

  3. @TerjeP

    Roughly 26% of that oil is consumed by the US alone.

    The next 29% is consumed by EU, China and Japan.

    The rest of the world shares the leftovers in very uneven measure.

  4. @Megan
    In recent days the West Texas Intermediate oil price has been nudging $100 a barrel with the Tapis price relevant to us around $115. At the height of the 2008 GFC WTI hit $147 leading some to speculate that for practical purposes $200 is the limit. Think retail petrol at $3/L here but a lower price than that has knocked the wind out of the EU economy.

    If this theory is correct we’ll never pay more than $3 a litre for fuel. The downside is that fuel may be effectively rationed e.g. by massive unemployment. I don’t think $60k electric cars will help outer suburb battlers so I think we may flirt with natural gas powered cars for a decade or two. Eventually that resource will go as well. Maybe there are just too many of us expecting high mobility.

  5. @Hermit

    I’m a big fan of free public transport. It has to be completely free – no ticketing, cash handling, enforcement etc.., and it has to be expanded as far as necessary to fill demand.

    Unfortunately, ideas like that stand no chance with our political system (dis)functioning as it currently is. Ever since Firestone, GM and Standard oil conspired, successfully, to destroy the US tram system and transition transport to oil/internal combustion (the “National City Lines” conspiracy) our governments have refused to address transport seriously.

    I don’t know if there is sufficient proof, but I’m fairly certain that the loss of Brisbane’s trams was an extension of that conspiracy (eg: the mysterious 1962 Paddington tram depot fire that destroyed most of the city’s trams in one hit – the City Council hadn’t insured the trams or the depot).

    Some “big oil” conspiracies are real, not just theories!

  6. As for the graphs of the p.c. data of oil consumption:

    Setting aside questions about the quality of the data, the graph is consistent with micro-economics. But it is not necessarily consistent with the ‘free market believe’ because the significant relative price change (oil price hike) in or around 1994 was brought about by OPEC. As such it provides a historical example of an administered price for ghg emissions leading to a reduction in p.c. emissions.

    The limitations of the entrenched habit of having ‘micro-economics’ and ‘macro-economics’ shows up again. What is the total oil consumption during this period?

    It is the total oil consumption which is relevant for peak oil. It seems to me only if one starts off with textbook micro-economics and the premise of a ‘free market’ could one possibly interpret the graph as being related to peak oil (marginal rates of production and marginal rates of substitution). But it was an administrative (collusion) relative price change not a ‘free market’ outcome.

    A time series of total oil consumption is, in one way or another related to the time series of oil consumption per capita and the time series of population growth. The following web-site contains a graphs of population growth for industrialised and developing countries. I can’t garantee the categories are comparable to the p.c. oil consumption graphs. On the contrary, since countries have differing development paths, the categories in both sets of graphs are likely to be wrong in some sense. But, as an indication of the importance of population growth, the web-site might suffice.

    http://www.google.com.au/imgres?imgurl=http://www.wrsc.org/sites/default/files/images/2012/1_world_popluation_1.jpg&imgrefurl=http://www.wrsc.org/attach_image/world-population-growth&h=381&w=580&sz=91&tbnid=Cl03sJ3iAr2jsM:&tbnh=79&tbnw=120&prev=/search%3Fq%3Dpopulation%2Bgrowth%2Bworld%26tbm%3Disch%26tbo%3Du&zoom=1&q=population+growth+world&usg=__IlG-69czIq-iZ2wc6fGX1NY74UQ=&docid=d-nTHe7DpxzsKM&hl=en&sa=X&ei=w75YUf3NLYmiiAfMjoC4Aw&ved=0CFQQ9QEwBw&dur=10315

    It seems to me, a difficulty with the acceptability of the Kyoto protocoll lies in the dual aim of reducing global ghg emissions (an aggregate) but working with per capita emissions targets. I believe the latter was intended to assist developing countries in ‘catching up’ a bit – or to put it another way, not giving the industrialised countries a permanent advantage. Am I wrong is saying there is one concurrent target missing to make the scheme credible, namely a population growth target, conditional on which the per capital emission target is set? This is easier said than morally and politically supported

    In my reading, there is a postive message in the p.c. oil consumption graphs when combined with daily life experience. Our (OECD)standard of living hasn’t declined even though the p.c. consumption in developing countries has increased a little bit. I expect something similar with ghg emission pricing.

  7. Fatal error correction please: The oil price hike took place in or around 1974 and not 1994. Sincere apologies.

    I can’t figure out why the error jumps in my face only after I submit!

