A Rebuttal to 'Peak Oil' Doomsday Predictions

At The Oil Drum, a detailed article by 'Gail the Actuary' speculates on how declining production of oil combined with rising demand will cause an economic catastrophe, leading to the global economy contracting so severely, that by 2040 it is much smaller than it is today.  The author actually believes that in 2040, most people will no longer be able to afford cars, electricity will be unreliable, and goods and services will be fewer and rarer than today. 

Another article submitted by an different contributor on The Oil Drum arrives at the same pessimistic conclusion, stating that 'economic growth will end one way or another'.  Most of the commenters on both articles are in a groupthink state of agreement that can best be described as a Maoist-Malthusian cult. 

I would normally not bother to rebut something like this, except that this particular essay is so stunningly wrong and annoyingly pessimistic, despite the seemingly meticulous research the author has conducted, that I am compelled to disect how insulated groupthink can spiral into a zone where even the most extreme conclusions are accepted. 

Note that I happen to be someone who actually does believe in Peak Oil theory, but that such a condition generates long-term positives that outweigh short-term negatives. 

The assumptions that the 'Peak Oil' doomsday scenario makes are :

1) That rising oil prices do not cause a long-term downward adjustment in demand.  Oil demand may be inelastic in the short-term, but in the long term, people will buy more efficient cars, carpool, ride bicycles, reduce discretionary trips, conduct more commerce online, etc.  To assume otherwise is to ignore the most basic law of economics.  This is before even accounting for the indirect benefits of declining oil demand such as a drop in traffic fatalities (which cost $2 million apiece to the economy), less wear and tear on roads and tires, less pollution, less real estate consumed by gas stations, less competition for parking spaces, etc. 

2) That rising grain prices will not move consumption away from increasingly expensive meat towards affordable grains, fruits, and vegetables, thereby reducing grain and water demand.  This, too, is economic illiteracy.  If the price of beef triples while the price of rice and potatoes does not, consumption patterns shift.   

3) That there will be very little technological innovation in alternative energy, automobile efficiency, batteries, or information technology from this point on.  In fact, there is innovation in all of those areas, so we have multiple layers of protection against the doomsday scenario, as detailed by these articles :

A Future Timeline for Energy

A Future Timeline for Automobiles

Batteries Set to Advance, Finally

Solar Energy Cost Curve

Terrorism, Oil, Globalization, and the Impact of Computing

4) That most economic growth is not in knowledge-based industries, which consume far less energy per dollar of output.  The US economy today produces twice the financial output per unit of oil consumption as it did in 1975, with information technology rising as a portion of total economic output. 

5) That a major economic downturn, featuring skyrocketing food prices for people in poorer countries, will somehow not translate to a lower birth rate that inhibits population growth and hence curbs demand, and that population projections will somehow not change. 

6) That there will be no humans living beyond the Earth (whether in orbit or on the Moon) by 2040.  The reason this point is relevant is because a society cannot advance in space travel without simultaneous advances in energy technology.  I say that advances in photovoltaic efficiency make Lunar colonies closer to viability by that time. 

7) That we are going to have over 30 years of negative growth in World GDP, despite not having had a single year of negative growth since 1973, and despite the trendline of growth solidly registering at 4.5% a year even today.  I happen to think that by 2040, the world economy will be 4 times larger than it is today.  Even the Great Depression was only 5 years of negative growth, followed by a recovery that elevated prosperity to levels higher than they were in 1929, at a time when World GDP was only at a trendline of 2% annual growth, or less than half the level of today.  Yet Gail the Actuary thinks car ownership will no longer be affordable to most people by 2040. 

Peak oil may be on the horizon, but the US economy has already adapted to oil at sustained prices of $70 or $80/barrel (which is the biggest story that no one is noticing yet), and will soon adapt to $100/barrel.  I want oil to hit a sustained $120/barrel by 2010 to start a virtuous cycle of technological and geopolitical chain reactions that make the world a better place in the long term.  If oil hits $200/barrel, that will cause a deep recession that could last several years, but after that point, we will have adapted out of the oil burden almost entirely, and World GDP growth will resume at 5% a year. 

Could I be wrong and they be right?  Well, let us first see if oil rises substantially above $120/barrel, and if that year has negative World GDP. 

Does anyone feel like defending the doomsday prediction from The Oil Drum?

Comments

[Assistant Village Idiot]

I have often suspected a strong tribal component to the doomsayer's view. "My tribe is not ruling...the wrong people are making money...clearly we are on the brink of some disaster."

[GK]

AVI,

Excellent point. It could be the reason that enviro-doomsters, tax-the-rich zealots, anti-globalization activists, anti-US weirdos, etc. all tend to draw from the same group of individuals.

[Protagonist]

I stopped reading this kind of drivel at "By 2040, blah blah blah." The author might as well say "By 2040, we'll have run out of hay to feed our horses, and flint will become so rare that we'll no longer be able to make arrowheads to hunt our mastodons."

[Joe Ford]

This seems like it may effect oil's next cycle.

http://www.nextenergynews.com/news1/next-energy-news2.13s.html

[World Citizen]

Nah, people in 18-19 centuries used no oil, and yet the economies were developing quite strong... The Oil Drum will only hit US, because US has no infrastructure of public transportation, etc... Europe has electrical vehicles for public transportation, and the electric power is generated using nuclear and solar...
We might have very good batteries by 2015, so no worries, the only worries that I have is that Earth will become a Water World (read recent news about the huge iceberg has left Antarctica?)
If oil hits $5 at the pump, I spend $10,000 to convert my car into electric vehicle the very next day and will get 100 mile range on one 6-hour charge (a friend of mine has a vehicle like that, we tested it, so I'm telling fairy tales here), for long range travel we'll use my wife's Prius.
All those panic articles are merely a bubble... People will survive, economies will adjust, oil is not the only available fuel.... My dad had a natural gas (not gasoline) car for 10 years that was running even faster then the gasoline cars and was happy with that.

STOP FEEDING OIL COMPANIES

[Al Fin]

I agree that most people at the oil drum site are professional pessimists. Either they make money from doomsday predictions, or they get their jollies that way.

Peak oil catastrophe, global warming catastrophe, overpopulation catastrophe, Y2K catastrophe, nuclear winter catastrophe, . . . , . . . ,

It's a sure sign of decadent people with nothing important to do, to spend so much idle time master-baiting on catastrophe fantasies.

[Dave]

By 2040, who's gonna remember some penny-ante prediction by a small group of lame-brained, capitalist-hating, self-loathing extremists?

There is still lots of oil. Known reserves are larger now than they've ever been. First they extracted the easily-accessible, high-quality stuff, then the easily-accessbile, less high-quality stuff (eg. Venezuela), but as prices go higher you can bet your booties that they will go after the giant reserves in shale, much of it is right here in the USA.

Oil is an important resource and it will continue to be for a very long time. Soon automobiles will begin to use other sources of energy, but it will be a long time before they find a non-oil substitute for jet fuel, plastics, etc.

[GK]

So far, several right-wing readers and one left-wing reader have all agreed that the doomsday prediction is not realistic.

It appears that neither Gail the Actuary or the other guy are defending their theses here. They certainly have seen it as I have sent it to them. I will need them to address the seven flawed assumptions I point out, if they are to construct a credible defense of their prediction. Let's see what happens.

[Sam]

I visited the Oil Drum a couple of times looking for expert analysis of the oil industry, reserves, research, etc. But like you I got turned off by the relentless gloom and doom of the articles and the commenters. Rather than a site for learned discussion of oil related topics, it is a gathering place for the pessimistic. So I quit the place.

