The Futurist

"We know what we are, but we know not what we may become"

- William Shakespeare

ATOM Award of the Month, February 2020

It is time to award a new ATOM AotM, and the first one somewhat coincident with the newly published version 2.0 of the ATOM publication.  This one has been discussed elsewhere on this website, but at the moment, it is perhaps the single biggest disruption in the global economy.  

First, a small story.  Photovoltaics (PV) is actually my first exponential technology, and what made be aware of the concept in a time when even 'Moore's Law' was not a household term and Intel was a very small company.  When I was 10 years old, I wrote a 5th grade paper (about 800 words) on exponential improvement of solar cells of about 5% a year.  It predicted cost-effectiveness in the 'early 21st century'.  The paper was a hit and was submitted to a contest that all the elementary schools submitted papers to, and I was taken, along with a number of other 5th graders from the Cleveland area to an event where the Mayor of Cleveland at the time (George Voinovich) meets the children and does a photo op.  We didn't understand any of that, but each child got a framed certificate. 

1024px-PV_cume_semi_log_chart_2014_estimate.svgSure enough, as the decades passed, PV did become cost effective in the early 21st century.  It has been a subject on this website for a long time, and while we often point out how many technologies have failed to meet industry-derived projections, as you can see from this old 2007 article, a US DoE chart thought PV installations in the US would be merely 15 to 30 GWs.  In reality, the 2020 number is about thrice the upper bound of that projection, at 80-90 GWs, with over 3% of US electricity generated through PV.  Even better, the world average is higher than the US average, and the world total continues to grow in excess of 25% a year.  Remember that this ATOM advancement is tied to the advancement of electric vehicles, as not merely is crude oil being replaced with electricity.  For many countries, the oil was imported, while the photovoltaic electricity is generated domestically.  This is a victory against OPEC, as imports from OPEC are being replaced with domestic energy.   

Swansons-lawAs we recall Swanson's Law, the 40-year trend is consistent (note that both axes are logarithmic).  While it took decades to get up to 3% of world electricity consumption being through PV, the jump from 3% to 12%+ will not take longer than a few years.  The inflection point is here, and the dollar impact is among the biggest of any ATOM transformations currently underway.  Even more than the dollar impact, it is the multiplier effect of these specific dollars given where the shift is being generated.  

(Images from Wikipedia and Our World in Data.  Click to enlarge).  

Solar_land_areaThe best part about solar, which is not true of wind power, is that the poorest countries in the world are in fact the ones with the greatest solar intensity, and are thus the most suitable for solar.  Much has been written about why cold-weather cultures have done better than hot-weather cultures on average, but now the very resource that was not being monetized can be monetized.  By contrast, wind power, while good, is both slower-advancing and most applicable in countries that are already wealthy, and so does not have quite the same multiplier effect.  This map of solar intensity indicates where the greatest utility of photovoltaics can reside.    

The absolute lowest-prosperity countries are still too disorganized to take advantage of this, but even the third quartile is well-prepared to rapidly increase PV installations and move away from oil imports.  In the near future, it will seem quite absurd that people were importing their energy from thousands of miles away.  

 

Related :

The End of Petrotyranny - Victory

The End of Petrotyranny

Solar Power's Next Five Game-Changing Technologies

A Future Timeline for Energy

Why I Want Oil to Hit $120 per Barrel (epic 2007 article)

 

Related ATOM Chapters :

3.  Technological Disruption is Pervasive and Deepening

 

  

 

February 01, 2020 in ATOM AotM, Economics, Energy, Science, The ATOM | Permalink | Comments (39)

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ATOM Award of the Month, December 2018

It is time for another ATOM AotM.  This month, we return to the energy sector, for it is where the greatest size and scale of ATOM disruptions are currently underway.

BatteriesWe visited batteries briefly in August 2017's ATOM AotM.  There are two exponentials here, battery cost per unit of energy, and battery energy density per unit volume.  Hence, despite 40 years of apparent stagnation interspersed with angst about how electric vehicles failed to arrive in response to 1973 and 1981 oil spikes, the exponential trend quietly progressed towards the inflection point that we have arrived at.  True to the exponential nature of technology, more progress happened in 2011-20 than 1970-2010, and we now have viable electric vehicles that are selling rapidly and are set to displace gasoline consumption in a matter of just a few short years.  Electric vehicles are now 2% of all new vehicle sales in the US, and 3% worldwide, with a high annual growth rate.  Due to the rapid cost improvements in EVs expected in the next three years, a substantial tipping point is perhaps no more than three years away.  

This rapid rise is in the face of two major headwinds : the low price of oil (due to another ATOM disruption), and the high price of EVs (the top-seller in units is a $50,000 vehicle).  It is now a certainty that once a high-quality EV becomes available at the $30,000 pricepoint, the speed of displacement will be startling.

EVsA tracker that records monthly sales at both US and WW levels is here.  The speed of advancement merits monthly visits to this tracker, at this point.  Note that over time, the US is actually where total displacement of ICEs by EVs will be the slowest, since other countries are more suited for EVs than the US (they have higher gasoline prices, and often 220V electrical outlets that lead to faster charging).  In fact, a suddenly popular home upgrade in the US is, ironically, the installation of 220V outlets in the garage, specifically for EV charging.  

As an example of a true ATOM disruption, the transformation will be multi-layered.  From oil import/export balances, to gasoline refinement and distribution networks, to the reduction of near-slave labor from the Subcontinent forced to find work in Gulf petrostates, to mechanics dependent on ICE vehicle malfunctions, to surplus used ICEs unable to sell and thus forced to slash prices, to power management and pricing by electric utilities, to prime land occupied by gas stations, a variety of status quos will end. 

Don't underestimate how soon the domino effect will take place.  Once EVs are sufficiently mainstreamed in the luxury car market (which is set to happen in 2019), then the entire range of urban commercial/government vehicles will swiftly transition to electric.  The US has 800,000 police cars, 210,000 USPS vans, and a variety of other government vehicles.  On top of that, private enterprises include 110,000 UPS vehicles, 60,000 FedEx vehicles, and perhaps over 300,000 pizza delivery vehicles.  As these transition, observe how many gasoline stations shutter.  

The much greater lifespan of EVs relative to ICE's will be one of the four factors that lead to the majority of automobile use migrating to an on-demand, autonomous vehicle model by 2032, as discussed before.  

 

Related :

The End of Petrotyranny

Why I Want Oil to be $120/Barrel

 

Related ATOM Chapters :

3.  Technological Disruption is Pervasive and Deepening.

 

December 10, 2018 in ATOM AotM, Energy, Technology, The ATOM | Permalink | Comments (101)

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ATOM Award of the Month, August 2017

For the August 2017 ATOM AotM, we will bend one of the rules.  The rule is that a disruption already has to have begun, and be presently underway.  

But this time, a conversation in the last month's comments brought forth a vision of a quad-layer disruption that is already in the early stages and will manifest in no more than 15 years time.  When fully underway, this disruption will further tighten the screws on government bodies that are far too sclerotic to adapt to the speed of the ATOM.  

To start, we will list out the progression of each of the four disruptions separately.

Batteries1) Batteries are improving quickly, and while electric vehicles are not yet competitive in terms of cost and charging speeds (partly due to the true cost of imported oil not being directly visible to consumers).  At the same time, an electric car has far fewer moving parts, and fewer liquids to deal with.  By many estimates, an electric car can last 300,000 before significant deterioration occurs, vs. 150,000 for an internal combustion engine car.  Now, under the current ownership model, a car is driven only 12,000 miles/year and is parked 90% of the time or more.  The second half of an electric vehicle's lifetime (150,001-300,000 miles) would only begin in year 13 and extend until year 25 of ownership, which is not practical.  If only there were a way to avoid having the car remain idle 90% of the time, occupying parking spaces.  It may take until 2032 for electric cars to compress the cost delta to the extent of being superior to ICE cars in total ownership costs for the early years, which then leads to the dividend available in the later years of the electric car's life.  

2) Autonomous vehicles are a very overhyped technology.  Stanford University demonstrated an early prototype in 2007.  Yet even a decade later, a fully autonomous car that operates without any human involvement, let alone the benefit of having a network of such cars, seems scarcely any closer.

Eventually, by about 2032, cars will be fully autonomous, widely adopted, and communicate with each other, greatly increasing driving efficiency through high speeds and far less distance between cars than humans can manage.  Uber-like services will cost 60-80% less than they do now, since the earnings of the human driver are no longer an element of cost, and Uber charges just 20-30% of the fare itself.  It will be cheaper for almost everyone to take the on-demand service all the time, than to own a car outright or even take the bus.  If such a car is driven 20 hours a day, it can in fact accrue 300,000 miles in just 5 years of use.  This effectively is the only way that electric cars can be driven all the way up to the 300,000 limit.  

Retail Square Footage3) The displacement of brick and mortar retail by e-commerce has far greater implications for the US than for any other country, given the excessive level of land devoted to retails stores and their parking lots.  The most grotesque example of this is in Silicon Valley itself (and to a lesser extent, Los Angeles), where vast retail strip mall parking lots are largely empty, yet are within walking distance of tall, narrow townhouses that cost $1.5M despite taking up footprints of barely 600 sqft each.  

As the closure of more retail stores progresses, and on-demand car usage reduces the need for so many parking spaces, these vast tracts of land can be diverted for another purpose.  In major California metros, the economically and morally sound strategy would be to convert the land into multi-story buildings, preferentially residential.  But extreme regulatory hurdles and resistance towards construction of any new housing supply will leave this land as dead capital for as long as the obstructionists can manage.  

