[robsmith]

Intuitively, I've had the feeling for some time that it is world economic growth that is a greater danger to the USA than Peak Oil and has had more to do with driving oil prices higher. So, I started thinking in terms of Peak Oil per capita, then Peak Oil per unit of GDP.

Checking up on this last concept, I discovered Peak Oil per unit of world GDP occurred a long time ago, at least before 1973.

From 1973 to 2004 we have had the following factor increases

1.4 World Oil Production
7.9 World real GDP
2.5 US real GDP
1.2 US Oil Consumption

Oil per unit of GDP has been plummeting for 31 years! Increasing efficiency of oil usage (production or consumption divided by real GDP) has kept us well ahead of the game.

In 31 years, world efficiency has increase by a factor of 5.6. Even in the USA, the most technologically advanced major country, where further advances are most difficult, efficiency has increased by a factor of 2.1.

Efficiency increases so far are nothing compared to what really major price increases would cause. People would move from rural, exurban and suburban to urban areas and from single family homes to apartments. They would also live closer to where they work. There would be far more efficient cars on the road and mass transportation would become more common.

Does any of this mean life would be worse? I don't think so! People who race cigarette boats and drive tanks wouldn't be too happy, but it won't matter much to the rest of us. We should be good for at least a century and by then nuclear fusion will be a reality.

There is really nothing much to worry about here. Let's forget the whole thing, close down this site, and go do something fun like racing cigarette boats.

[Cola-Is-Petroleum]

Things may be alright when oil production is increasing by a factor of 1.4 or what have you, but when it starts to decrease not only continually but at an accelerating rate , that is when things really start to difficult. The sh*t really starts to hit the fan when the current major exporters become net importers themselves (which is were the world is heading).

You yourself have even made an allusion to the diminishing returns of efficiency increases in your post. The first improvements to efficiency are easy, but then they get harder and more expensive, because the lower fruits are typically picked first, so to speak. Now couple these diminishing returns to efficiency with declining oil supplies AND Jevon's Paradox. What do you get? A big problem.

[Doly]

$this->bbcode_second_pass_quote('Cola-Is-Petroleum', 'T')he sh*t really starts to hit the fan when the current major exporters become net importers themselves (which is were the world is heading).

[robsmith]

$this->bbcode_second_pass_quote('Cola-Is-Petroleum', 'T')hings may be alright when oil production is increasing by a factor of 1.4 or what have you, but when it starts to decrease not only continually but at an accelerating rate , that is when things really start to difficult. The sh*t really starts to hit the fan when the current major exporters become net importers themselves (which is were the world is heading).

You yourself have even made an allusion to the diminishing returns of efficiency increases in your post. The first improvements to efficiency are easy, but then they get harder and more expensive, because the lower fruits are typically picked first, so to speak. Now couple these diminishing returns to efficiency with declining oil supplies AND Jevon's Paradox. What do you get? A big problem.

[robsmith]

$this->bbcode_second_pass_quote('Doly', '
')Like many people have said before, Jevon's Paradox only applies when energy supply is plentiful. And it won't be after peak oil.

[mididoctors]

lets go with your figures

oil/gas unit per capita cost rises?

substitution stresses other energy markets?


substitution requires a greater energy input thus escalating a efficencey challenge..

once past peak a liner projection of GDP and efficencey behave in the same liner extension?



$this->bbcode_second_pass_quote('', 'M')y understanding is that production does not strictly follow a bell curve but falls off somewhat more slowly than it increased. So, if it peaks in 2010, we can expect the 1973 level to be reached again some time past 2040, say 2050. By that time, efficiency will have seen spectacular improvements.

[Mesuge]

Well, I must admit I cooled down recently too..
We can powerdown and maintain certain level of high civilization at the same time quite easily. I've seen folks building dirt cheap diy windmills 1-3kW enough for your electricity needs. Heating can be supplied according to your location either as thermal-solar or by high efficiency burning of veggie oil or biomass and with no pollution if you burn it in simple diy pressuarized air stoves at 600C..etc..