[Quinn]

You have absolutely no understanding of biophysical economics. We need energy to do work - to get energy takes energy, not GDP or dollars. The energy surplus of ALL fossil fuels has been declining per unit - once it declines in aggregate there will be no economic growth unless the loss in energy surplus is offset by conservation and/or efficiency, year after year. In effect, we have been in a race between technology and depletion and depletion is winning.

Im sure you have good intent but you are criticizing aspects of a topic you know very little about. Read Cutler Clevelands 'Energy Transition' post or "$100 Oil - what a scientist would say to an Investor" (both on theoildrum), for some biophysical insight not based on abstractions.

[GK]

Quinn,

And you have no understanding of technology. Please re-read the article.

To believe what you believe, you would have to assume all 7 of the flawed assumptions above (which I see you have not addressed).

Among them you would have to believe that solar, nuclear, and cellulostic biomass will go nowhere, despite the massive progress that is already happening. You would have to assume that advances in materials science to reduce the weight of cars without compromising strength will not occur, and you would have to assume that better computerized systems that make cars more efficient, and have already yielded benefits since 1990, will somehow halt.

There will be many 4-seater cars available in 2010 (beyond just the Prius), that offer 50-60 mpg. These are already preparing for launch.

Above all else, you will have to assume that rising price will not lead to people adjusting their consumption patterns downward. Econ 101.

So you better rebut the 7 points I make, if you are to appear credible.

[Rich]

I read through the Oil Drum article and it smells like the same old Paul Ehrlich like bullshit that I heard in the 1970's.

They were wrong then, they're wrong now.

[Brutus]

The two sides of this issue appear to each believe the other side has its head stuck in the sand (or nose in the air -- pick your metaphor). I tend toward the pessimistic view and believe material processes (extraction, processing, consumption, and disposal) trump abstract financial analyses at every turn. Both are plagued by considerable problems, which point in the next fifty years to a world very different from the one in which we now live.

To address the alleged flawed assumptions:

"1) That rising oil prices do not cause a long-term downward adjustment in demand. Oil demand may be inelastic in the short-term, but in the long term, people will buy more efficient cars, carpool, ride bicycles, reduce discretionary trips, conduct more commerce online, etc. To assume otherwise is to ignore the most basic law of economics."

I doubt anyone would dispute an eventual adjustment in demand and indeed availability. However, reduced demand (for oil in particular) doesn't solve the problem of ongoing energy needs, nor does reducing demand on one resource and shifting to another. Conservation (out of sheer financial necessity) is in fact the very contraction of options the doomers assert, and it will filter throughout all economic and human activity, not merely discretionary consumption.

"2) That rising grain prices will not move consumption away from increasingly expensive meat towards affordable grains, fruits, and vegetables, thereby reducing grain and water demand. This, too, is economic illiteracy."

Consumption patterns will change, I agree. Meaning that things will be different from what they are now.

"3) That there will be very little technological innovation in alternative energy, automobile efficiency, batteries, or information technology from this point on."

Technical innovation, efficiency, and alternative energy may ease our problems to some degree, but they won't accomplish full sustainability. We take out far more than we put back in, and resource consumption is a true zero sum game in any meaningful timeline. Jim Kunstler says the doom deniers fall into two camps: those who believe we can innovate our way out of catastrophe and those who believe we can organize our way out. They're seductive beliefs but only partially true -- perhaps only negligibly true. Time will tell.

"4) That most economic growth is now in knowledge-based industries, which consume far less energy per dollar of output. The US economy today produces twice the financial output per unit of oil consumption as it did in 1975, with information technology rising as a portion of total economic output."

The U.S. economy may be based on information or knowledge, but Americans still consume material goods. If others with material resources cut off our supply or charge usurious prices, what good will our money do? It's a very plausible scenario that fuel and food will eventually be sequestered for domestic use. Hoarding is very common in times of scarcity.

"5) That a major economic downturn, featuring skyrocketing food prices for people in poorer countries, will somehow not translate to a lower birth rate that inhibits population growth and hence curbs demand, and that population projections will somehow not change."

No argument. Widespread famine and starvation will likely occur elsewhere before the U.S. Again, that means a world very different from now. That's what the pessimistic reports are saying above all: things will be drastically different and not for the better.

"6) That there will be no humans living beyond the Earth (whether in orbit or on the Moon) by 2040. I say that advances in photovoltaic efficiency make Lunar colonies closer to viability by that time."

Hmmm. Whether this is true or not, I can't see how it will solve the problem of excessive resource consumption. It could worsen it, considering orbital or lunar colonies would require considerable material support from Earth, unless of course they are technological marvels of self-sufficiency (doubtful in the short term, meaning before catastrophe strikes). How many billions of people do you anticipate will migrate off the Earth?

"7) That we are going to have over 30 years of negative growth in World GDP, despite not having had a single year of negative growth since 1973, and despite the trendline of growth solidly registering at 4.5% a year even today."

As they say, past results are no guarantee of future performance. Following trendlines is useful, but there are ceilings or limits that eventually come into play. GDP is essentially an abstraction of human activity, and following its projected trend requires both stability and ample material resources to exploit. Other trendlines point to limits on those resources, which threaten overall stability in ways we can't yet fully predict. The complexity of the interlocking pieces of the equation is far greater than the focus on GDP would admit.

[GK]

Brutus,

Thanks for writing the first intelligent disagreement.

To address your points :

1) Oil is just 37% of WW energy consumption. Advances in various technologies will make oil demand more vulnerable to displacement by electricity. All oil will never be phased out, but we just need a large fraction of it to be phased out.

Also, the last 6 months have proven that $100/barrel oil is not dramatically worsening life in America. It is now clear that even $5/gallon gasoline will not shatter the US economy, but will merely cause more carpooling, more Priuses bought than SUVs, etc.

My main dispute is the claim that 'the world of 2040 will be much poorer than today' and that 'car ownership will be rare'. I don't think you are advocating that as a realistic outcome.

2) Meaning that things will be different from what they are now.

Different, but not worse. Perhaps even better. A 50% reduction in meat consumption will merely return people to the dietary norms of 60-100 years ago, which were healthier anyway.

3) We take out far more than we put back in, and resource consumption is a true zero sum game in any meaningful timeline.

Only if you assume that :

a) Oil cannot be even partially displaced by electricity.
b) Innovations in batteries, solar cells, etc. will not happen.

If even modest advancement happens in these two areas, oil demand could fall 10-20%, which is enough to cushion the economy for quite some time.

4) but Americans still consume material goods.

But not more than 10 years ago. Per capita oil consumption in the US has saturated. Oil consumption per dollar of real GDP is half of what it was in 1976.

Material consumption has saturated, and the incremental consumption is now in non-material goods, and services.

6) Certainly not billions of people, but I do think small settlements of scientists will be fully self-sufficient from the Earth, by 2040.

7) Such a major, lengthy departure from GDP has never, ever happened. More of the growth is happening in non-material-intensive sectors. Cellphones are a big driver of emerging market growth, and they do not consume much in the way of materials or electricity.

So are you actually saying there IS a risk of the world of 2040 being much poorer than today? This is what I violently dispute.

[Zyndryl]

lunar colonies won't depend upon Earth for the bulk commodities, since dragging that stuff up and out of the gravity well is not worth it.

Instead, they'll get it from asteroids in cislunar space.

Certain trace minerals and critical manufactured goods (medicines and electronics, for example) will still need to be shipped up.

[Zyndryl]

Also, oil consumption for energy in the US happens almost exclusively in the transportation sector now.

Oil fired electrical generation plants have been phased out since the 1979 oil crisis. And since electricity (starting with plug-ins and then advanced battery cars) will replace ICE-powered cars with or w/o $5/gallon gas eventually, oil is on its last legs as an energy source for even transportation, I think.