  8. @Megan

    I’m a big fan of free public transport. It has to be completely free – no ticketing, cash handling, enforcement etc.., and it has to be expanded as far as necessary to fill demand.

    I used to favour that, but I’m now disinclined. To make the case, one has to argue that public transport has a greater claim on community support than every other service that is truncated due to capital or recurrent cost. I doubt that is so. I’m also not sure why public transport commuters, who tend to be better off than the un(der)employed ought to get this subsidy. Yes, there is a collection cost, but it’s fairly trifling in relation to revenue.

    You could make a case for easier access to concessional or free travel for those on low incomes.

    I also don’t agree that the cost of public transport deters many people from using it. At peak times especially, it’s often standing room only. A much more potent deterrent is unavailability of service, poor connectivity or lack of comfort (being on a really crowded bus or train is tough at the end of a long day).

    Let’s make public transport better value for money by having it more available and less crowded and better matched to need. As long as it ticks these boxes, paying for it is entirely reasonable. I’d happily pay 20% or even 50% more depending on how well it did in these respects. As these benefits were delivered, you could progressively raise the cost of private road usage to fund improvements to the system and reconfiguration of cities to make public transport easier and lower cost to deliver at quality.

  9. @Fran Barlow

    I also don’t agree that the cost of public transport deters many people from using it.

    Perhaps you should come to Brisbane, Fran. The cost of a fare to the CBD from any of the outer suburbs and surrounding local government areas where over half the population lives is a minimum of $7.80 each way, per person. Not much less, btw, for inner suburbs. For a couple, or a couple with commuting children, the cost difference between public transport and car use with paid all day parking is marginal or negative.

    Users of public transport in Brisbane resort to amazing stratagems to reduce the cost and navigate the fare structure. For example, Campbell Newman fulfilled his election promise to reintroduce the ‘pay for no more than ten trips per week’ system that went out when they brought in Go-Card, the Qld equivalent of Myki (he then jacked up fares a couple of months later to pay for it). So thousands of city workers take useless trips for a couple of blocks around the city each week to build up journey credits against their extortionate commuter fares. In my workplace of a dozen, two colleagues do this every week and two more do it at least once a month.

  10. @Fran Barlow

    The cost: Vehicles, maintenance, wages, fuel/electricity. The ‘Go-Card’ system cost something like $50m to buy and install. That expense produces no revenue. Finding the break down of expense and revenue is very difficult so I’m stuck with generalisations.

    If it was totally free there would be no costs for ticketing, cash handling, enforcement and associated admin. There would be increased efficiency through speed loading/unloading passengers.

    In the 1940s Brisbane moved something like 160million passenger trips pa. The population has doubled and usage roughly halved.

    The direct savings: Road construction/maintenance, pollution/accident health costs.

    Benefits: decreased road congestion for car-users/commercial vehicles etc.. & therefore faster trips, increased amenity, financial benefit to businesses by delivering customers and staff, less pollution, great for tourism.

    If it were free I’d bet the “subsidy” would be tiny compared to the indirect subsidies going to the road-users/car related industries.

    In Brisbane every time there is a big sport event public transport is free for ticketholders. They seem to be able to do it for the corporate big business of sport, but not for the rest of us the rest of the time.

    I’d really like to see a genuinely transparent and independent economic analysis taking all of the factors into account. I still think totally free public transport would be a net benefit to society.

  11. @Hal9000

    I suppose I was thinking mainly of Sydney. You can live 40kms from the centre of the city and still get unlimited train travel to and from the city for a week for $40. Even Penrith (50kms) is $40. I’m not sure about the buses though — they are a bit more expensive.

    Brisbane does sound a horror on your description. Acknowledging that is not the same as arguing for free public transport of course.

  12. @Megan

    I still think totally free public transport would be a net benefit to society.

    Possibly, but would it provide as much net benefit as subsidised means-tested public (or semi-public) housing? Better public schools? Better services to children?

    These are questions that don’t admit easy answers.

  13. Word War II provides a dramatic example of how oil use can be rapidly cut while not only maintaining but increasing industrial production. When I mention this fact it is often countered by the Creampuff Theory of Human Development which states that in our modern age even a mild inconvenience such as carpooling can and will destroy human civilization in a way Nazi Germany and Imperial Japan could not.

  14. @Fran Barlow

    I don’t see it as ‘either/or’. Universal free healthcare, free education and public housing are all non-negotiable in my book.