VW and Shell are building first biomass gasification plants in the former E. Germany as crazy. It's based on the WWII technology but instead of coal they are feeding the reactor with biomass (crops, scrap wood etc..)..
Sure, it is more expensive energy than just sucking Saudi crude but with top speeds limits imposed on autobahns, trucking moved on railways not a big deal..

Yes, there will be economic recession a bit of starvation and perhaps even something like long emergency but people are devilishly smart critters when it comes to evade the traps of nature. I think we will hit the 10bln population limit at the turn of the century and the following collapse of the entire ecosystem incl. runaway global warming will be much serious issue than catching cold aka today's PO..

[MonteQuest]

$this->bbcode_second_pass_quote('robsmith', ' ')Oil per unit of GDP has been plummeting for 31 years! Increasing efficiency of oil usage (production or consumption divided by real GDP) has kept us well ahead of the game.

[MacG]

$this->bbcode_second_pass_quote('robsmith', 'E')ven in the USA, the most technologically advanced major country, where further advances are most difficult, efficiency has increased by a factor of 2.1.

[gt1370a]

Alternatives to oil (including improvements in efficiency) won't happen unless/until they are profitable. By then they may be too late to implement in time to avoid a crisis, in which case demand destruction will be the only option, and it will be a painful one. Have you read the Hirsch report? They basically say that yeah, alternatives and efficiency and conservation will work, but it may take 20 years to transition. We don't have 20 years.

Example, let's say you wait until gas gets to $5 a gallon and you decide, "I better move downtown closer to work," but by then everyone else is thinking the same thing and real estate prices there have skyrocketed. Can you even afford to move? Is it possible for a builder to cram in more dwellings there? How long will that take?

Or let's say GM has a great idea for an electric car, requiring no gasoline, and assume they have overcome all the technical problems. They won't be able to market and sell that car until they can turn a profit on it. Then, how many people will be in the market for a new car? And you have to build infrastructure to produce the electricity to meet all that new demand.

So yeah, it matters a lot. You can't just all of a sudden become more efficient overnight. You CAN reduce demand overnight, but the consequences of that are what most of us on this board fear.

[Guest]

I'll chip in a couple of brief comments...

Oil intensity (per unit of GDP) in the U.S.A has dropped by 50% since '73 because of substitution of oil for NG in electricity production, likewise for industrial processes (the ones that didn't go offshore) and a temporary improvement in the MPG of the vehicle fleet. For the U.S.A to achieve further efficiencies it would have to quickly turn over it's private vehicle fleet - I believe Amory Lovins has done studies on the potential savings available in this area (the practacalites of his study is debatable).

Comparing the oil intensity of various countries like Luxembourg or Japan to the U.S.A is just plain ridiculous. Read Vaclav Smil if you're interested.

[robsmith]

This thread has largely settled down, so I am going to sum up what my position is now after getting feedback from others and after having some more time to think about the topic.

PEAK OIL AND ITS IMPACT ON SUPPLY

I take "peak oil" to refer to the year when oil reaches its maximum annual production. This is by various accounts supposed to happen before, when, or after half of our oil has been used up. My impression is that the consensus of experts is that it will be when half is used up (ramp down like ramp up), but that the consensus on this board is that it will be after half is used up (rapid drop-off).

The assumption that oil production will ramp down like it ramped up is partly based, I am guessing, on a mathematical theorem (the central limit theorem?) that the sum of a large number of random variables, subject to certain constraints, tends toward a normal distribution. Although we are not dealing here with random variables, the sum of production histories over many oil fields sounds similar.

The assumption that rapid drop-off will occur depends, I think, on (1) the belief that improvements in technology will give us the ability to exhaust oil fields much more quickly and (2) the importance of a few massive oil fields (violating one of the constraints of that mathematical theorem), where oil production some (eg, Matt Simmons) expect to drop off rapidly.