Expensive oil is better utilized in the making of high-value plastics and agricultural fertilizer, after all.

[Brian H]

Here's a new entry for your timeline:
2018-20: Focusfusion reactors begin production and emplacement where needed. Output is at ~.15¢/kwh (yes, $0.0015). Construction costs are ~$50/MW. The Oil Economy begins to dissolve and collapse. All other generation plant sites and designs are moved as rapidly as possible into mothballed storage. Or museums. Pollution and GW vanish as issues. Etc.

[Brian H]

Typo correction: $50K/MW ($50,000/MW, or $50/kW)
Versus $1,000+/kW for all current or planned alternatives.

[Brian H]

For oil lovers: Google "Bakken". Enjoy.

[Tushar]

Scott Adams, the creator of Dilbert, wrote, and I paraphrase - If you watch the growth of a week old puppy for a week, and extrapolate it linearly, the puppy, by the time it is an year old, will be the size of Manhattan.

The OilDrum predictions depend a lot on similar calculation methods.

[Brutus]

Sorry it took me a while to get back to this. Regarding GK's first point:

"Fossil fuels are currently the most economically available source of power for both personal and commercial uses. Petroleum fuels our cars and thirst for plastics, while natural gas and coal heat and electrify our homes. Mass transportation is also largely propelled by fossil fuels. In 2005, more than 3/4 of total world energy consumption was through the use of fossil fuels. Petroleum led with over 43.4 percent of the world's total energy consumption, followed by natural gas (15.6 percent) and coal (8.3 percent). North America is the largest consumer of fossil fuels, utilizing nearly 25 percent of the world's resources."

http://www.enviroliteracy.org/subcategory.php/21.html

There is a great deal of information at that site, and it doesn't appear to be doctrinaire. It would surprise me not at all to learn of other sources that offer numbers different from GK's 37% and the above 43.4% of energy coming from oil. My immediate concern is that our current society is organized around a transportation system wholly reliant on oil. When the economics of oil shift, how quickly will we be able to adapt? Has the electric car been suppressed since the 1970s? Will it go into immediate production, and the car manufacturers get a windfall as everyone replaces their cars (as with flat screen TVs)? Whereas GK is confident that the transition will be smooth and easy, I'm inclined to think it will at least entail acute short-term disruptions.

GK wrote: "My main dispute is the claim that 'the world of 2040 will be much poorer than today' and that 'car ownership will be rare'. I don't think you are advocating that as a realistic outcome."

Leaving aside car ownership, we are already poorer today than 30 years ago, though there is some lag before the effects manifest as a lower standard of living. Conservation biologists use the acronym HIPPO to describe five factors that point to a destabilized biosphere (a consideration that trumps mere economics, as I stated before): Habitat destruction, Invasive species, Pollution, Population, and Overharvesting. We have a bad record on all these accounts, but the most threatening is simple population. Earlier this week, Ted Turner was branded insane for saying with greater force, alarm, and truth what many of us believe: there are too many people using too many resources; the way we're currently behaving is slow suicide.

We're poorer today because of loss of biodiversity, loss of unpolluted waterways, reliance on questionable transgenic crops, shrinking arable land, etc. These (and others) are larger, more important issues than economic analysis. The strange hubris of economics is that it has evolved from theories and descriptions of markets and monetary systems to a unified theory of everything. It's similar to the misapplication of Darwinian theory to business models. Economics does sometimes explain why we behave in ways destructive to our interests, but then, so does biology, and psychology, and sociology, and anthropology. But economics as the primary means of prophesying what life on earth 30 years from now will be may not be the best lens through which to filter our view.

As to GK's other points, material saturation may have occurred in the U.S. and Western Europe, but now the rest of the world wants our standard of living. I can't remember where I read it, but for that to occur, it would take four planets. That's a recipe for scarcity, and the last time we experienced that in the U.S. in the 1970s fuel crisis, it wasn't pretty.

The obsession with GDP is just that: an obsession. Growth in the economy, according to some analysts, is predicated in part on growth in the population. That's clearly unsustainable. The biosphere is a mostly closed system, and despite the availability of alternative energy and material sources in the near term, we can't continue to take and take and take. Already, large swaths of land in a variety of locations around the globe are ruined and reduced to uselessness because of ruthless extraction techniques used by heavy industry. As with all other living things on the earth, we rely on endless cycles of growth, death, and renewal in nature to survive. But yet we're currently destroying those very things we need for our short-term wealth accumulation at the expense of long-term prospects for survival. For a biological perspective (as opposed to an economics perspective) on this, check out E.O. Wilson's book The Future of Life. It's sobering but hopeful. However, I doubt we possess the will and wisdom to adopt change fast enough to forestall collapse.

[GK]

Brutus,

This is where your argument collapses :

Leaving aside car ownership, we are already poorer today than 30 years ago,

Dead wrong. Choose whatever measure you want, from life expectancy, to UN Human Development Data, to infant mortality, to nutrition, to vacations taken, the world, and the US, are much richer than 30 years ago. All these are data beyond GDP.

Regarding material saturation, that is where technological efficiencies offset the demand from emerging markets. Improvements in Photovoltaics alone could provide enough electricity for all the new emerging nations, at a faster rate than their consumption grows.

The loss of biodiversity is a problem, but not related to the argument that high oil prices will make the world of 2040 much poorer than today.

[stalker]

@GK,

Hello. I used to be ilya.

I do not think the world will be poorer in 2040, quiet the reverse in fact, but I can't help but think you are minimizing the true impacts of peak oil.

Firstly, it is vitally important how fast the downwards slope in oil production will be. If it's fast (i.e. much more than 1%), then it will bite hard.

1. While I agree wind and solar show rapid exponential growth and are viable long-term, the problem is that as of today they account for a negligible % of total world energy production (about 0.6%, to be precise) and as such it will be at least two decades before they can make any real volume contribution to world energy production. Same with biofuels - the area devoted to planting sugar cane will have to be increased by a factor of dozens (which will presumably have to be hacked out of the Amazon).

2. "Heavy oil" will not save us. To take an example, even in principle, producing 5mn barrels/day in Canadian oil sands is unrealistic because it will consume 60% of Canada's gas production!, quite besides draining half the Great Lakes, emitting loads of CO2 and requiring literally tens if not hundreds of billions of dollars to build up the necessary infrastructure to achieve quite a pathetic EROEI. Not to mention that even if, odds aside, significant amounts of oil from tar sands is produced, it will be buried by declines in production from the supergiants.

3. According to the Hirsch report, 20 years is required to transition without substantial impacts (i.e. replacing the vehicle fleet, etc). (see summary here http://www.acus.org/docs/051007-Hirsch_World_Oil_Production.pdf). But the US has done practically no mitigation.

Secondly, you seem to have an overinflated opinion of the "new economy".

1. As a sector, ICT has actually declined in the US from 9.5% to 8.8% of GDP from 2000 to 2005. (http://devdata.worldbank.org/ict/usa_ict.pdf). Not very exponential.

2. It's true that there has been a residual due to improvements in ICT/optimization systems across the entire economy since about 1980. Nonetheless, this comes from the same paper that comes to the conclusion that : "Exergy services can be equated to exergy inputs multiplied by an overall conversion efficiency. which, of course, corresponds to cumulative technological improvements over time. Based on this hypothesis economic growth from 1900 to 1975 or so is explained almost perfectly, except
for wartime perturbations."
(http://www.iea.org/textbase/work/2004/eewp/ayres-paper1.pdf). In other words, an energy crunch, for which the world is as of today not prepared, will hit economies hard, will probably lead to substantial reductions in trend growth and will cause them to fall to a lower level.