    Hal: Some free-market entrepreneur could charge city workers a fee to collect their go-cards in the morning, make 10 trips up to Spring Hill or on the train between Central and Roma St and back and have them back in the office by 5pm!

    Say $10/card, you could probably work the timetable to knock off 10 trips/hr = 7 cards a day = $350/wk. I imagine there are very stiff penalties for doing that.

  15. There is no such thing as a free lunch. Milton Friedman was wrong about many things but he was right about that.

  16. Ever noticed that the suburbs with train stations are the ones with expensive housing. The well off buy their way to the head of the public transport queue. Which makes the case for a subsidy as some sort of income redistribution measure kind of weak.

  17. a transport economist mate told me that buses work much better in winning buiness when they are on time and no more than ten minutes apart.

  18. @TerjeP

    Ever noticed that the suburbs with train stations are the ones with expensive housing.

    There is something to this, though it’s not clear to me that the land at Rooty Hill (which has a station) is a lot more expensive than the land at nearby Whalan or Dean Park. I’d lso be surprised if it turned out that buying a house at Longueville or Greenwich or Cammeray or Crows Nest were cheaper than buying the same house at Artarmon or St Leonards or North Sydney notwithstanding that the latter have stations.

    Doubtless a station (especially one that has the express service to the city stop at it) will, ceteris paribus, attract more buyers than one that hasn’t, but one shouldn’t overstate it.

  19. Jim – if they were ten minutes apart I wouldn’t much care if they were late on occasion.

    On time running as a KPI can create some perverse incentives where drivers with buses that are not quite full skip stops with waiting passengers to make up time.

  20. @TerjeP

    On time running as a KPI can create some perverse incentives where drivers with buses that are not quite full skip stops with waiting passengers to make up time.

    Speaking as someone who drove a bus in 1980-81 (Atlanteans, Leyland Leopards, Tigers, and the early Mercedes) for the then UTA in Sydney, the other thing that occurs is a tendency to cut corners at embarkation, so that you take off before people who have just got on are secure in the bus, which, particularly in the case of our older folk or someone who has had a couple of drinks and doing the right thing, is not ideal. You can get a little heavier on the peddle and toss the bus about in an attempt to make up time and this also reduces passenger comfort and can prejudice safety.

    The old 417 route from the Quay to Central was pretty much impossible to timetable because it was entirely dependent on how Pitt St was flowing.

  21. the trains were on time in Tokyo, and stopped for about ten seconds, and ran 180% to capacity. The buses were terrible because of the road traffic.

  22. Rog – I bought a quarter acre in Sydney about seven minutes walk from the railway station. If I had bought a similar lot in the area at a 30 minute walk from the station I would have saved quite a bit of money. It seems pretty consistent to me that proximity to a railway means higher land value in Sydney. All else being equal.

  23. @Mel

    Strictly speaking – of course there is no such thing as a free lunch.

    The fluoride in our drinking water, for example, costs Queenslanders about $40 million pa. But it is “free” in the sense that we all get it from the tax-payer funded base upon which all public services are provided whether we need it personally or not.

    People are selective in their views of what should/could be “free” and what absolutely cannot be “free” but must be funded according to strict “market” principles.

  24. @Megan

    People are selective in their views of what should/could be “free” and what absolutely cannot be “free” but must be funded according to strict “market” principles.

    And speaking as a socialist, I’d say that’s a pretty good thing.

  25. Megan – isn’t the cost of fluoride built into the utility price paid for water?

  26. @Mel

    Not true, all capitalists get free lunches. The workers do the work and the capitalist gets the money.

  27. @TerjeP

    I’d have to look into the way the dosing is paid for and whether that cost is quarantined.

    Under the ‘Fluoridation Capital Assistance Program’ the actual capital costs of about $72.65million came straight out of the free-lunch-box. If you consider drinking water should strictly be user pays then this fails the test, the government paid for it.

    Of course, I argue that the government could also pay for 100% free public transport, for the reasons I’ve given before.

  28. @TerjeP

    LOL. In Brisbane, being closer (walking distance) to many train stations means a higher probability of your house being robbed. Train-riding house break-in thieves you see. I deliberately live a long way from train stations for that very reason.

  29. Megan:

    Water fluoridation is one of the most cost-effective public health programs available. The public cost of fluoridation is only a tiny fraction private cost of dental work caused by not fluoridating. From the US CDC:

    ” In fact, the economic analysis [of fluoridated water] found that for larger communities of more than 20,000 people where it costs about 50 cents per person to fluoridate the water, every $1 invested in this preventive measure yields approximately $38 savings in dental treatment costs.”

