May 28, 2008

Peak Oil. How We've Tied Economic Growth to Oil

The following collection of salient points regarding the energy crisis and Peak Oil were made by Charles Hall [Peak Oil: The End of Economic Growth?] a major authority on energy. He was the major force behind that great poster that I had added to this blog last week. Please read carefully each and every point that Dr. Hall makes. He is a national treasure of very important information that we need to become aware of.

1) We have constructed an entire civilization based on cheap oil (and gas), a finite resource.

2) Oil was and remains cheap (yes at $4 a gallon) because the energy return on energy invested (EROI--my thing) in getting it was very high and remains fairly high.

3) Nevertheless EROI is declining – this has many economic effects.

4) The EROI for any conceivable substitute to oil is far less than oil for the foreseeable future.

5) Hence there is no possible substitute, qualitatively and quantitatively, for oil.

6) We are using oil 4 to 5 times faster than we are finding it.

7) Therefore we are just using up our remaining oil reserves, faster or slower depending in part upon economic growth.

8) Increased drilling historically has NOT led to increased oil finding or production.

9) Food prices and availability, subprime mortgages and Wall Street are all tightly related to oil availability and price.

10) Discretionary income in the US is declining and is likely to virtually disappear in the future as more and more of the output of our society is dedicated to the dollars and energy that must be used to get the energy required to run the economy. We must plan for this.

11) Efficiency is important but over rated (long story). It is not a silver bullet.

12) Most oil exporting countries cannot lower prices much as their own population growth requires the oil revenues for public programs. The money does not go only for luxury.

13) All of these issues were laid out very clearly by geologists and ecologists more than 30 years ago but were suppressed by economists who believe too much in markets and technology. The world is finite, we must adjust accordingly.


Pacer said...

Do you mean that the view, I'm ahead if more people are behind me isn't valid??!!!

As long as there are many more poorer people my standard of living is going to be higher by definition!

That feels good!


living in pleasantville said...

The US having only a tiny percentage of the global human population is consuming a quarter of its energy. Furthermore, this energy comes from outside the US.

Now, it would be smart to change our energy needs and especially the sources, but we are about POWER.... and we want our cars powerful (more than we need them to be)...

Pacer said...

and, doesn't the NYC skyline look beautiful at night?!!

I pay (in rent) for this view! Don't go around spreading ideas to turn off lights, ya hear?

Ghassan said...

Pacer, Your remark about the skyline, which we are all paying for by the way, reminds me of a true story that took place around 6-7 years ago at the city council of White Plains in Westchester NY. The city hired an architechtural consultant to make recommendations about whether to allow the construction of buildings more than 18 stories tall. He made a presentation of how the city would look like from the sky given high rise office buildings vs elegant less bulky residential ones. He recommended the ones that make the skyline look better. Moral of the story: Important issues such as urban, planning, traffic congestion, availability of parks and open spaces were not even considered. The only yardstick was whether it makes a nice postcard and how does it look to the birds from up high.