My prediction?

1. The oil peak becomes truly visible sometime in 2008-2012. However, since its a bell-shaped curved, as first the fall will be slow, steady and manageable. The oil price will rise to perhaps 150$ by 2012. The economic effect will not be huge since there's still plenty of discretionary spending you can cut.

2. From 2012-20, oil production will start falling very rapidly, and will not be made up for by alternatives or the as yet still small base of wind/solar. Oil soars to 250-400$. The US will experience stagflation and possibly a Depression. Europe and Japan will fare a bit (not a lot) better, having developed more non-oil dependent transport systems. Russia will fare very well - it will cap production at a lower level, cap domestic price levels and export the remainded for a very good profit. China will not be in a good situation, but its economy will continue growing at a respectable pace due to its sheer potential for catch-up. Structural changes that should have been made years ago are made in this period. Unfortunately, advanced countries give in to domestic pressure and expand coal output, which accelerates climate change.

3. 2020-30 will see the advanced countries coming out of their deep slumps and normal growth resumes, although from a lower base. (No rapid post-Great Depression rebound, unless cheap energy magically comes back). However, this normal growth, certainly towards the end of the period, accelerates to well over today's rates. This is because of the a) growing impact of renewables, especially solar, which is rapidly getting cheaper and b) a continuation in the increase of the trend rate of growth as has been covered by GK on the Futurist.

4. By 2030, world GDP is nearly double that of 2000. By 2040, it nearly doubles again. Then it becomes hard to predict as we start to get engulfed by the Singularity's event horizon.

Now a few more comments...

If the price of beef triples while the price of rice and potatoes does not, consumption patterns shift.

There's an advantage to all this, of course. A healthier diet (and lifestyle).

That most economic growth is now in knowledge-based industries, which consume far less energy per dollar of output.

Sorry to disappoint you, but most growth is in rather mundane things like retail, catering & hospitality, healthcare, until recently construction. And many of these very much depend on cheap liquid energy. You won't get many people vacationing in Florida if petroleum and aviation fuel prices go through the roof.

That a major economic downturn, featuring skyrocketing food prices for people in poorer countries, will somehow not translate to a lower birth rate that inhibits population growth and hence curbs demand, and that population projections will somehow not change.

Impoverishing further already poor people doesn't reduce birth rates, quite the opposite in fact.

That there will be no humans living beyond the Earth (whether in orbit or on the Moon) by 2040.

How many surplus billions, heck, let's settle for thousands, will we be able to sling off?

That we are going to have over 30 years of negative growth in World GDP, despite not having had a single year of negative growth since 1973

Fallacy of linear extrapolation.

Will civilization survive peak oil? Yes. Will growth continue? Yes. Are you belittling its impacts? I suspect so. We'll see.

[GK]

stalker,

I agree with most of your cause-effect scenarios. A few comments :

1) I count nuclear and biomass as part of renewable energy. If cellulostic/algaeic ethanol can replace just 5% of oil consumption, that is still a timely and welcome cushion.

While Solar has the highest potential, it may be the latest one to scale. But the progress in Solar in the last 4 years has been much more than the previous 30.

Read this solar timeline to 2050 from Scientific American. The article is not even singularity-aware, but still forecasts big jumps in Solar energy.

3) We are now seeing that even $100 oil is not causing major disruptions to the average US consumer, who has not yet made made major adjustments to discretionary consumption. When oil was $20 a few years ago, no one thought $100 by 2008 would cause as little pain as it has.

It is true that if oil hit $200 by 2010, that would cause a steep downturn. But if oil gradually rises 6-9% a year, and only hits $200 by 2020, it will be well-digested without much trouble.

The ceiling that consumers can sustain continues to rise.

Note that soon there will be many more choices of cars that yield 50 mpg. In under 5 years, a few 100 mpg 4-seater ploug-in hybrid options will be available. Check out the Automotive X-Prize. If one or more companies can meet the X-Prize hurdles (which stipulate cost and mass-production requirements), the 'ceiling' of tolerance rises further. Gasoline prices of $5, $6, or even $8/gallon will not be disastrous for Americans who choose to get 100 mpg cars. It will take years for the replacement effect to occur in car ownership, which is why the 6-9% annual oil price rise is optimal.

Air travel is the major remaining use that does not have any solution on the horizon. I have stated this in my Future Timeline for Energy. This is where telepresence and high-speed rail may have opportunities.

$120 by 2010 = no problem
$200 by 2020 = no problem

The only real risk is if the falloff after the peak plateau is very steep, shooting oil higher than the time-indexed ceilings above. Hopefully, Brazil's Tupi, The Gulf of Mexico, Bakken, and other finds can mitigate this.

Regarding IT, if you take the convenient 2000 to 2005 period, a decline is unsurprising, as 2000 was a once-in-a-lifetime high outlier of IT spending, while 2005 was the peak of housing, thus making the proportion of IT seem small.

You have to take a 40-year span to see the actual trendline.

Furthermore, IT is not only computers and networking. All knowledge-based industries have to be counted in terms of knowledge contribution to GDP. This includes biotech, nanotech, and even new energy technologies. Even retail and hospitality industries have greatly increased their productivity and profitability through the incorporation of more technology, so the GDP that is due to them does have major IT indirect influence.

If you believe that world GDP will double from 2030 to 2040 (which is a bit more optimistic than my own estimate), then IT becoming a pervasive part of most economic activities is a necessary condition. I think you know this.

Impoverishing further already poor people doesn't reduce birth rates, quite the opposite in fact.

Not if women have already crossed the education barrier. GDP per capita regresses, but education does not. There are many middle income nations with fertility rates below 2.0 already (Brazil, Turkey, Iran, Thailand, etc.) Poverty may increase this from 2.0 to 2.5, but there is no chance of getting back to 6.0. Fertility will not rise in China or Russia either, as I am sure you will agree.

[Brutus]

GK wrote:

"Dead wrong. Choose whatever measure you want, from life expectancy, to UN Human Development Data, to infant mortality, to nutrition, to vacations taken, the world, and the US, are much richer than 30 years ago. All these are data beyond GDP."

I don't think you actually considered what I wrote, especially the lag time it takes for our practices over the last 30 years to manifest. Further, I'd argue that we've lost ground with respect to nutrition and worked hours, not because of failed knowledge or technology but because of lifestyle demands. Also, U.S. infant mortality fares worse than most other Westernized countries (though perhaps better than 30 years ago, I don't know).

I'll offer one good example of overharvesting that affects us right now: ocean fisheries. From Scientific American (see http://www.sciam.com/article.cfm?id=fishing-blues):

"It has been 16 years since the demand for cod led to the collapse of the once superabundant cod fisheries in the North Atlantic off Newfoundland. Disappearing with them were some 40,000 jobs ... [other] deep-sea species have already been depleted: the orange roughy, formerly known as the slimehead, and the Chilean sea bass, aka Patagonian or Antarctic toothfish."

This makes us poorer not just metaphorically but in the very real sense that, except for those with deep pockets, we can no longer afford to buy these fish since their scarcity has driven the price out of sight. This points toward a coming poverty of choice that may well be in stark contrast to our current overabundance.

[stalker]

@GK,

Quick reply to your comments.

1. The key question is a) how fast peak oil will arrive, and b) how fast will production decline from the plateau.

a) is anytime from 2008 to 2020. b) is anywhere from slow decline (1%) to very rapid (5%), as was the case with the North Sea for instance.

If decline will be slow and closer to 2020, then the effects will be much less, of course, and will only result in slightly slower trend growth. If it is already happening, and decline will accelerate to fast rates, then no renewables can fill the gaps quickly enough for at least the next two decades, and we are looking at a world depression.