But in the vast open suburbs of the American interior, land is about to go from plentiful to extremely plentiful.  If you think yards in the suburbs of interior cities are large, wait until most of their nearby strip malls are available for redevelopment, and the only two choices are either residential land or office buildings (there are more than enough parks and golf courses in those locations already).  Areas where population is already flat or declining will have little choice but to build even more, and hope that ultra-low real estate costs can attract businesses (this will be no problem at all if the ATOM-DUES program is implemented by then).  

This disruption is not nearly as much a factor in any country other than the US and, to a lesser extent, Australia, as other countries did not misallocate so much land to retail (and the associated parking lots) in the first place.   

Construction4) This fourth disruption is not as essential to this future as the first three, but is highly desirable, simply due to how overdue the disruption is.  It is quite shocking that the least productive industry in the private sector relative to 50 years ago is not education, not medicine, but construction.  US construction productivity has fallen over the last 50 years.  Not merely failed to rise, mind you, but outright declined in absolute terms.  

But remember, under ATOM principles, the more overdue a disruption is, and the more artificial the obstructions thwarting it, the more sudden it is when it eventually happens.  China is not held back by the factors that have led to the abysmally low productivity in US construction, and when there is so much retail land to repurpose, pressure to revive that dead capital will just become too great, even if that means Chinese construction companies have to come in to provide what the US counterparts cannot.  This pressure could be the catalyst of the long overdue construction productivity catchup.  This topic warrants a lengthy article of its own, but that is for another day.  

Hence, the first three factors, and possibly the fourth, combine by 2032 to generate a disruption that will be so comprehensive in the US that the inability of government to change zoning laws and permitting at anything close to the speed of market demand will be greatly exposed.

The first disruption, batteries, alone could be an ATOM AotM, but this time, the cumulative disruption from these multiple factors, even if it will take the next 15 years to accomplish, gets the award.

Related :

The End of Petrotyranny (and Victory)

Why I Want(ed) Oil to Hit $120 per Barrel

A Future Timeline for Automobiles

A Future Timeline for Energy

Why $70/Barrel Oil is (was) Good for America

 

Related ATOM Chapters :

3. Technological Disruption is Pervasive and Deepening

11. Implementation of the ATOM Age for Individuals

 

August 27, 2017 in ATOM AotM, Economics, Energy, Technology, The ATOM | Permalink | Comments (72)

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ATOM Award of the Month, March 2017

It is that time of the month again.  For our third ever award of the ATOM AotM, we return to an article I wrote over 10 years ago about the lighting revolution.  At that time, when the disruption was still in the future, I highlighted how the humble status of the light fixture leads to an associated disruption going widely unnoticed.  That continues to be true even today, despite the important product transition that most people have already undertaken.  

LightingSo the ATOM AotM award for March 2017 goes to the LED lightbulb.  Something that most people do not even notice is a major engine of the ATOM, as it has introduced rapid price/performance improvements into what used to be a stagnant product.

Charge of the Light Brigade :  Remember that the average household has about 25 light bulbs on average.  From the chart, we can see that light output per until of energy and cost per watt of LED lighting are both improving rapidly, leading to a double-exponential effect.  Lighting is hence now fully in the path of the ATOM and is seeing progress at a rate entirely beyond what the predecessor technology could have have experienced, and is indeed one of the fastest technology shifts ever (see the second chart).  Bulbs are now purchased in packs of 4-12 units, rather than the single-unit purchases of the recent past.  The expected electricity savings worldwide are estimated to be over $100 Billion per year in the near future.  

LED DiffusionThe domino effects of this are immense.  Follow the sequence of steps below :

  • LED bulbs are reducing the electricity consumed by lighting.
  • This reduction in demand more than accommodates the proliferation of electric cars.  The first 100 million electric cars worldwide (a level we are still extremely far from) will merely offset the loss of electricity demand for lighting.  
  • The spread of electric cars with no net rise in electricity consumption nonetheless reduces oil consumption and hence oil imports.  The US already has a trade surplus with OPEC, for the first time in half a century, and this force is strengthening further.  Even if the price per barrel of oil had not fallen through fracking, the number of imported barrels still would have plunged.  
  • So even though most lighting is not fueled by oil, it created a puncture point through which a second-degree blow to oil demand arose.  

That is truly amazing, making LED lighting not just a component of the ATOM but one of the largest disruptions currently underway.  

That concludes this month's ATOM AotM.  I need more reader submissions to ensure we have a good award each month.  

Related :

3. Technological Disruption is Pervasive and Deepening.

The Imminent Revolution in Lighting, and Why it is More Important Than You Think

 

March 26, 2017 in ATOM AotM, Energy, Technology, The ATOM | Permalink | Comments (21)

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ATOM Award of the Month, January 2017

With the new year, we are starting a new article series here at The Futurist.  The theme will be a recognition of exceptional innovation.  Candidates can be any industry, corporation, or individual that has created an innovation exemplifying the very best of technological disruption.  The more ATOM principles exhibited in an innovation (rising living standards, deflation acting in proportion to prior inflation in the incumbent industry, rapid continuous technological improvement, etc.), the greater the chance of qualification.

Fracking BreakevensThe inaugural winner of the ATOM Award of the Month is the US hydraulic fracturing industry.  While 'fracking' garnered the most news in 2011-13, the rapid technological improvements continued.  Natural gas continues to hover around just $3, making the US one of the most competitive countries in industries where natural gas is a large input.  Oil prices continue to fall due to ever-improving efficiencies, and from the chart, we can see how many of the largest fields have seen breakevens fall from $80 to under $40 in just the brief 2013-16 period.  This is of profound importance, because now even $50 is a profitable price for US shale oil.  There is no indication that this trend of lower breakeven prices has stopped.  Keep in mind that the massive shale formations in California are not even being accessed yet due to radical obstruction, but a breakeven of $30 or lower ensure the pressure to extract this profit from the Monterrey shale continues to rise.  Beyond that, Canada has not yet begun fracking of its own, and when it does, it will certainly have at least as much additional oil as the US found.  

This increase, which is just an extra 3M barrels/day to US supply, was nonetheless enough to capsize this highly elastic market and crash world oil prices from $100+ to about $50.  Given the improving breakevens, and possibility of new production, this will continue to pressure oil prices for the foreseeable future.  This has led to the US turning the tables on OPEC and reversing a large trade deficit into what is now a surplus.   OPEC Trade DeficitIf you told any of those 'peak oil' Malthusians that the US would soon have a trade surplus with OPEC, they would have branded you as a lunatic.  Note how that ill-informed Maoist-Malthusian cult utterly vanished.  Furthermore, this plunge in oil prices has strengthened the economies of other countries that import most of their oil, from Japan to India.  

Under ATOM principles, technology always finds a way to lower the cost of something that has become artificially expensive and is hence obstructing the advancement of other technologies.  Oil was a premier example of this, as almost all technological innovation is done in countries that have to import large portions of their oil, while almost none is done by oil exporters.  Excess wealth accumulation by oil exporters was an anti-technology impediment, and demanded the attention of a good portion of the ATOM.  Remember that the worldwide ATOM is of an ever rising size, and comprises of the sum total of all technological products in production at a given time (currently, about 2% of world GDP).  Hence, all technological disruptions are interconnected, and when the ATOM is freed up from the completion of a certain disruption, that amount of disruptive capacity becomes available to tackle something new.  Given the size of this disruption to oil prices and production geography, this occupied a large portion of the ATOM for a few years, which means a lot of ATOM capacity is now free to act elsewhere.

This disruption was also one of the most famous predictions of mine here at The Futurist.  In 2011, I predicted that high oil prices was effectively a form of burning a candle at both ends and such prices were jolting at least six compensating technologies into overdrive.  I provided an equation predicting when oil would topple, and it toppled well in accordance with that prediction (even sooner than the equation estimated).  

This concludes our very first ATOM AotM to kick off the new year.  I need candidate submissions from readers in order to get a good pool to select from.  Criteria include the size and scope of the disruption, how anti-technology the disrupted incumbent was, and an obvious improvement in the quality of a large number of lives through this disruption.  

 

January 31, 2017 in Accelerating Change, ATOM AotM, Energy, Technology, The ATOM | Permalink | Comments (36)

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Tesla's Rapid Disruption

MIT Technology Review has an article describing how Tesla Motors has brought rapid disruption to the previously staid auto industry, where there are too many factors precluding the entry of new companies.  But this is nothing new for readers of The Futurist, as I specifically identified Tesla as a key candidate for disruption way back in 2006.  In Venture Capital terms, this was an exceptionally good pick such an early stage.  

In ATOM terms, the progress of Tesla is an example of everything from how all technological disruptions are interlinked, to how each disruption is deflationary in nature.  It is not just about the early progress towards electric cars, removal of the dealership layer of distribution, or the recent erratic progress of semi-autonomous driving.  Among other things, Tesla has introduced lower-key but huge innovations such as remote wireless software upgrades of the customer fleet, which itself is a paradigm shift towards rapidly-iterating product improvement.  In true ATOM form, the accelerating rate of technological change is beginning to sweep the automobile along with it.  

When Tesla eventually manages to release a sub-$35,000 vehicle, the precedents set in dealership displacement, continual wireless upgrades, and semi-autonomous driving will suddenly all be available across hundreds of thousands of cars, surprising unprepared observers but proceeding precisely along the expected ATOM trajectory.  

July 12, 2016 in Accelerating Change, Energy, Technology, The ATOM | Permalink | Comments (3)

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The End of Petrotyranny - Victory

I refer readers back to an article written here in 2011, titled 'The End of Petrotyranny', where I claimed that high oil prices were rapidly burning through the buffer that was shielding oil from technological disruption.  I quantified the buffer in an equation, and even provided a point value to how much of the buffer was still remaining at the time.