All theory aside, the experience of the lower 48 has been roughly a linear ramp up followed by a linear ramp down. If we take that as likely to be characteristic of world oil production, then peak oil is the date when the supply slips from increasing about 40% in 31 years to decreasing about 29% over the next 31 years. That is, an annual rate of increase of 1.1% will be followed by annual rate of decrease of about 1.1% with maybe two or three years of plateau.

That, then, is the expected impact of peak oil. Supply will slip about 2.2% per annum, relative to the former trend.

GROWTH AND ITS IMPACT ON DEMAND

On the demand side, we have growth in real GDP. World wide, real GDP has grown by a factor of 7.9 in 31 years, an average annual rate of 6.9%. Rates considerably higher than 2.2% will presumably continue into the future for many years in the third world, due to growth in China (currently about 9.1%) and India (currently about 6.2%). The US growth rate in real GDP is currently about 4.4%, Western Europe's is about 2% and Russia's about 6.7%.

Demand, therefore, is probably the more important factor in recent price increases.

IMPACT OF PEAK OIL ON THE WORLD

Impact of peak oil on the world will fall most heavily upon the developed countries, because that is where real GDP is increasing most slowly, but even here it is not clear that it will do any more than cause growth rates in real GDP to drop to about zero. Zero would imply a small drop in real GDP/capita.

Complicating this picture is the certainty that we will see major increases in oil use efficiency as the price of oil rises ever higher. Consider the most obvious problem, the USA's high per capita consumption of gasoline. Fewer gas guzzlers will be bought and more high mileage cars and hybrids. A complete turnover of the vehicle fleet will certainly not be required. Many families have multiple cars. The SUVs will be used less, the more economical cars more. There will be more carpooling, fewer trips for vacations, etc. Use of buses will grow more common, as in less developed countries. Will that annoy the electorate? Certainly. Does it represent a real decline in living standards? Not much of one IMHO. The majority will just get use to traveling less or riding the bus. The wealthy minority will hardly notice.

The major danger is that the annoyed electorate will do something stupid, like elect leaders that put an end to democracy, although, come to think of it, how much worse would that be than our present democracy? Depends on the dictator(s) doesn't it? If we're lucky, we'll get a dictator who murders 0.1% of the population and, after twenty years or so, the country will revert to a much chastened form of democracy. If unlucky, 10% to 50% of the population will be murdered by hare-brained incompetents. Of course, this same could happen even without peak oil, given the current unstable nature of the world's financial system and the huge debt loads in the leading superpower (USA).

Hence, what we have here is an adjustment problem, not really an oil problem. And, IMHO, it will even turn out to be more of a debt problem than an oil problem.

TO RESPOND TO SOME SPECIFIC COMMENTS

$this->bbcode_second_pass_quote('MonteQuest', '
')Some false assumptions going on here. Much of the US per capita use has declined due to outsourcing of industrial production.

[PhilBiker]

from Dmitry Podborits' LiveJournal Blog, as linked to by Jim Kunstler this week:$this->bbcode_second_pass_quote('', 'T')he argument goes like this (I generalize it from all these multiple sources):

Because our economy requires a lot less oil circa 2005 for each dollar of GDP that it generates than circa 1973, therefore it (the economy) is much less vulnerable to oil supply disruptions and oil price spikes than it was 30 years ago.

It is just incredible to me to hear this argument again and again in our enlightened age from such a diverse group of seemingly intelligent people (although I suspect that, say, Dick Cheney may have much more insight into the nature of our energy predicament than he is letting on). If our economy, for the sake of the argument, doubled in terms of dollars of GDP since 1973 (let's measure everything in constant dollars, adjusting for inflation), and (again, for the sake of the argument) our annual oil consumption did not change from back then, we have twice as many dollars of GDP riding on the same barrel of oil we consume, do we not? Doesn't it make the economy twice as vulnerable (as expressed in the monetary impact) to the same amount of oil shortage (as expressed in barrels), instead of less vulnerable?