Interesting article btw.

2. The US is inoculated against 100$ oil because it already lived through it in 1979. It's nothing new. But the US will be harder hit by rising oil prices than most European countries because of urban development and car efficiency factors.

3. I agree with your assessment that 6-9% price rises per year will not lead to catastrophe. Of course, that's an optimistic assumption, since real price rises from 1997-2007 have been at 10% (http://www.inflationdata.com/inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp), and we haven't even peaked yet. The problem isn't that technology doesn't exist, but that it takes time to implement it. Replacing half the US car fleet takes about 15 years, IIRC. This rate will be even lower if there are real economic problems.

4. I'm not optimistic about the new finds. For instance, in Bakken, only a tiny portion of the oil in it can actually be extracted.

5. I was merely pointing out that while ICT's long-term prospects are extremely good, it does not contribute as much to economic growth as of today as some would assume. Again, consult the paper I quoted by Ayres. Even today, most growth comes from exergy inputs (as well as capital and labor). While there has developed a residual, probably due to ICT, since about 1975, it remains small in comparison to the above factors, regardless of future trends.

6. Agreed on poverty and education. Still, my point was to counter your point that impoverishment will depress fertility rates.

[GK]

stalker,

We appear to be in agreement on most points. The main points of mine are :

1) Ceiling of tolerance continues to rise. Again, $120 in 2010 = no problem, $200 by 2020 = no problem. The big uncertainty is, without a doubt, the rate of production falloff.

2) But the US will be harder hit by rising oil prices than most European countries because of urban development and car efficiency factors.

Yes, but I would argue that Americans are a lot more adaptable to change than most non-Americans realize. Note how many Americans are already buying hybrids, installing solar panels, going to CFL/LED light bulbs, etc. They will adapt to smaller cars.

3) Replacing half the US car fleet takes about 15 years, IIRC.

How do you figure that? The median life of a car is not 30 years, nor is the half-life of car ownership that long. I think it takes just 6 years to replace half the fleet. Also, don't discount the fact that upper middle class Americans may segment into owning both SUVs and small plug-in hybrids, and using each for different purposes.

4) that's an optimistic assumption, since real price rises from 1997-2007 have been at 10%

But that was off an unusually low base, was a rise confined entirely to a zone of low resistance (well below the ceilings mentioned above), and was at a time before the new technologies could enter the marketplace. In 1997, no one even had heard of the term 'hybrid'.

Also note that the greater the rise in oil prices, that itself accelerates the introduction of new technologies into the market - classical market forces. Hybrids have grown tremendously each year. Innovation in lighter materials to lower car weight has accelerated. All this goes into why the time-indexed ceiling of tolerance rises 6-9% a year.

5) it does not contribute as much to economic growth as of today as some would assume.

I actually think that the indirect effect of IT on increasing the productivity of hospitality, retail, education, and construction industries is underestimated, and this includes the greater productivity of capital and labor. Also, advances in biotech, nanotech, and energy are also knowledge-based, even if not recorded under the pure definition of IT.

6) Still, my point was to counter your point that impoverishment will depress fertility rates.

For middle-income people across the world (anyone between $5000 and $40,000 PPP income, in any country), it does. They can no longer afford children because they do expect to educate, clothe, and entertain them. The very poorest (sub-$5000) may not lower their fertility rates, but their infant mortality will rise, as life expectancy will drop, thus slowing population growth.

[Armed Liberal]

Can you drop me a note at the email above? Can't find a 'contact' on the site...

A.L.

[stalker]

@GK,

The figure on cars is taken from here (http://www.energybulletin.net/4577.html).

For example, the U.S. has a fleet of over 200 million automobiles, vans, pick-ups, and SUVs. Replacement of just half with higher efficiency models will require at least 15 years at a cost of over two trillion dollars for the U.S. alone. Similar conclusions generally apply worldwide.

Anyway. Now's time for your take on climate change. :)

[GK]

stalker,

It may take 15 years to replace half the fleet in terms of what your link shows, because not everyone is choosing to buy hybrid compact cars over SUVs.

But if fuel prices rose sharply, the shift would accelerate as everyone's very next car will be a hybrid/plug-in hybrid. We know that the average car lasts 10-12 years, so 15 years to replace half is more a comment on voluntary technology migration, rather than vehicle lifespan.

If gasoline hits $6/gallon, new car demand will strongly migrate towards efficiency, and it will take only 6 years to get a major change in 50% of the US fleet. That is for sure.
_________________________

Climate change :

I don't feel compelled to come out on either side just yet. The issue is still dominated by emotion and fashion politics, and thus rational assessment, on either side, is not yet prevalent. I have only ever written one article on the subject here.

My only view so far is that the solution should reside with technology and entrepreneurship, not with taxes on rich countries and other socialist schemes.

I actually think a much more pressing problem is Planetary Defense, which is less controversial yet more dangerous, due to the 'surprise' effect it would have. Additionally, an asteroid hitting the Earth would change the climate a lot more than our present CO2 emissions would.

[brokerdavelhr]

Been awhile, just thought I would throw this out there again.

GK,
Yes we are poorer now then before. Gas has increased 3x's, bread 2x's, and milk 2.5x's/gallon. Of course the list can go on and on. The average salary has not even come close to reaching such increases.
I put less into my IRA a month then what comes out of my paycheck for social security. Yet My IRA will yield a great deal more.
The prices of cars themselves have even shown a sharp increase. Not so for the average paycheck.
I do not care what survey you are looking at, the fact is, ask anyone if their paycheck has doubled. The answer will inevitably be no.
Moving on.
Global warming, and planetary defense???? Wow. Whatever happened to take care of the mundane things? First off, there is NO WEATHER MODEL OUT THERE THAT HAS PROVED GLOBAL WARMING!!!!! Also, even if you could prove it, WHERE IS IT PROVEN TO BE A PLANET ENDING CATASTROPHE?
Want a new theory? With all of the new discoveries and implementation in modern medice etc., people inevitably live longer. So, the population increases, as does the amount of ruined environments, etc. etc. One way or another, Terra will have hers, and will not be denied. No matter what we do, people will grow old, diseased, poor, etc., and die. Think about it. Lets just say for the sake of argument that humans do evolve further (wether super-ficially, or otherwise) and live longer, or are more easily repaired. A point will be reached where our natural boundries are way to exceeded, and a mass death pool will form. Tell me, what is the secret if life? What tells a newborn to breath? What tells a hawk to hunt when it gets its wings? What causes the great storms that devastate entire cities with no discretion on who lives or dies? Instinct? Learned behaviour? Jet-streams? The truth is, we do not know. Sure we have ideas, but when you get down to it, we just don't know.
I said all that to say this: It does not matter wether we go mad over oil or not. Did you know that the only reason we have not divided Iraq up yet is because the Kurds would gain an oil rich province, tell Iran to go screw themselves, and start another war via oil embargo? Wow. Heck, when the US allied herself to Isreal way back in the late 60's early seventies, she knew damn well that SA would start the crap they are still pulling today (which is why gas prices continue to go up). Bush (not to mention the rest of the government), loves giving speeches about how America needs to break her oil dependency. Yet do they take any real action to help facilitate this? No. Hillary proposes an energy bill, but instead of going to R&D for affordable consumer solutions, they would go to fund groups and research teams that push their own agenda. What I am trying to say, is that because everyone has their own agenda's behind 'the betterment of humanity', no real dramatic increase in the next 10 years can be expected. Yes, we will use less oil in the future. I have no real proof to base this off of except for history. We had our stone, bronze, iron ages etc., and back in the 1600, no one could even had dreamed such a thing as a modern car would exist. In the 1960's, scientist thought that a home computer by the year 2000 would fill an entire room. Yet by the year 2000, we had laptops! Yet such a growth has never been sustained throughout history. History is like a wheel. Some wheels are bigger then others, and yes they keep turning. But it remains a wheel non the less. Ancient Egyptians knew what batteries were. Heck, they found batteries in ancient ruins that at the time of creation, could have powered light bulbs etc. But they never got around to figuring out what to use them for.
My thoughts, is that we have a bunch of peices to a bigger puzzle, just waiting to be put together. Now, what this puzzle is, is beyond me.
Also GK, your research relies heavily on evolution. When was a major evolution ever really experienced? A few skeletons have been found that seem to be a mix of man and ape, and now we evolve from monkeys? So if our society was blown to hell by a gigantic meteor, and only a few hundred thousand people survived in a now stone age environment, thousands of years later when a dwarfs or elephantmans skeleton was dug up, would they assume then say that humans evolved from that?
I am not saying that humans do not evlolve at all. Quite the contrary, we have been proven to adapt very well to our environment. Ex- an arab would not survive well in the arctic, and so forth....
So does it even matter if oil is a catastrophe or not? Have humans yet learned the lesson of history? In truth we have not. the next question is can we truly learn? The human brain can only store so much. Each generation provides it's own Einstein etc., but for the most part, we have learned and discovered very little.
So, let the crtiquing begin. I love debating with you because you always throw something at me that I have not heard before, and I learn from it. So please be assured that I am most eager to hear what you will reply to this.