I am happy to declare a precise victory for this prediction, with oil prices having fallen by two-thirds and remaining there for well over a year.  While hydraulic fracturing (fracking) turned out to be the primary technology to bring down the OPEC fortress, other technologies such as photovoltaics, batteries, and nanomaterials contributed secondary pressure to the disruption.  The disruption unfolded in accordance with the 2011 Law of Finite Petrotyranny :

From the start of 2011, measure the dollar-years of area enclosed by a chart of the price of oil above $70.  There are only 200 such dollar-years remaining for the current world petro-order.  We can call this the 'Law of Finite Petrotyranny'. 

Go to the original article to see various scenarios of how the dollar-years could have been depleted.  While we have not used up the full 200 dollar-years to date, the range of scenarios is now much tighter, particularly since fracking in the US continues to lower its breakeven threshold.  At present, over $2T/year that was flowing from oil importers to oil producers, has now vanished, to the immense benefit of oil importers, which are the nations that conduct virtually all technological innovation.  

The 2011 article was not the first time this subject of technological pressure rising in proportion to the degree of oil price excess has been addressed here at The Futurist.  There were prior articles in 2007, as well as 2006 (twice).  

As production feverishly scales back, and some of the less central petrostates implode, oil prices will gradually rise back up, generally saturating at the $70 level (itself predicted in 2006) in order to deplete the remaining dollar-years.  But we may never again see oil at such a high price relative to world GDP, as existed from most of 2007-14 (oil would have to be $200+/barrel today to surpass the record of $147 set in 2008, in proportion to World GDP).

 

March 08, 2016 in Accelerating Change, Economics, Energy, Technology | Permalink | Comments (22)

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The End of Petrotyranny

As oil prices remain high, we once again see murmurs of anticipated doom from various quarters.  Such fears are grossly miscalculated, as I have described in my 2007-08 articles about how oil at $120/barrel creates desirable chain reactions, as well as my rebuttal to the poorly considered beliefs of peak oil alarmists, who seem capable of being sold not one, but two bridges in Brooklyn.  Today, however, I am going to combine the concepts in both of those articles with some new analysis I have done to enable us to predict when oil will lose the economic power it currently holds.  You are about to see that not only are peak oil alarmists wrong, but they are just about as wrong as those predicting in 1988 that the Soviet Union would soon dominate the world, and will soon be equally worthy of ridicule.

Unenlightened Punditry and Fashionable Posturing :

As I mentioned in a previous article, many observers incessantly contradict themselves on whether they want oil to be inexpensive, or whether they want higher oil prices to spur technological innovations.  One of the most visible such pundits is Thomas Friedman, who has many interesting articles on the subject, such as his 2007 piece titled 'Fill 'Er Up With Dictators' :

But as oil has moved to $60 to $70 a barrel, it has fostered a counterwave — a wave of authoritarian leaders who are not only able to ensconce themselves in power because of huge oil profits but also to use their oil wealth to poison the global system — to get it to look the other way at genocide, or ignore an Iranian leader who says from one side of his mouth that the Holocaust is a myth and from the other that Iran would never dream of developing nuclear weapons, or to indulge a buffoon like Chávez, who uses Venezuela’s oil riches to try to sway democratic elections in Latin America and promote an economic populism that will eventually lead his country into a ditch.

But Mr. Friedman is a bit self-contradictory on which outcome he wants, as evidenced across his New York Times columns.

Over here, he says :

In short, the best tool we have for curbing Iran’s influence is not containment or engagement, but getting the price of oil down

And here, he says :

So here’s my prediction: You tell me the price of oil, and I’ll tell you what kind of Russia you’ll have. If the price stays at $60 a barrel, it’s going to be more like Venezuela, because its leaders will have plenty of money to indulge their worst instincts, with too few checks and balances. If the price falls to $30, it will be more like Norway. If the price falls to $15 a barrel, it could become more like America

Yet over here he says :

Either tax gasoline by another 50 cents to $1 a gallon at the pump, or set a $50 floor price per barrel of oil sold in America. Once energy entrepreneurs know they will never again be undercut by cheap oil, you’ll see an explosion of innovation in alternatives.

As well as over here :

And by not setting a hard floor price for oil to promote alternative energy, we are only helping to subsidize bad governance by Arab leaders toward their people and bad behavior by Americans toward the climate.

All of these articles were written within a 4-month period in early 2007.  Both philosophies are true by themselves, but they are mutually exclusive.  Mr. Friedman, what do you want?  Higher oil prices or lower oil prices?  Such confusion indicates how the debate about energy costs and technology is often high on rhetoric and low on analysis. 

Much worse, however, is the fashionable scaremongering that the financial media uses to fill up their schedule, amplified by a general public that gets suckered into groupthink.  To separate the whining from the reality, I apply the following simple test to verify whether people are actually being pinched by high oil prices or not.  If a large portion of average Americans have made arrangements to carpool to work (as was common in the 1970s), then oil prices are high.  Absent the willingness to make this adjustment, their whining about gasoline is not a reflection of actual hardship.  This enables us to declare that oil prices are not approaching crisis levels until most 10-mile-plus commuters are carpooling, that too in groups of three, rather than just two.  Coordinating of carpools is thus the minimum test of whether oil prices are actually causing any significant changes in behavior. 

Fortunately, $100 oil, a price that was considered a harbinger of doom as recently as 2007, is now not even enough to induce carpooling in 2011.  This quiet development is remarkably unnoticed, and conceals the substantial economic progress that has occurred.   

Economic Adaptations :

Trade Deficit The following chart from Calculated Risk (click to enlarge) shows the US trade deficit split between oil and non-oil imports.  This chart is not indexed as a percentage of GDP, but if it were, we would see that oil imports at $100/barrel today are not much higher of a percentage of GDP than in 1998, when oil was just $20/barrel.  In fact, the US produces much more economic output per barrel of oil compared to 1998.  We can thus see that unlike in 1974 when the US economy has much less demand elasticity for oil, today the ability of the economy to adjust oil consumption more quickly in reaction to higher prices makes the bar to experience an 'oil shock' much harder to clear.  US oil imports will never again attain the same percentage of GDP as was briefly seen in 2008. 

World Oil Consumption Per Capita-Downey-Oil 101 Of even more importance is the amazingly consistent per capita consumption of oil since 1982, which has remained at exactly 4.6 barrels/person despite a tripling real GDP per capita during the same period (chart by Morgan Downey).  This immediately deflates the claim that the looming economic growth of China and India will greatly increase oil consumption, since the massive growth from 1982 to 2011 did not manage to do this.  At this point, annual oil consumption, currently at around 32 billion barrels, only rises at the rate of population growth - about 1% a year. 

This leads me to make a declaration.  32 billion barrels at around $100/barrel is $3.2 Trillion in annual consumption.  This is currently less than 5% of nominal world GDP.  I hereby declare that :

Oil consumption worldwide will never exceed $4 Trillion/year, no matter how much inflation, political turmoil, or economic growth there is.  Thus, 'Peak Oil Consumption' happens long before 'Peak Oil Supply' ever could. 

This would mean that oil would gradually shrink as a percentage of world GDP, just as it has shrunk as a percentage of US GDP since 1982.  Even when world GDP is $150 Trillion, oil consumption will still be under $4 Trillion a year, and thus a very small percentage of the economy.  Mark my words, and proceed further to read about how I can predict this with confidence.   

The Carnival of Creative Destruction :

There are at least seven technologies that are advancing to reduce oil demand by varying degrees, many of which have been written about separately here at The Futurist : 

1) Natural Gas : Technologies that aid the discovery of natural gas have advanced at great speed, and supplies have skyrocketed to a level that exceeds anything humanity could consume in the next few decades.  The US alone has enough natural gas to more than offset all oil consumption, and the price of natural gas is currently on par with $50 oil. 

2) Efficiency gains : From innovations in engine design, airplane wing shape, reflective windows, and lighter nanomaterials, efficiency is advancing rapidly, to the extent that economic growth no longer increases oil consumption per capita, as described earlier.  There are many options available to consumers seeking 40 mpg or higher without sacrificing too much power or size, and I predicted back in early 2006 that in 2015, a 4-door family car with a 240 hp engine would deliver 60 mpg (or equivalent) yet still cost no more than $35,000 in 2015 dollars.  People scoffed at that prediction then, but now it seems quite safe.   

3) Cellulose Ethanol and Algae Oil : Corn ethanol was never going to be suitable in cost or scale, but the infrastructure established by the corn ethanol industry makes the transition to more sophisticated forms of ethanol production easier.  But fuels from switchgrass and algae are much more cost-effective, and will be ramping up in 2012.  Solazyme is an algae oil company that went public recently, and already has a market capitalization of $1.5 Billion. 

4) Batteries : Most of the limitations of electric and hybrid vehicles stem from shortcomings in battery technology.  However, since batteries are improving at a rate that is beginning to exceed the traditional 5-8% per year, and companies such as Tesla are able to lower the cost of their fully electric vehicles, the knee of the curve is near. 

5) Telepresence : Telepresence, while expensive today, will drop in price under the Impact of Computing and displace a substantial portion of business air travel, as described in detail here.  By 2015, geographically dispersed colleagues will seem to be closer to each other, despite meeting in person less often than they did in 2008.   

6) Wind Power : Wind Power already generates almost 3% of global electricity consumption, and is growing quickly.  When combined with battery advances that improve the range and power of electric and plug-in hybrid vehicles, we get two simultaneous disruptions - oil being displaced not just by electriciy, but by wind electricity.    