    Ikon:

    “Not true, all capitalists get free lunches. The workers do the work and the capitalist gets the money.”

    False. If workers self-organised into collectives to produce the goods we want at competitive prices, capitalists would be redundant. But they don’t. Hence capitalists provide a vital service for which they are entitled to a fee.

    Anyway, PrQ will get cross if we continue to disrupt his thread with OT remarks. Anymore discussion of these topics should be in the sandpit.

  30. To try to get back on topic, I would have thought that the key point here is that in a period when the per capita GDP of the most populous countries in the developing world has at least doubled (in some countries quadrupled) their per capita oil use has not. At the same time, OECD countries have been adjusting – suggesting that as John says there is a convergence. Not hard to see why convergence happens. Prices are leading to takeup of alternatives in both sets of economies, but the OECD is coming off a higher base and a much more entrenched reliance on oil. However the trend is good.

    Which indicates a couple of things:

    1) poor countries coming out of poverty need not be at the cost of the global climate. We had better hope so – because it both will and should happen.

    2) price signals change consumption patterns – if they work for oil, they ought to work for other fuels.

  31. I’m troubled by the rationale given for coal exports to developing countries, namely to help them get ahead. That apparently clears our conscience about taking the money while we tell ourselves we are rapidly weaning ourselves off coal. If we’re so technologically superior and morally upright we should decline to export coal but show these countries the alternatives instead.

    The other problem with coal exports is emissions by proxy. Thus Australia can export iron ore and coking coal or alumina and thermal coal to Asia then re-import the products from our own ingredients and fuels. However we’re off the hook for the emissions. I think that makes us carbon sleazebags.

  32. False. If workers self-organised into collectives to produce the goods we want at competitive prices, capitalists would be redundant. But they don’t. Hence capitalists provide a vital service for which they are entitled to a fee.

    Amazing that this needs explaining.

  33. does the graph count the oil used for petrochemical products such as plastics and fertilisers?

  34. TerjeP :

    False. If workers self-organised into collectives to produce the goods we want at competitive prices, capitalists would be redundant. But they don’t. Hence capitalists provide a vital service for which they are entitled to a fee.

    Amazing that this needs explaining.

    the anomalies extant to the first can be illustrated by the old standby Mondragon.
    how it has managed to survive in the face of implacable capitalist hostility?

    it’s not the exchange for services rendered that is the problem.

    it is the scale of return on the exchange.

    not that i would hope you find yourself in the desperate situation of being in a completely free and unregulated market where your diamonds aren’t worth their weight in potatoes.

    never happened?
    never could happen?

  35. @may
    “how it has managed to survive in the face of implacable capitalist hostility?”

    The question should be, why hasn’t its model been replicated more widely? Since it’s so successful and all.

  36. TerjeP, if cooperative ownership is so efficient, why are there so few cooperatives?

    Workers’ cooperatives should be able to slowly under cut other firms on price because they do not have to pay a profit to the capitalists.

    Building societies, credit unions and some life insurance companies were mutually owned by their customers, but they fell out of favour because of a lack of competitiveness.

    Cooperatives are not economically viable because of intrinsic difficulties of entrepreneurship and management and most workers prefer working in capitalist firms for a wage rather than waiting for the co-op to start-up and hopefully break-even.

    Originally, most kibbutzim followed strict socialist policies forbidding private property; they also required near-total equality of income regardless of differences in productivity, and in some cases even abandoned the specialisation of labour. anyone who wanted to leave could only leave with the shirts on the back.

    Kibbutzim are communities whose aim is equal-sharing. They are expected to unravel because of moral hazard and adverse selection. Other organisations subject to adverse selection and moral hazard are professional partnerships, co-operatives, and labour-managed firms because they are all based on revenue sharing.

    Kibbutzim have persisted for most of the twentieth century and are one of the largest communal movements in history. 40% are still run on communist principles.

    The founders of kibbutzim were socialist idealists wanting to create a new human being.

    Ran Abramitzky is writing a book The Mystery of the Kibbutz: How Socialism Succeeded See http://www.stanford.edu/~ranabr/Abramitzky_book_presentation.pdf

    He found that high-ability individuals more likely to leave. The brain drain would be worse if kibbutzim didn’t make it so costly to exit. is this a familiar theme of socialism? Kibbutzim also put prospective members through lengthy trial periods.

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