[The Sanity Inspector]

Not everyone who discusses the oil production peak is a doomsayer. The U.S. is past its oil production peak, so it isn't far-fetched to see a day when other countries will be, too. Alternative fuel sources will become viable as oil prices rise, and we'll scrape through somehow, is the message of geologist Deffeyes' book.

[riddiford]

Great blog.

Any reason why there is not a "send to a friend" enveloppe ?

Is it that one does not really want too many people to read or something else?

best
Riddiford

[GK]

brokerdavelhr,

Yes we are poorer now then before. Gas has increased 3x's, bread 2x's, and milk 2.5x's/gallon.

Bread and milk most certainly has not risen that much.

Why are you taking only the items that have risen price? Also, why are you not annualizing the price? Something that doubles in 20 years is only a 3.6% rate of annual increase?

Lastly, you conveniently ignore how many things have DROPPED in price. 42-inch Plasma TVs have gone from $8000 in 2003 to $1000 today. The price of 1 GB RAM, of 1 TB Storage, of 1 Mbps of bandwidth speed, etc. has all dropped greatly. Not to mention that there are now lightbulbs that can slash your electricity bill.

The only way to actually measure inflation is to use the CPI. If you don't like that, use the price of postage stamps. That is the true measure of inflation, not cherrypicked examples of only the items that have risen the most, without even annualizing the rate of increase. Come on, you should know better than that.

So no, we are not poorer now than your unspecified 'before' period.

[GK]

riddiford,

Thanks. It does not appear that I have that feature available to me.

[brokerdavelhr]

Bread and milk most certainly has not risen that much.

I used to pay $1.25 for a loaf of wonderbread back in 1998. Maybe it’s just the area I live in, but now I pay $3.25. A gallon of milk used to cost about $2- $2.50 depending on where you live. It is now $4.50 - $5.00. I will scan the receipts if you want.

Lastly, you conveniently ignore how many things have DROPPED in price. 42-inch Plasma TVs have gone from $8000 in 2003 to $1000 today. The price of 1 GB RAM, of 1 TB Storage, of 1 Mbps of bandwidth speed, etc. has all dropped greatly. Not to mention that there are now lightbulbs that can slash your electricity bill.

I do apologize immensely for not making myself clearer on this point. I focused around food, milk, gas, etc, because we need them to live. The rest of the things you have mentioned are not daily necessities. I also apologize because I did not mean that we are poorer then ever, but rather that we are not well off either. The light bulb may indeed slash the electric bill, but the plasma TV makes up the difference. You need gas to get to work. You need milk for strong bones and protein (unless you take supplements which are more expensive). You need bread or pasta for the carbs, and so forth. The only thing the extra gig of RAM does for you is to improve your computer. Also eats more energy. The only thing a 42” plasma will do for you is to keep you caught up with the Jones. Sure, the non-neccesities are going down in price, but what you need to live sure isn’t. This is not a government conspiracy or the like, but rather a reaction to an entertainment driven market (which is pathetic considering many people choose entertainment over their own health, which also explains why diet companies make a killing).

The only way to actually measure inflation is to use the CPI. If you don't like that, use the price of postage stamps. That is the true measure of inflation, not cherrypicked examples of only the items that have risen the most, without even annualizing the rate of increase. Come on, you should know better than that.

Here is where we differ you and I. You grab statistics (take the CPI for example). I use my eyes and experience. You say that that unemployment and wages are up. I have yet to meet anyone who can back this despite what the ‘statistics’ say. I am not quite sure where these statistics are gathered, but I can tell you that from what I have seen, they appear far from accurate.
At this point, I ask your forgiveness. I have been around a little bit, and tried several avenues of life, before choosing my current one. I have a very broad base of knowledge so, I ask that you do not take me lightly. I am MCP, CCNA, Series 7& 63 certified (if you want proof, I will mail you my proof if you wish). I can balance your portfolio, or build and maintain your cooperate network. Yet despite all this, I am easily confused as to how you missed my point, and accused me of ‘cherry-picking’. I did not cite certain examples just to use to my advantage, as fact needs no ‘cherry-picking’ to it. I cited them for the reasons stated above.
If you view a 42” plasma or an extra gig of memory as a necessity, then I am guilty as charged. If you make so much money that you do not even notice the increase of gas prices, then I am guilty as charged. But if you are a hard working American who juggles work, and trying to keep up with family, who not only works hard, but studies constantly to keep up with new and existing technologies, then you will know from where I come. I am your average middle class citizen. No more, no less. And I can honestly tell you that if my salary has increase as much as gas, housing costs, food, etc since 1998, then I would no longer be middle class.

In this case, the period I am using for a bench mark is 1998. I am not complaining mind you, as it solves nothing, and does not form solutions. I am merely pointing out what I see. And I could very well be wrong. My guess is that you have been around a lot longer then I have, and have seen these trends before. I get where you are coming from, and if I trusted ‘statistics etc’ as much as you, then I would be forced to agree. But my experience is in direct contradiction with these said ‘statistics’. So I can not take them as presented. I must also say that I live in the DC area, so my view maybe quite colored by the sheer BS found in the area. If this is the cause of my apposing view points, then I apologize, and humbly ask your forgiveness. But if I go to Texas this summer for vacation, and see that the current prices are as stated above, then I know that I have not erred.

[brokerdavelhr]

GK,
About the stamp. A stamp is merely a tiny peice of paper with adhesive on the back. Back in 1998, a stamp cost me 33 cents to the best of my recollection. Now it is 41 cents. That is nearly a 20% increase. What salary has increased that much at the same work level?
I just used your example, not one that has been 'cherry-picked'.

[GK]

brokerdavelhr,

Come on, you are falling into the same mentality of the fashion-leftists that we both like to bash up. Just about every Bush-hater will say that the last 7 years were the worst economy of our lifetimes.

Statistics beat anecdotes, period. You can say you 'saw this' or 'heard that', it is not representative of the weighted average of the population.

If you view a 42” plasma or an extra gig of memory as a necessity, then I am guilty as charged.

More RAM on your PC is arguably more of a basic necessity than an SUV that uses twice the gasoline as a compact car. Try getting by on a PC with only 1/4th the RAM of your present PC, and see how long it takes before you get fed up.