7) Solar Power : This source today generates the least power among those listed here.  But it is the fastest growing of the group with multiple technologies advancing at once, and with decades of steady price declines finally reaching competitive pricepoints.  It also has many structural advantages, most notably the fact that it be deployed to land that is currently unused and inhospitable.  Many of the countries with the fastest growth in energy consumption are also those with the greatest solar intensity. 

Plus, these are just the technologies that displace oil demand.  There are also technologies that increase oil supply, such as supercomputing-assisted oil discovery and new drilling techniques.  Supply-increasing technologies work to reduce oil prices and while they possibly slow down oil demand displacement, they too work to weaken petrotyranny. 

The problem in any discussion of these technologies is that the debate centers around an 'all or none' simplicity of whether the alternative can replace all oil demand, or none at all.  That is an unnuanced exchange that fails to comprehend that each technology only has to replace 10% of oil demand.  Natural gas can replace 10%, ethanol another 10%, efficiency gains another 10%, wind + solar another 10%, and so on.  Thus, if oil consumption as a percentage of world GDP is lower in a decade than it is today, that itself is a huge victory.  It hardly matters which technology advances faster than the others (in 2007, natural gas did not appear as though it would take the lead that it enjoys today), what matters is that all are advancing, and that many of these technologies are highly complementary to each other.     

What is also overlooked is how quickly the pressure to shift to alternatives grows as oil becomes more expensive.  If, say, cellulose ethanol is cost-effective with oil at $70, then oil at $80 causes a modest $10 dollar differential in favor of cellulose.  If oil is $120, then this differential is now $50, or five times more.  Such a delta causes much greater investment and urgency to ramp up research and production in cellulose ethanol.  Thus, each increment in oil price creates a much larger zone of profitability for any alternative. 

The Cost of Petrotyranny :

Map01_1024 This map of nations scaled in proportion to their petroleum reserves (click to enlarge) replaces thousands of words.  Some contend that the easy money derived from exporting oil leads to inevitable corruption and the financing of evil well beyond the borders of petro-states, while others lament the misfortune that this major energy source is concentrated in a very small area containing under 2% of the world's population.  Other sources of energy, such as natural gas, are much more evenly distributed across the planet, and this supply chain disadvantage is starting to work against oil.   

However, as we saw in the 2008 article, many of these regimes are dancing on a very narrow beam only as wide as the span between oil of $70 and $120/barrel.  While a price below $70 would be fatal to the current operations of Iran, Venezuela, and Russia, even a high price leads to a shrinkage in export revenue, as domestic consumption rises to reduce export units to a greater degree than can be offset by a price rise.  Furthermore, higher prices accelerate the advance of the previously mentioned technologies.  For the first time, we can now estimate how long oil can still hold such an exalted economic status. 

Quantifying the Remaining Petro-Yoke :

For the first time, we can make the analysis of both technological and political pressure exerted by a particular oil price more precise.   We can now quantify the rate of technological demand destruction, and predict the actual number of years before oil ceases to have any ability to cause economic recessions, and regimes like Iran, Venezuela, and Russia no longer can subsist on oil exports to the same degree.  This brings me to the second declaration of this article :

From the start of 2011, measure the dollar-years of area enclosed by a chart of the price of oil above $70.  There are only 200 such dollar-years remaining for the current world petro-order.  We can call this the 'Law of Finite Petrotyranny'. 

Allow me to elaborate. 

Through some proprietary analysis, I have calculated that the remaining lifetime of oil's economic importance as follows :

  • From the start of 2011, take the average price of West Texas Intermediate (WTI), Brent, or NYMEX oil, and subtract $70 from that, each year. 
  • Take the number accumulated, and designate that as 'X' dollar-years.
  • As soon as X equals to 200 dollar-years, then oil will not just fall below $70, but will never again be a large enough portion of world GDP to have a significant macroeconomic impact. 
     

Oil Price You can plug in your own numbers to estimate the year in which oil will cease to exert such power.  For example, if you believe that oil will average $120, which is $50 above the $70 floor, then the X points are expended at a rate of $50/year, meaning depletion at the end of 2014.  If oil instead averages just $100, then the X points are expended at $30/year, meaning it will take 6.67 years, or until late 2017, to consume them.  Points are only depleted when oil is above $70, but are not restored if oil is below $70 (as research projects may be discontinued or postponed, but work already done is not erased).  For those who (wrongly) insist that oil will soon be $170, the good news for them is that in such an event they will see the X points depleted in just two short years.  The graph provides 3 scenarios, of oil averaging $120, $110, and $100, and indicating in which year such a price trend would exhaust the 200 X points from points A, B, and C, which is the area of each of the three rectangles.  In reality, price fluctuations will cause variations in the rate of X point depletion, but you get the idea. 

Keep in mind the Law of Finite Petrotyranny, and on that basis, welcome any increase in oil prices as the hastening force of oil replacement that it is.  My personal opinion?  We average about $100/barrel, causing depletion of the X points in 2017 (scenario 'C' in green). 

Conclusion :

So what happens after the Law of Finite Petrotyranny manifests itself?  Let me pre-empt the strawmen that critics will erect, and state that oil will still be an important source of energy.  But most people will no longer care about the price of oil, much as the average person does not keep track of the price of natural gas or coal.  Oil will simply be a fuel no longer important enough to cause recessions or greatly alter consumer behavior through short-term spikes.  Many OPEC countries will see a great reduction in their power, and will no longer be able to placate their citizens through petro-handouts alone.  These countries would do well to act now and diversify their economies, phase in civil liberties while they can still do so incrementally, and prepare for a future of much lower leverage over their current customers.

So cheer oil prices higher so that the X points get frittered away quickly.  It will be fun. 

 

Related :

A Future Timeline for Energy

A Future Timeline for Automobiles 

July 01, 2011 in Accelerating Change, Core Articles, Economics, Energy, Technology | Permalink | Comments (76) | TrackBack (0)

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The Carnival of Creative Destruction

Words like 'disruption' and 'destruction' usually have negative meanings, and one may strain to find any good ways in which to use the terms.  But today, the accelerating rate of change ensures that more technologies alter more aspects of life at an ever-quickening rate.  A little-understood dimension of this is the concept of Joseph Schumpeter's 'Creative Destruction', where the process of technological change topples existing norms and replaces them with new ones, often quite rapidly. 

Technological diffusion was in a lull in 2008, as I pointed out at the time.  But now, in 2010, I am happy to report that the recess has passed, and that the accelerating rate of change is rising back to the long-term exponential trendline (although it may not be fully back at the trendline until 2013, when people who have not been paying attention will be wondering why they were taken by surprise).  The Impact of Computing continues to progress, infusing itself into a wider and wider swath of our lives, and speeding up the rate of change in complacently stagnant industries that never thought technology could affect them.  Silicon Valley continues to be 'ground zero' for creative destruction, and complacent industries thousands of miles away could be toppled by someone working from their bedroom in Silicon Valley. 

Just a few of the examples of creative destruction that is presently in process have been covered by prior articles here at The Futurist.  These, along with others, are :

1) Video Conferencing is poised to disrupt not just airline and hotel industry revenues (which stand to lose tens of billions of dollars per year of business travel revenue), but the real-estate, medical, and aeronautical industries as well.  Corporations will see substantial productivity gains from successful adoption of videoconferencing as a substitute for 50% or more of their travel expenses.  Major mergers and acquisitions have happened in this sector in the last few months, and imminent price reductions will open the floodgates of diffusion.  Skype provides a form of video telephony that is free of cost.  This is described in detail in my August 2008 article on the subject, as well as in my earlier October 2006 introductory article. 

2) Surface Computing, which I wrote about in July of 2008, has begun to emerge in a myriad of forms, from the handheld Apple iPad to the upcoming consumer version of the table-sized Microsoft Surface.  This not only transforms human-computer interaction for the first time in decades, but the Apple 'Apps' ecosystem alters the utility of the Internet as well.  All sizes between the blackboard and the iPad will soon be available, and by 2015, personal computing, and the Internet, will be quite different than they are today, with surfaces of varying sizes abundant in many homes. 

3) The complete and total transformation of video games into the dominant form of home entertainment will be visible by 2012 through a combination of technologies such as realistic graphics, motion-responsive controllers, 3-D televisions, voice recognition, etc.  The biggest casualty of this disruption will be television programming, which will struggle to retain viewers.  Beyond this, the way in which humans process sensations of pleasure, excitement, and entertainment will irrevocably change.  Thus, the way humans relate to each other will also change.  I have written about this in April 2006, with a follow-up in July 2009. 

4) The book-publishing industry has been stubbornly resistant to technology, as evidenced by their insistence as late as 2003 that manuscript queries be submitted by postal mail, and that a self-addressed stamped envelope be enclosed in which a reply can be sent.  A completed manuscript would take a full 12 months to be printed and distributed, and the editors didn't even find this to be odd.  Fortunately, two simultaneous disruptions are toppling this obsolete and unproductive industry from both ends.  Print-on-demand services that greatly shorten the self-publishing process and entry-cost, such as iUniverse and Blurb, are now flexible and easy, while finished books can further avoid the paper-binding process altogether and be available to millions in e-book format for the Kindle and other e-readers.  Books that cost, say, $15 to print, bind, and distribute now cost almost zero, enabling the author and reader to effectively split the money saved.  When e-readers are eventually available for only $100, bookstores that sell paper books will be relegated to surviving mostly on gifts, coffee table books, and cafe revenues.  This is a disruption that is happening quickly due to it being so overdue in the first place, resulting in a speedy 'catchup'.  I wrote about this in more detail in December of 2009.