Let me use this example. Let's say, thirty years ago I started a business leasing out a circa 1973 Buick as a taxi. By 2005, my business has doubled in size and revenue, and currently I lease out two super energy efficient Toyota Priuses as taxis, which together consume the same amount of fuel as the old Buick consumed alone, but produce double the revenue amount (again, in constant dollars). Say, an oil supply disruption grounds my taxi fleet. What will have a bigger impact on the economy in terms of lost revenue -- one stalled taxi or two stalled taxis? Which economy has more capacity to optimize its energy usage and find reserves for growth, instead of shrinking its GDP -- an energy inefficient economy or an energy efficient economy? Which economy is more likely to contract in the face of shortages?

[robsmith]

$this->bbcode_second_pass_quote('PhilBiker', 'f')rom Dmitry Podborits' LiveJournal Blog, as linked to by Jim Kunstler this week:$this->bbcode_second_pass_quote('', 'T')he argument goes like this (I generalize it from all these multiple sources):

Because our economy requires a lot less oil circa 2005 for each dollar of GDP that it generates than circa 1973, therefore it (the economy) is much less vulnerable to oil supply disruptions and oil price spikes than it was 30 years ago.

It is just incredible to me to hear this argument again and again in our enlightened age from such a diverse group of seemingly intelligent people (although I suspect that, say, Dick Cheney may have much more insight into the nature of our energy predicament than he is letting on). If our economy, for the sake of the argument, doubled in terms of dollars of GDP since 1973 (let's measure everything in constant dollars, adjusting for inflation), and (again, for the sake of the argument) our annual oil consumption did not change from back then, we have twice as many dollars of GDP riding on the same barrel of oil we consume, do we not? Doesn't it make the economy twice as vulnerable (as expressed in the monetary impact) to the same amount of oil shortage (as expressed in barrels), instead of less vulnerable?

Let me use this example. Let's say, thirty years ago I started a business leasing out a circa 1973 Buick as a taxi. By 2005, my business has doubled in size and revenue, and currently I lease out two super energy efficient Toyota Priuses as taxis, which together consume the same amount of fuel as the old Buick consumed alone, but produce double the revenue amount (again, in constant dollars). Say, an oil supply disruption grounds my taxi fleet. What will have a bigger impact on the economy in terms of lost revenue -- one stalled taxi or two stalled taxis? Which economy has more capacity to optimize its energy usage and find reserves for growth, instead of shrinking its GDP -- an energy inefficient economy or an energy efficient economy? Which economy is more likely to contract in the face of shortages?

[MonteQuest]

$this->bbcode_second_pass_quote('robsmith', ' ')The assumption that rapid drop-off will occur depends, I think, on (1) the belief that improvements in technology will give us the ability to exhaust oil fields much more quickly and (2) the importance of a few massive oil fields (violating one of the constraints of that mathematical theorem), where oil production some (eg, Matt Simmons) expect to drop off rapidly.

[robsmith]

$this->bbcode_second_pass_quote('MonteQuest', '
')Not a belief, but a fact that improvements in technology and water cut have increased the rate of extraction, especially in the larger fields like Ghawar. So, the decline rate will be higher than the lower 48 experience due to this factor alone. Cantarell at 15% and the North Sea at 17%.

[MonteQuest]

$this->bbcode_second_pass_quote('robsmith', '')$this->bbcode_second_pass_quote('MonteQuest', '
')Not a belief, but a fact that improvements in technology and water cut have increased the rate of extraction, especially in the larger fields like Ghawar. So, the decline rate will be higher than the lower 48 experience due to this factor alone. Cantarell at 15% and the North Sea at 17%.

[robsmith]

$this->bbcode_second_pass_quote('MonteQuest', '')$this->bbcode_second_pass_quote('robsmith', '
')Why should the Saudis pump out their oil at a faster than optimal rate? With prices heading up over the longer term, why not hold back your oil to get the much higher prices that will exist in the future?

[MonteQuest]

$this->bbcode_second_pass_quote('robsmith', ' ')Why would the Saudis "meet demand" rather than maximize their profits?