Plasma TV sales in the US increased in the last 12 months, which show that the economy was still not so weak as to crimp demand of this luxury. Plus, all these electronic devices are forms of deflation in the economy, offsetting the inflation in oil and corn prices, and keeping total inflation down to the 3-4% level, as per the CPI.

I am MCP, CCNA, Series 7& 63 certified

All the more reason you should annualize all discussion of inflation, AND recognize that the few items that have risen a lot are offset by the items that have dropped in price.

Also, all the more reason to know that salaries have risen a lot in the last 10 years, especially in the financial sector.

Regarding postage stamps, 41 cents now from 33 cents in 1998 is a 24% increase, in TEN YEARS. Thus, the ANNUAL rate of increase was just 2% a year. And yes, most people's salaries have risen by more than that over the same period.

Postage stamps are representative of what inflation really is, as they are a function of government worker salaries, fuel costs, etc. They are the true measure of composite inflation.

[Cervus]

$115 oil today. $120 soon. It wouldn't surprise me to see $4.50 gas in California this summer. About the only thing that could change oil prices is a worldwide recession, which if commodities keep rising, may actually happen as inflation spirals out of control.

I'm not sure that the Oil Drum is entirely incorrect.

[GK]

Cervus,

A recession, such as the one we currently are in, is very different than a 32-year decline that makes the world of 2040 so poor that car ownership itself will be rare.

That is why the Oil Drum is unrealistic and shockingly uninformed. The seven flawed assumptions they make have scarcely been defended by anyone here.

[brokerdavelhr]

GK,
LOL, far from leftist my friend (don’t know to many leftist who are .50AE Desert Eagle enthusiasts). Anyway, moving on.
I gotta tell you that if you need more then a gig of memory on your PC, that you are either not taking care of your machine, are using graphic intensive applications, running entirely to many applications at once, or to many monitor programs. I have never needed more then a gig, (my computer is over 6 years old, and running just fine :-). Well, there is also Windows Vista.
Now down to it. You said ‘Statistics beat anecdotes, period. You can say you 'saw this' or 'heard that', it is not representative of the weighted average of the population’.

Where does the CPI pull their stats from? Is there a website you could give me? I understand that statistically speaking it looks like you are right. And to some bureaucrats, is a good measure of the health of the economy. It would be easy for me to sit on my butt and take these at face value, but symptoms of a bigger problem are there. Another thing I do not necessarily agree with (and this is just based on my experience, so can only be put in the ‘for what it’s worth department’), is the whole ‘on average’ concept. Remember back in school when they started using the bell curve? You always had the few straight A students who would throw the curve? Well, this is how I view this ‘average’ model. I am sure that if you take the ‘average’ and combine it all, then I could see where these stats come from. However I do not believe that they speak for the majority. Also, how many Americans have to put themselves in debt for said 42” plasma? I am not saying that America is poorer since whenever, but in the last 10 + years where I actually had to sit up and take note, they have definitely gone the opposite way. And the debt speaks for itself.
I agree completely that the price of oil really makes no real long term impact anymore. With all of the modern technology coming to bear, in another few decades or so, it might just be meaningless. But will it get there before we lose sight of the long term? Lack of self-discipline, responsibility, and extremism is threatening progress. People want the easy answer, and they want it yesterday. Problem is, the US population continues to grow, diversify, and divide itself. To accommodate this, laws change, the constitution is under heavy attack (in a slow but sure manor of speaking), and due to the other factors listed above, very few people even notice. Worse yet, out of the few that do notice, many apply their own belief from their sheltered eyes on the matter, and make it worse. I believe in the freedom of speech to be used in a responsible manor as did our forefathers. Most rappers use it as an excuse to sing of rape, drugs, and murder. I believe in the freedom to bear arms (own quite a few myself), to protect me and mine, to hunt, and target practice with. Cowards use them against other people for ‘disrespecting’ them.
And so on, and so on.
I believe that the current oil situation is a blown out of proportion argument. There is no real crises. Sadly enough, you have college students (who for the most part drive gas powered motors), getting extra credit for skipping class and then protesting saying ‘ BUSH FOR WAR AND OIL’ etc. I am not anti-American by any means. But I am anti-idiot, and allergic to BS. A leftist?? Far from it. It is because of the said ‘leftist’, that everyday, my freedoms are under attack, and the culprits are given a slap on the wrist. No. Oil is a distracter used to keep the ignorant masses (most who are sadly enough happy in their ignorance, and think that after living in the same place their whole lives that they actually know how the world works), from realizing the real problem- themselves. Whether they like it or not, the majority voted for Bush. Whether they like it or not, they voted for the current leftists into office. And if they didn’t vote, then they should have no say. The worst part of this, is that they most annoying people are the loudest, therefore the ones the media cater to the most. The government for the most part has no choice but to listen to the media, lest it be bitten by it later. This is really bad when you learn that they realize that it will attack them regardless.
Sigh. Point is, I wish people would cut it out with this ‘oil crises’ BS, and start fixing themselves so that they may be able to make more knowledgeable decisions in the future. Decisions that would make the future so much easier to obtain. From nano-technology (like circuitry, carbon nano-tubes, etc), to emerging forms of power, etc, the future holds a lot of promise if we would just cut the crap, and get to it.
Lastly, want to read brief examples of past civilizations and countries that in their early stages mirrored our own? Rome before its collapse. France before WWII. All great examples of what will happen to the US if allowed to be carried that far. Rome was one of the most technologically advanced society of its time. France was free as a bird after WWI. Read between the lines on this one folks. Freedom is good. Freedom without the responsibility of realizing its true meaning is not. And the answer is not to make more laws, but to actually grow a brain and learn discretion, responsibility, etc.
Sorry for the sermon GK, I will keep my opinions to myself in the future.

[GK]

brokerdavelhr,

Come on, computer RAM is far more important to day-to-day life than many other things. To suggest otherwise is silly. How about Hard Drive storage space? Mbps of bandwidth, processor speeds?

If anything, it is fairer to say that no one *needs* a car that costs over $25,000. Any car more expensive than that is a luxury.

I still don't find any of your anecdotal examples to be compelling substitutes for official data. The CPI is one measure of inflation, and postage stamps are another. They are far more likely to include ALL components of inflation rather than just putting forth statements like 'I heard that someone was doing badly', and 'bread has risen 2x in price' without stating what number of years the increase happened over.

www.bls.gov is the Bureau of Labor Statistics, where the CPI is presented in all detail.

I can present a very compelling case that the CPI actually overstates inflation, by not taking enough of the effect of Moore's Law and Storage cost efficiency gains into account, amd for not accounting for entirely new services like Skype, Wikipedia, etc. as substitutues for previous costly goods and services.

The US will still be the only Superpower in 2030. I have written about that, and don't see any reason to change that opinion quite yet.

[brokerdavelhr]

‘Come on, computer RAM is far more important to day-to-day life than many other things. To suggest otherwise is silly. How about Hard Drive storage space? Mbps of bandwidth, processor speeds?’
Please support this statement. I have given my reasons backed up by factual proof. Take any operating system and slap on any word processing, firewall, backup programs you want (within reason) and look at your memory usage. Unless you are running Windows Vista, you will find that the totals equal about 512 MB tops, well below a gig level. Video games, auto cad programs, etc, are either for entertainment, or work, and would be the only reasons you need more then a gig of memory. Ditto with the newer processors and hard drives. So your next statement of
‘If anything, it is fairer to say that no one *needs* a car that costs over $25,000. Any car more expensive than that is a luxury.’
is a horrible comparison. You accuse me of using anecdotes, yet in this case, you yourself use one with no facts at all to back it. I am a wire head when it comes to systems and networks, so I can state this with absolute certainty. Yes it is fun to have a higher end machine to play with, but at that point, necessity goes out the window, and it becomes luxury.
Thank you for the link to the CPI website. I have been working, studying, spending time with family, etc a lot lately so have had precious little time to dig it up myself. I have been to the website, and thank you for making my point easier to prove. This is their data gathering information:
‘Prices for the goods and services used to calculate the CPI are collected in 87 urban areas throughout the country and from about 23,000 retail and service establishments. Data on rents are collected from about 50,000 landlords or tenants.
The weight for an item is derived from reported expenditures on that item as estimated by the Consumer Expenditure Survey.’