5) The automobile is undergoing multiple major transformations at once.  Strong, light nanomaterials are entering the bodies of cars to increase fuel efficiency, engines are migrating to hybrid and electrical forms, sub-$5000 cars in India and China will lead to innovations that percolate up to lower the cost of traditional Western models, and the computational power engineered into the average car today leads to major feature jumps relative to models from just 5 years ago.  The $25,000 car of 2020 will be superior to the $50,000 car of 2005 in every measurable way. 

By 2016, consumer behavior will change to a mode where people consider it normal to 'upgrade' their perfectly functioning 6-year-old cars to get a newer model with better electronic features.  This may seem odd, but people did not tend to replace fully functional television sets before they failed until the 2003 thin-TV disruption.  The Impact of Computing pulls ever-more products into a rapid trajectory of improvement. 

By 2018, self-driving cars will be readily available to the average US consumer, and will constitute a significant fraction of cars on the highway.  This will revise existing assumptions about highway speeds and acceptable commute distances, and will further impede the real estate prices of expensive areas. 

6) The Mobile Internet revolution, which I wrote about in October of 2009, is already transforming the way consumers in developed markets access the Internet.  The bigger disruption is the entry of 1 billion new Internet users from emerging economies.  While many of these people have relatively little education compared to Western Internet users, as the West shrinks as a fraction of total Internet mindshare, many Western cultural quirks that are seen as normal might be seen for the minority positions that they are.  Thomas Friedman's concept of the world being 'flat' has not even begun to fully manifest. 

7) The energy sector is in the midst of multiple disruptions, which will introduce competition between sectors that were previously unrelated.  Electrical vehicles displace oil consumption with electricity, even while the electricity itself starts to be generated through nuclear, solar, and wind.  The electrical economy will be further transformed by revolutions in lighting and batteries.  Cellulostic ethanol will arrive in 2012, and further replace billions of gallons of gasoline.  I wrote in October 2007 why I want oil to surpass $120/barrel and stay there (it subsequently was above that level for a mere 6-week period in 2008).  This leads to why I claim that 'Peak Oil', far from being fatal for civilization, will actually be a topic few people even mention in 2020.  The creative destruction in energy will extend to the geopolitical landscape, where we will see many petrotyrannies much weaker in 2020 than they are today. 

8) Despite the efforts of Democrats to create a system unfavorable to advancement in healthcare and biotechnology, innovation continues on several fronts (partly due to Asian nations compensating for US shortfalls).  One disruption is robotic surgery, where incisions can be narrow instead of the customary practice of making incisions large enough for the surgeon's hands, which in turn often necessitates sawing open the sternum, pelvis, etc.  Intuitive Surgical is a company that already has a market cap of $14 Billion. 

The biggest disruption, however, is that the globalization of technology is enabling medical tourism.  In the US, about twice as much is spent on healthcare per person as in other OECD countries.  If manufacturing and software work can be offshored, so can many aspects of healthcare, which is much more expensive than manufacturing or software engineering ever became in the US.  This will correct inflated salaries in the healthcare sector, return the savings to consumers, and force innovations and systemic improvements in all OECD countries. 

Genome 9) By all accounts, the cost of genome sequencing has plunged faster than any other technology, ever (it is less clear how this was accomplished, and whether the next 4 years will see a comparable drop).  I tend to be skeptical about such eye-popping numbers, because if something became so much cheaper so quickly, yet it still didn't sweep over the world, then maybe it was not so valuable after all. 

But it is also possible that while the raw data is now available cheaply, there is not yet enough of a community that instructs people why they should get their genome sequenced, and how to use their data.  The Economist has a special report on the implications of inexpensive genome sequencing. 

10) Social media such as Facebook, Twitter, etc. are mostly inundated with the trivialities of young people, or of older people who never matured, who think they have an audience far larger than it is.  However, these mediums have been used to horizontally organize interest groups and movements for political change that know no distance barriers or boundaries. 

Blogs have shattered the hold that traditional media had on the release of information and opinions, and the revenues of newspapers, magazines, and network television have tumbled.  The Tea Party movement in the US was started by a very small number of people, but has surged with a momentum that has reshaped the American landscape in just one year, and, irony of ironies, the Tea Party is spreading to overtaxed Britain.  The next Iranian revolution will not only use Twitter and YouTube, but will have millions of collaborators outside of Iran, operating out of their own homes. 

11) The financial services industry is overdue for disruption, and this was the cover story of Wired Magazine for March 2010, and was a structure established in an era when computing power needed to process transactions was expensive.  Today, several startups are seeking to change the way money is transacted to eliminate this cut that incumbent companies take.  Major financial services companies will see shrinkages in revenue, and will have to innovate and create new value-added services, or accept a diminishment. 

Aside from this effectively being a sizable 'tax cut' for the economy, this is particularly valuable as a complement to mobile Internet penetration in poorer regions, as the capacity to conduct web micro-transactions without fees will be an essential element of human development.  The highly successful concept of micro-finance will be augmented when transaction fees that consumed a high percentage of these sub-$10 transactions are minimized. 

12) 3-D Printing will soon be accessible to small businesses and households.  This transforms everything from commodity consumer goods to the construction of buildings.  An individual could download a design and print it at home, rather than be restricted to only those products that can be mass produced.  It is quite possible that by 2025, construction of basic structures takes less than one-tenth the time that it does today, which, of course, will deflate the value of all existing buildings in the world at that time. 

So we see there are at least 12 ways in which our daily lives will shift considerably in just the next few years.  The typical process of creative destruction results in X wealth being destroyed, and 2X wealth being created instead, but by different people.  For each of the 12 disruptions listed, 'X' might be as much a $1 Trillion.  As a result, the US economy might be mired in a long-term situation where vanishing industries force many laid off workers to start in new industries at the entry level, for half of their previous compensation, even as new fortunes created by the new industries cause net wealth increases.  The US could see a continuation of high unemployment combined with high productivity gains and corporate earnings growth for several years to come.  Big paydays for entrepreneurs will make the headlines frequently, right alongside stories of people who have to accept permanent 50% pay reductions.  This would be the 'new normal'. 

Income diversification is the golden rule of the early 21st century.  Those that fail to create and maintain multiple streams of income are imperiling themselves.  The hottest career one can embark on, which will never be obsolete, is that of the serial entrepreneur. 

 

June 01, 2010 in Computing, Energy, Technology | Permalink | Comments (45)

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Energy vs. Financials, FINAL RESULTS

Many of you may be familiar with this sectoral strategy that I have presented, which was due to the unusually wide extreme to which these two sectors had diverged from each other as of April 22, 2008. To review :

On April 22, 2008, I decided to go short on Energy (XLE) and long on Financials (XLF).

Then, on May 20, 2009, I decided to cover the Energy short, and use the proceeds to double down on Financials.  Up till that point, the trade had earned a loss of -5.36%, vs. a loss of -32.20% for the S&P500.

Now, it is time to sell the Financials position, and assess the final performance over the entire 18-month period, against the S&P 500.

Enerfin

The purple line indicates the May 20, 2009 transition from being short XLE to covering that short and using the full proceeds to double down on XLF.  Note that the short of XLE was profitable, so that the amount that was redeployed to XLF was more than the existing value of the XLF position. 

Therefore, the final results are (with all dividends reinvested) :

Enerfin2 
This strategy yielded a gain of 21.92% vs. a loss of -17.19% for the S&P500.  This is a huge gap of almost 40 points, and means that $10,000 deployed to this strategy would have yielded $12,192, vs. just $8,281 if placed in the S&P500 over this period.  Also note how the gap widened from what it was on May 20, 2009. 

This continues our track record here at The Futurist of collectively beating the market by a wide margin, with portfolios that beat the market greatly exceeding the deficit of those that do not.  Of course, these trades are for entertainment purposes only, and should not be taken as professional advice. 

Related :

A History of Stock Market Bottoms   

November 12, 2009 in Economics, Energy, Stock Market | Permalink | Comments (6) | TrackBack (0)

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Energy vs. Financials, RESULTS

On April 22, 2008, I wrote about how the Energy and Financial sectors had diverged from each other, up to that point, to a degree that rarely happens between any two major sectors of the market.  I proceeded to suggest a trade of shorting Energy while going long on Financials. 

Let us see how that trade turned out, about 1 year after it was suggested. 

EF 

Both sectors did worse than the S&P500, but as we were short on Energy, this is favorable.  With dividends reinvested (which for Financials, were substantial), we come to total returns of :

Results  

So this trade earned a return of -5.36%, vs. -32.20% for the S&P500.  This is a dramatic outperformance relative to the index, even though staying in cash would have been even better.

For a next step, I would cover the short on Energy, and double down on my long position in Financials, given the low current price of Financials. 

May 20, 2009 in Economics, Energy, Stock Market | Permalink | Comments (20) | TrackBack (0)

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Solar Power's Next 5 Game-Changing Technologies

I have written beffore about the reduction in price of solar energy, and how each succcessive price decline would deliver a new generation of adoption.  Now, we can examine some of the specfic technologies that are driving the race to affordability, and will enable solar energy to be one of the only candidate technologies to lead an economic recovery from the present downturn. 