87 urban areas out of how many thousands in existence? 23,000 retail and service establishments out of how many millions? Data on rents collected from 50,000 landlords out of how many hundreds of thousands?
This is the source of the survey you place so much trust in? It does not include income tax in it either. Also ‘The CPI-W includes only expenditures by those in hourly wage earning or clerical jobs.’ And you still take this survey seriously? It is specifically written for the government to measure it’s own effectiveness, IT SAYS SO ON ITS SITE!.
Sorry, I got carried away. The point is, you listen to a survey not even intended for the citizen populace, but for the government to measure its own effectiveness. Yet when a person writes in an observation, you dismiss it as being inferior to said survey. Maybe I am misunderstanding your point though. Maybe I am so blind that I am only seeing what I want to.
The only way for a survey to be applicable to the US as a whole (which is not even theoretically possible), is for all of the people in question to be surveyed. So lets be fair. Over 800 people have visited this site in the last 2 days. Lets ask them. HAS ANYONE OUT THERE EVER BEEN THE SUBJECT OF SUCH A SURVEY FROM THE GOVERNMENT? If so, please let us know, so that we can lay this matter to rest.
If the CPI is as accurate as you claim GK, then we will get at least 1 response to this question within the week. Once we get a response, we can ask how the survey was conducted, and move on from there. Until then, I will be operating on the assumption that your CPI is accurate enough to prove your point, and that I was highly mistaken.
For the sake of argument, lets just say that your CPI is extremely accurate, and I am the one who is wrong. I am not conceding this point, not by a long shot, but because it is your website, and this is merely my observation vs. your CPI, I will let it go. Not worth it for either of us to further pursue.
I am also apologizing to you here and now. I am not trying to fuel an argument, and I regret that I ever mentioned it. My point has been made, and until we hear back from the surveyed people (if they even respond, I hope they do), there is no further reason for me to argue. I have stated my fact and experiences, not how I interpreted them. So far, you have been the only one to disagree with me. Out of 800+ people reading in two days, no other response has been made. You will not take my ‘anecdotal substitutes’ over your CPI, and I refuse to accept the CPI as anything less then a highly flawed survey. Unless I have changed your mind with the little bit of common sense that I have inserted, then you will not relinquish your point. You have not convinced me that the CPI as anything less then a flawed measurement. So at this point an impasse has been reached, and until you come up with further proof to your statement, I cannot accept it as truth over the facts that I see. I am very sorry.

[Bill]

Food remains a very low percentage of the U.S. household budget for those with the ability and leisure time to post here.

Back to the topic of liquid fuels & peak oil, what concerns me is the potential for near-term supply disruptions.

$5/gallon gasoline readily available is less of a concern than a return to "odd/even" or other rationing schemes.

I welcome the new high-efficiency diesels that are coming to the U.S.

Mostly because unlike gasoline, storing up to several hundred gallons of diesel at hime is legal and safe.

Sure, in the longer term something like the Volt, but diesel fueled vehicles are very attractive right now.

[Cervus]

Well, oil is in a "wild bull market" and will easily hit $120 this week. The supply picture is looking tighter and tighter. More Nigerian disruptions. Worse and worse...

[GK]

Cervus,

We want $120/barrel. Read the link on the case for $120/barrel.

BTW, whenever the price of anything is rising this fast on a daily basis (whether stocks, real-estate, or commodity), a correction is near.

[Cervus]

GK:

I just read your $120 post, and you make a good case. I see more and more announcements for EVs these days. But I fear it's not going to be enough to prevent shortages. Algae, which I've followed for three years now, is still not ready. Cellulose isn't there. There's not enough there there to allay my fears. I'm just trying to cut my oil use as much as possible and hope that inflation doesn't destroy my current surplus.

[GK]

Cervus,

The thing is, the higher the price of oil, the faster the innovation, to a point. In 2002, few would have thought that we would have so many different new energy technologies as soon as 2008.

The other reason oil is rising so quickly is that it still has not hit the ceiling where people's actions actually change in order to reduce consumptions. People like to complain, but until the pain is enough that they actually take the actions to make their next purchase a small car, get into a carpool, take the bus, etc., demand does not contract. A sustained $120+ may be when demand actually contracts, making it much harder for prices to rise vs. when there was no headwind of demand contraction.

There are now many new car choices above 40 mpg, and soon there will be several choices above 60 mpg. Yet, there is only some migration out of SUVs into these efficient cars. Oil still is not expensive enough for a mass migration.

And oil doesn't even have to get that high to gain many long-term benefits. $120 is enough for rapid innovation and to corner the petrotyrants into a deathtrap, yet not enough for a severe economic crisis. Hence, that is the magic number.

[Cervus]

GK:

The number of Priuses (Prii?) is exploding around here, with gas at $3.85+. I must've seen a dozen just today, 25 on Saturday. A lot without license plates, which in California is the best way to tell if a car is new. As is the number of scooters. I live in San Diego and the climate is perfect for them.

[M. Simon]

The big shift in electric/hybrid car costs/capability will come after 2012 when semiconductor wafer size goes to 450 mm.

That will cut the cost of power semiconductors in 1/2.

[M. Simon]

Gasoline consumption in the USA is expected to decline year over year. For the fist time in a very long time.

OPEC just cut its quotas.

There is an oil crash coming.

[Bill Peschel]

The only point I'll contest is this one:

"I say that advances in photovoltaic efficiency make Lunar colonies closer to viability by that time."

While I won't say it's impossible, I will say that, judging by the amount of work it takes to keep the space station up, there are a huge number of technological challenges that must be overcome before Lunar colonies are feasible. Human can live in extreme environments, but they all share the possibility of breathing oxygen and finding food. That is removed on the moon and must be supplied elsewhere. Building and maintaning that cycle requires having the proper parts available, with no margin of error when it comes to problems and accidents.

Not to mention finding a reason to fly people to the moon and making it profitable.

[aCanadian]

To the observer who was concerned that the CPI was a "flawed survey". That would be like saying that election polls are totally flawed. You do not need to sample a high percentage of the population to get an accurate representation of what they are thinking.

The accuracy of a survey/poll is more dependent on making sure that the sample is truly random. If you have a truly random sample, you can extrapolate (to within a margin of error) of what the overall population is.

While some areas may be higher and some lower, the average will still meet the same point.

Eventually the areas should equal out (unless there is a super strong employment base somewhere and a deteriorating one else where).

[Geoman]

Well, from the perspective of 2020 I must say this post absolutely nailed it. Think about that - this website absolutely called it right 12 years ago.

Look at where we are today - solar panels are a popular addition to people's roofs, electric cars are gaining market share, the mileage of cars has increased dramatically, and oil is cheap and plentiful, even before the COVID19 crises.

Meanwhile the website oil drum is out of business.

[Kartik Gada]

Geoman,

Thanks. It was crazy how they insisted that the world of 2040 would be far poorer than the world of 2006-08. No understanding of, or faith in, technology at all.