Popular Mechanics has a roundup of five new areas of innovation in harnessing energy from the Sun.  All five promise to make solar energy competitive with the cheapest sources of fossil-fuel energy, and many of these five technologies could work in combination with each other.  The five technologies are the following :

Solar 

Now, many of these technologies were invented before 2008, so this roundup does not alter the fact that 2008 was a year of very low technological innovation.  However, all these innovations bode very well for a tremendous boom in solar power starting around 2010.  Each technology has one or more startup companies mentioned in each section.  The industry consensus is that solar power becomes competitive with conventional sources of power generation by around 2011, varying by the local cost of electricity and the solar intensity of a particular region (i.e Arizona becomes cost-competitive for solar before British Columbia does).

The greatest benefits, however, will accrue to emerging markets.  Many poorer countries not only have electricity rates that are much more expensive than in the US, but these countries, being in more southern latitudes, receive greater solar intensity to begin with.  Breakeven in these markets arrives even sooner than it does for the wealthy countries at more northern latitudes.  Many villages in India, VietNam, Iraq, Egypt, and Indonesia will go from having no electricity to having photovoltaic electricity. 

Related :

Solar Energy Cost Curve

The Solar Revolution is Near

A Future Timeline for Energy

(crossposted on TechSector)

February 03, 2009 in Energy, Nanotechnology, Technology | Permalink | Comments (12) | TrackBack (0)

Tags: greentech, photovoltaic, solar

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A Future Timeline for Economics

The accelerating rate of change in many fields of technology all manifest themselves in terms of human development, some of which can be accurately tracked within economic data.  Contrary to what the media may peddle and despite periodic setbacks, average human prosperity is rising at a rate faster than any other time in human history.  I have described this in great detail in prior articles, and I continue to be amazed at how little attention is devoted to the important subject of accelerating economic growth, even by other futurists.

The time has thus come for making specific predictions about the details of future economic advancement.  I hereby present a speculative future timeline of economic events and milestones, which is a sibling article to Economic Growth is Exponential and Accelerating, v2.0. 

2008-09 : A severe US recession and global slowdown still results in global PPP economic growth staying positive in calendar 2008 and 2009.  Negative growth for world GDP, which has not happened since 1973, is not a serious possibility, even though the US and Europe experience GDP contraction in this period.  The world GDP growth rate trendline resides at growth of 4.5% a year.

2010 : World GDP growth rebounds strongly to 5% a year.  More than 3 billion people now live in emerging economies growing at over 6% a year.  More than 80 countries, including China, have achieved a Human Development Index of 0.800 or higher, classifying them as developed countries. 

2011 : Economic mismanagement in the US leads to a tax increase at the start of 2011, combined with higher interest rates on account of the budget deficit.  This leads to a near-recession or even a full recession in the US, despite the recovery out of the 2008-09 recession still being young. 

2012 : Over 2 billion people have access to unlimited broadband Internet service at speeds greater than 1 mbps, a majority of them receiving it through their wireless phone/handheld device. 

2013 : Many single-family homes in the US, particularly in California, are still priced below the levels they reached at the peak in 2006, as predicted in early 2006 on The Futurist.  If one adjusts for cost of capital over this period, many California homes have corrected their valuations by as much as 50%. 

2014 : The positive deflationary economic forces introduced by the Impact of Computing are now large and pervasive enough to generate mainstream attention.  The semiconductor and storage industries combined exceed $800 Billion in size, up from $450 Billion in 2008.  The typical US household is now spending $2500 a year on semiconductors, storage, and other items with rapidly deflating prices per fixed performance.  Of course, the items puchased for $2500 in 2014 can be purchased for $1600 in 2015, $1000 in 2016, $600 in 2017, etc. 

2015 : As predicted in early 2006 on The Futurist, a 4-door sedan with a 240 hp engine, yet costing only 5 cents/mile to operate (the equivalent of 60 mpg of gasoline), is widely available for $35,000 (which is within the middle-class price band by 2015). This is the result of combined advances in energy, lighter nanomaterials, and computerized systems.

2016 : Medical Tourism introduces $100B/year of net deflationary benefit to healthcare costs in the US economy.  Healthcare inflation is slowed, except for the most advanced technologies for life extension. 

2017 : China's per-capita GDP on a PPP basis converges with the world average, resulting in a rise in the Yuan exchange rate.  This is neither good nor bad, but very confusing for trade calculations.  A recession ensues while all the adjustments are sorted out. 

2018 : Among new cars sold, gasoline-only vehicles are now a minority.  Millions of vehicles are electrically charged through solar panels on a daily basis, relieving those consumers of a fuel expenditure that was as high as $3000 a year in 2008.  Some electrical vehicles cost as little as 1 cent/mile to operate. 

2019 : The Dow Jones Industrial Average surpasses 25,000.  The Nasdaq exceeds 5000, finally surpassing the record set 19 years prior in early 2000. 

2020 : World GDP per capita surpasses $15,000 in 2008 dollars (up from $8000 in 2008).  Over 100 of the world's nations have achieved a Human Development Index of 0.800 or higher, with the only major concentrations of poverty being in Africa and South Asia.  The basic necessities of food, clothing, literacy, electricity, and shelter are available to over 90% of the human race. 

Trade between India and the US touches $400 Billion a year, up from only $32 Billion in 2006. 

2022 : Several millon people worldwide are each earning over $50,000 a year through web-based activities.  These activities include blogging, barter trading, video production, web-based retail ventures, and economic activites within virtual worlds.  Some of these people are under the age of 16.  Headlines will be made when a child known to be perpetually glued to his video game one day surprises his parents by disclosing that he has accumulated a legitimate fortune of more than $1 million. 

2024 : The typical US household is now spending over $5000 a year on products and services that are affected by the Impact of Computing, where value received per dollar spent rises dramatically each year.  These include electronic, biotechnology, software, and nanotechnology products.  Even cars are sometimes 'upgraded' in a PC-like manner in order to receive better technology, long before they experience mechanical failure.  Of course, the products and services purchased for this $5000 in 2024 can be obtained for $3200 in 2025, $2000 in 2026, $1300 in 2027, etc. 

2025 : The printing of solid objects through 3-D printers is inexpensive enough for such printers to be common in upper-middle-class homes.  This disrupts the economics of manufacturing, and revamps most manufacturing business models. 

2027 : 90% of humans are now living in nations with a UN Human Development Index greater than 0.800 (the 2008 definition of a 'developed country', approximately that of the US in 1960).  Many Asian nations have achieved per capita income parity with Europe.  Only Africa contains a major concentration of poverty. 

2030 : The United States still has the largest nominal GDP among the world's nations, in excess of $50 Trillion in 2030 dollars.  China's economy is a close second to the US in size.  No other country surpasses even half the size of either of the two twin giants. 

The world GDP growth rate trendline has now surpassed 5% a year.  As the per capita gap has reduced from what it was in 2000, the US now grows at 4% a year, while China grows at 6% a year. 

10,000 billionaires now exist worldwide, causing the term to lose some exclusivity. 

2032 : At least 2 TeraWatts of photovoltaic capacity is in operation worldwide, generating 8% of all energy consumed by society.  Vast solar farms covering several square miles are in operation in North Africa, the Middle East, India, and Australia.  These farms are visible from space. 

2034 : The typical US household is now spending over $10,000 a year on products and services that are affected by the Impact of Computing.  These include electronic, biotech, software, and nanotechnology products.  Of course, the products and services purchased for this $10,000 in 2034 can be obtained for $6400 in 2035, $4000 in 2036, $2500 in 2037, etc. 

2040 : Rapidly accelerating GDP growth is creating astonishing abundance that was unimaginable at the start of the 21st century.  Inequality continues to be high, but this is balanced by the fact that many individual fortunes are created in extremely short times.  The basic tools to produce wealth are available to at least 80% of all humans. 

Greatly increased lifespans are distorting economics, mostly for the better, as active careers last well past the age of 80. 

Tourism into space is affordable for upper middle class people, and is widely undertaken. 

________________________________________________________

I believe that this timeline represents a median forecast for economic growth from many major sources, and will be perceived as too optimistic or too pessimistic by an equal number of readers.  Let's see how closely reality tracks this timeline.

September 28, 2008 in Accelerating Change, China, Computing, Core Articles, Economics, Energy, India, The Singularity | Permalink | Comments (56)

Tags: Accelerating, China, Economics, Economy, Event Horizon, Future, GDP, Moore's Law, Singularity

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The Solar Revolution is Near

I have long been optimistic about Solar Energy (whether photovoltaic or thermal) becoming our largest energy source within a few decades.  Earlier articles on the subject include :

A Future Timeline for Energy

Solar Energy Cost Curve

Several recent events and developments have led me to reinforce this view.  First of all, consider this article from Scientific American, detailing a Solar timeline to 2050. The article is not even Singularity-aware, yet details many steps that will enable Solar energy to expand by orders of magnitude above the level that it is today.  Secondly, two of the most uniquely brilliant people alive today, Ray Kurzweil and Elon Musk (who I recently chatted with), have both provided compelling cases on why Solar will be our largest energy source by 2030.  Both Kurzweil and Musk reside in significantly different spheres, yet have arrived at the same prediction.

However, the third point is the one that I find to be the most compelling. There are a number of publicly traded companies selling solar energy products, many of which had IPOs in just the last three years.  Some of these companies, and their market capitalizations, are :

Solar1

Now consider that the companies on this list alone amount to about $50 Billion in capitalization.  There are, additionally, many smaller companies not included on this list, many companies like Applied Materials (AMAT) and Cypress Semiconductor (CY) for which solar products comprise only a portion of their business, and large private companies like NanoSolar (which I have heavily profiled here) and SolFocus that may have valuations in the billions.  Thus, the market cap of the 'solar sector' is already between $60B and $100B, depending on what you include within the total.  This immense valuation has accumulated at a pace that has taken many casual observers by surprise.  A 2-year chart of some of the stocks listed above tells the story. 

Solar2

While FirstSolar (FSLR) has been the brightest star, all the others have trounced the S&P500 to a degree that would put even Google or Apple to shame over this period.  Clearly, a dramatic ramp in Solar energy is about to make mainstream headlines very soon, even if the present valuations are too high. 

Is this a dot-com-like bubble?  Yes, in the near-term, it is.  However, after a sharp correction, the long term growth will resume for the companies that emerge as leaders.  I won't recommend a specific stock among this cluster just yet, as there are a wave of private companies with new technologies that could render any of these incumbents obsolete.  Specific company profiles will follow soon, but in the meantime, for more detail on the long-term trends in favor of Solar, refer to these additional articles of mine :

Why I Want Oil to Hit $120 per Barrel

Terrorism, Oil, Globalization, and the Impact of Computing

(crossposted on TechSector)

May 20, 2008 in Energy, Nanotechnology, Stock Market, Technology, The Singularity | Permalink | Comments (13) | TrackBack (0)

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Energy vs. Financials, A Divergence of Historical Extremes

Energy and Financials are both large sectoral components of the S&P500.  Yet the two have diverged immensely over the last 2 years.  Not since the technology bust at the start of the decade have any two sectors diverged so much from each other, and from the composite S&P500 index. 

XLE is an exchanged-traded fund for the Energy sector, while XLF is the equivalent for the Financial sector.  First, let us view a two-year chart : 

Xlexlf2_3

Energy has outperformed the S&P500 by an equal margin that Financials have lagged the S&P500 by.  Next, we can view a five-year chart :

Xlfxle_3

While Financials only began to fall away in 2007, Energy has gone so high above the composite market that it reminds one of the technology bubble of the late 1990s. 

It seems quite obvious here that while it is impossible to identify the exact top of the Energy run, or the exact bottom of the Financials correction, it would be very prudent to sell any existing holdings in Energy (or even short Energy if you have the appetite) and rotate the proceeds into Financials.  The gap could widen in the short term, but rarely do two sectors reach such extreme disparities that make a profitable trade so obvious. 

(crossposted on TechSector).

April 22, 2008 in Economics, Energy, Stock Market | Permalink | Comments (6) | TrackBack (0)

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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?

March 28, 2008 in Accelerating Change, Economics, Energy, Politics | Permalink | Comments (55)

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Batteries Set to Advance, Finally

Battery The Economist has a great article on the history and near-future outlook for battery technology. Batteries have scarcely improved in the last century, and there have been too many false starts for a seasoned observer to get his hopes up too easily.  But this chart of battery capacity by unit weight, in particular, is something I have been seeking for a long time.  It vindicates my belief that lithium-ion technology is improving at a rate far faster than traditional nickel batteries (that have scarcely improved at all in the last half-century).  Note, importantly, that if we join the multiple curves, we see a strong indication of the classic accelerating technology exponential curve.  This time we know it's for real. 

This is exciting on multiple levels, because it opens to door to not just mainsteam electical vehicles in the next decade, but to a variety of wearable electronic devices, 20-30 hour laptop batteries, household robotics, and other applications that have not yet been imagined. 

Future projections are usually over-optimistic, you say?  Let's also not forget Stanford University's nanowire research to increase Lithium-ion battery capacity, which was wide acclaimed as among the most important scientific breakthroughs of 2007. 

Related :

A Future Timeline for Energy

A Future Timeline for Automobiles

Why I Want Oil to Hit $120 per Barrel

March 11, 2008 in Accelerating Change, Energy, Nanotechnology, Technology | Permalink | Comments (10) | TrackBack (0)

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Nine Tantalizing Small Companies

In scouring the startup universe for the companies and technologies that can reshape human society and create entirely new industries, one has to play the role of a prospective Venture Capitalist, yet not be constrained by the need for a financial exit 3-6 years hence. 

Therefore, I have assembled a list of nine small companies, each with technologies that have the potential to create trillion-dollar economic disruptions by 2020, disruptions that most people have scarcely begun to imagine today.  Note that the emphasis is on the technologies rather than the companies themselves, as a startup requires much more than a revolutionary technology in order to prosper.  Management skills, team synergy, and execution efficiency are all equally important.  I predict that out of this list of nine companies, perhaps one or two will become titans, while the others will be acquired by larger companies for modest sums, enabling the technology to reach the market through the acquiring company. 

1) NanoSolar : NanoSolar produces low-cost solar cells that are manufactured by a process analogous to 'printing'.  The company's technology was selected by Popular Mechanics as the 'Innovation of the Year' for 2007, and Nanosolar's solar cells are significantly ahead of the Solar Energy Cost Curve.  The flexible, thin nature of Nanosolar's cells may enable them to be quickly incorporated onto the surfaces of many types of commercial buildings.  Nanosolar's first shipments have already occurred, and if we see several large deployments in the near future, this might just be the company that finally makes solar energy a mass-adopted consumer technology.  Nanosolar itself calls this the 'third wave' of solar power technology. 

2) Tesla Motors : I wrote about Tesla Motors in late 2006.  Tesla produces fully electric cars that can consume as little as 1 cent of electricity per mile.  They are about to deliver the first few hundred units of the $98,000 Tesla Roadster to customers, and while the Roadster is not a car that can be marketed to average consumers, Tesla intends to release a 4-door $50,000 sedan named 'WhiteStar' in 2010, and a $30,000 sedan by 2013.  The press coverage devoted to Tesla Motors has been impressive, but until the WhiteStar sedan successfully sells at least 10,000 units, Tesla will not have silenced critics who say the technology cannot be brought down to mass-market costs. 

Aptera_33) Aptera Motors : When I first wrote about Tesla Motors, it was before I had heard about Aptera Motors.  While Tesla is aiming to produce a $30,000 sedan for 2013, Aptera already has an all-electric car due for late 2008 that is priced at just $27,000, while delivering the equivalent of between 200 and 330 mpg.  The fact that the vehicle has just three wheels may reduce mainstream appeal to some degree, but the futuristic appearance of the car will attract others.  Aptera Motors is a top candidate for winning the Automotive X-Prize in 2010. 

The simultaneous use of Nanosolar's solar panels with the all-electric cars from Tesla and Aptera may enable automotive driving to be powered by solar generated electricity for the average single-family household.  The combination of these two technologies would be the 'killer ap' of getting off of oil and onto fully renewable energy for cars. 

Related : Why I Want Oil to Hit $120/Barrel.

4) 23andMe : This company gets some press due to the fact that co-founder Anne Wojcicki is married to Sergey Brin, even as Google has poured $3.9M into 23andMe.  Aside from this, what 23andMe offers is an individual's personal genome for just $1000.  What a personal genome provides is a profile of which health conditions the customer is more or less susceptible to, and thus enables the customer to provide this information to his physician, and make the preventive lifestyle adjustments well in advance.  Proactive consumers will be able to extend their lifespans by systematically reducing their risks of ailments they are genetically predisposed to.  As the service is a function of computational power, the price of a personal genome will, of course, drop, and might become an integral part of the average person's medical records, as well as an expense that insurance covers. 

5) Desktop Factory : In 2008, Desktop Factory will begin to sell a $5000 device that functions as a 3-D printer, printing solid objects one layer at a time.  A user can scan almost any object (including a hand, foot, or head) and reproduce a miniature model of it (up to 5 X 5 X 5 inches).  The material used by the 3-D printer costs about $1 per cubic inch. 

The $5000 printer is a successor to similar $100,000 devices used in mechanical engineering and manufacturing firms.  Due to the Impact of Computing, consumer-targeted devices costing under $1000 will be available no later than 2014.  I envision an ecosystem where people invent their own objects (statuettes, toys, tools, etc.) and share the scanned templates of these objects on social networking sites like MySpace and Facebook.  People can thus 'share' actual objects over the Internet, through printing a downloaded template.  The cost of the printing material will drop over time as well.  A lot of fun is to be had, and expect an impressive array of brilliant ideas to come from people below the age of 16. 

6) Zazzle : Welcome to the age of the instapreneur.  Zazzle enables anyone to design their own consumer commodities like T-shirts, mugs, calendars, bumper stickers, etc. on demand.  If you have an idea, you can produce it on Zazzle with no start-up costs, and no inventory risks.  You profit even from the very first unit you sell, with no worries about breakeven thresholds.  You can produce an infinite number of products, limited only by your imagination.  At this point, those of you reading this are probably in the midst of an avalanche of ideas of products you would like to produce. 

While the bulk of Zazzle users today are would merely be vanity users who manage to sell under ten units of their creations, this new paradigm of low-cost customization will inevitably creep up to major industrial supply chains.  Even more interesting, think about #5 on this list, Desktop Factory, combining with Zazzle's application, into an amazing transformation of the very economics of manufacturing and mass-production. 

7) A123 Systems : Read here about how battery technology is finally set to advance after decades of stagnation.  A123 Systems is at the forefront of these advances, and has already received over $148 Million in private funding, as well as an article from the prestigious MIT Technology Review.  A123 is a supplier for GM's upcoming Volt, and has already has begun to sell a module to convert a Toyota Prius into a plug-in hybrid.  For choices beyond those offered by the #2 and #3 companies on this list, A123 Systems is poised to enable the creation of many new electric or plug-in hybrid vehicles, greatly increasing the the choices available to consumers seeking the equivalent of more than 50 mpg.  A123 may just become the Intel of batteries.  Combine A123's batteries with Nanosolar's cells, and the possibilities become even more interesting. 

8) Luxim : Brightness of light is measured in Lumens, not Watts, which is a measure of power consumption.  Consumers are learning that CFL and LED bulbs offer the same Lumens with just a fifth or a tenth of the Watts consumed by a traditional incandescent bulb, and billions of tons of coal are already being saved by the adoption of CFLs and LEDs.  Luxim, however, aims to take this even further.  Luxim makes tiny bulbs that deliver 8 times as many Lumens per Watt as incandescent bulbs.  The bulbs are too expensive for home use, but are already going into projection TVs.  With $61 Million in funding to date, Luxim's main hurdle will be to reduce the cost of their products enough to penetrate the vast home and office lighting market, which consumes tens of billions of bulbs each year.   

9) Ugobe : Ugobe sells a robotic dinosaur toy known as the Pleo.  A mere toy, especially a $350 toy, would not normally be on a list of technologies that promise to crease the fabric of human society.  However, a closer look at the Pleo reveals many impressive increments in the march to make inexpensive robots more lifelike.  The skin of the Pleo covers the joints, the Pleo has more advanced 'learning' abilities than $2500 robots from a few years ago, and the Pleo even cries when tortured, to the extent that it is difficult to watch this. 

The reason Ugobe is on this list is that I am curious to see what is the next product on their roadmap, so that I can gauge how quickly the technology is advancing.  The next logical step would be an artificial mammal of some sort, with greater intelligence and realistic fur.  The successful creation of this generation of robot would provide the datapoints to enable us to project the approximate arrival of future humanoid robots, for better or for worse.  Another company may leapfrog Ugobe in the meantime, but they are currently at the forefront of the race to create low-priced robotic toys. 

This concludes the list of nine companies that each could greatly alter our lives within the next several years.  Of these nine, at least three, Nanosolar, Tesla Motors, and 23andMe, have Google or Google's founders as investors.  The next 24 months have important milestones for each of these companies to cross (by which time I might have a new list of new companies).  For those that clear their respective near-term bars, there might just be a chance of attaining the dizzy heights that Google, Microsoft, or Intel has. 

Related :

The Impact of Computing

A Future Timeline for Automobiles

A Future Timeline for Energy

The Imminent Revolution in Lighting

Batteries Set to Advance, Finally

(crossposted on TechSector)

February 17, 2008 in Accelerating Change, Biotechnology, Economics, Energy, Nanotechnology, Technology, The Singularity | Permalink | Comments (6) | TrackBack (0)

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2007 Technology Breakthrough Roundup

One year ago, I posted a roundup of 2006 technology breakthroughs from MIT Technology Review.  Of the breakthroughs listed at that time, displays, plug-in hybrids, and solar cells showed impressive progress over the subsequent 12 months. 

Now, we arrive at the 2007 list, which has expanded from four categories last year to five this time. 

The Year in Software

The Year in Hardware : Gadgetmania

The Year in Energy : Solar power inches closer.

The Year in Biotechnology : Stem cell research methods that no longer need embryos.

The Year in Nanotechnology : Stanford University research into nanowires that dramatically increase battery capacity is the most promising breakthrough of 2007, in any discipline.  Think 30-hour laptop batteries. 

Most of the innovations in the articles above are in the laboratory phase, which means that about half will never progress enough to make it to market, and those that do will take 5 to 15 years to directly affect the lives of average people (remember that the laboratory-to-market transition period itself continues to shorten in most fields).  But each one of these breakthroughs has world-changing potential, and that there are so many fields advancing simultaneously guarantees a massive new wave of improvement to human lives. 

This scorching pace of innovation is entirely predictable, however.  To internalize the true rate of technological progress, one merely needs to appreciate :

The Milli, Micro, Nano, Pico curves

The Impact of Computing

The Accelerating Rate of Change

We are fortunate to live in an age when a single calendar year will invariably yield multiple technological breakthroughs, the details of which are easily accessible to laypeople.  In the 18th century, entire decades would pass without any observable technological improvements, and people knew that their children would experience a lifestyle identical to their own.  Today, we know with certainty that our lives in 2008 will have slight but distinct and numerous improvements in technological usage over 2007, just as 2007 was an improvement over 2006. 

Into the Future we continue, where 2008 awaits..

(cross-posted at TechSector).

January 12, 2008 in Accelerating Change, Biotechnology, Computing, Energy, Nanotechnology, Science, Technology | Permalink | Comments (1) | TrackBack (0)

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Why I Want Oil to Hit $120 per Barrel

Here on The Futurist, we have a long tradition of seeking permanent independence from oil-drunk dictatorships and theocracies, with the pursuit of long-term gains taking precendence over the avoidance of short-term pain.  I refer you to :

Why $70/barrel Oil is Good for America (February 1, 2006).

$70+/Barrel Oil, the Non-Crisis (April 25, 2006).

Terrorism, Oil, Globalization, and the Impact of Computing (August 22, 2006).

When oil first hit $70/barrel nearly two years ago, there were widespread fears of the US economy tipping into recession.  I pointed out that a much smaller piece of the US economy has exposure to oil than was the case in 1974 or 1981, which were the last times such high prices were seen (in inflation-adjusted terms).  Google, Oracle, and VMWare are far less vulnerable to oil prices than General Motors and Federal Express.  Sure enough, after 2 years of oil prices hovering around $70, the US economy has successfully adapted to it.  The specter of the $70 barrier is behind us, permanently.  This chart from the Bureau of Labor Statistics shows the annualized rate of oil price inflation over the last few years. 

Eiuir_132089_1191805717411_2

Notice how the rise from $20 to $80 led to import price inflation (the blue line) touching 10% for three years.  However, that rise is now behind us, with the settled price of $70/barrel or more no longer causing further inflation in the price of imported products.  0739_27busout Even more striking is the shrinkage in the US trade deficit.  Despite oil imports being as much as one third of the US trade deficit of about $60 Billion/month, the trade deficit has actually shrunk since the peak of 2006, contributing positively to GDP growth for the first time in over a decade (chart from BusinessWeek).  That the US economy can now take $70 and even $80 oil in stride is the biggest story that no one has noticed yet. 

However, $70 oil also fattens the coffers of the world's notorious 'Petrotyrants'.  From Iran to Venezuela to Saudi Arabia to Russia, one can note that there is a rather close corelation between an economy being heavily dependent on oil exports and the leaders of that country resisting or even rescinding democracy. 

Thomas Friedman has many interesting articles on the subject, such as his 'Fill 'Er Up With Dictators' :

But as oil has moved to $60 to $70 a barrel, it has fostered a counterwave — a wave of authoritarian leaders who are not only able to ensconce themselves in power because of huge oil profits but also to use their oil wealth to poison the global system — to get it to look the other way at genocide, or ignore an Iranian leader who says from one side of his mouth that the Holocaust is a myth and from the other that Iran would never dream of developing nuclear weapons, or to indulge a buffoon like Chávez, who uses Venezuela’s oil riches to try to sway democratic elections in Latin America and promote an economic populism that will eventually lead his country into a ditch.

But Mr. Friedman is a bit self-contradictory on which outcome he wants, as evidenced across his New York Times columns.

Over here, he says :

In short, the best tool we have for curbing Iran’s influence is not containment or engagement, but getting the price of oil down

And here, he says :

So here’s my prediction: You tell me the price of oil, and I’ll tell you what kind of Russia you’ll have. If the price stays at $60 a barrel, it’s going to be more like Venezuela, because its leaders will have plenty of money to indulge their worst instincts, with too few checks and balances. If the price falls to $30, it will be more like Norway. If the price falls to $15 a barrel, it could become more like America

Yet over here he says :

Either tax gasoline by another 50 cents to $1 a gallon at the pump, or set a $50 floor price per barrel of oil sold in America. Once energy entrepreneurs know they will never again be undercut by cheap oil, you’ll see an explosion of innovation in alternatives.

As well as over here :

And by not setting a hard floor price for oil to promote alternative energy, we are only helping to subsidize bad governance by Arab leaders toward their people and bad behavior by Americans toward the climate.

All of these articles were written within a 4-month period in early 2007.  Both philosophies are true by themselves, but they are mutually exclusive.  Mr. Friedman, what do you want?  Higher oil prices or lower oil prices?

But forget about Mr. Friedman wanting it both ways.  Instead, I am going to go with the second choice, that of higher oil prices.  I see this as a golden opportunity for permanent, far-reaching, multifaceted geopolitical change.  The US economy has successfully adapted to a permanent $70/barrel oil price with almost no real pain, and thus it is the time to take the bull by the horns, and lure the Petrotyrants into the ultimate irreversible trap. 

It is time to hope that the price of oil rises to $120/barrel by 2010, and stays above that level permanently. 

Why, you may ask?  Won't such a high price make Iran, Venezuela, Saudi Arabia, Russia, Nigeria, Sudan, Kazakhstan, and others even wealthier, without them having done anything to earn it?  Won't it make Sudan more genocidal, and Iran more able to equip terrorists?  Won't Saudi Arabia be able to fund even more Madrasas across the world? 

Sure it will, for a time.  But consider the perils of burning the candle at both ends.

But won't this also cause economic suffering in the US?  For a time, yes.  Gasoline will be at $5/gallon, and the trade deficit will temporarily widen.  I claim the possible recession will be brief, if there even is one at all, as the run-up from the present price of $80/barrel up to $120/barrel is already less of a shock than the jump from $20 to $80 that we already have successfully sustained.  I say all of this is worthwhile short-term pain, for when the quietly toiling engine of technological innovation emerges from its chrysalis, it will be gigantic. 

The technological climate of 2007 is very different from that of 1974 or 1981.  There is so much breadth and depth in energy innovation right now, even at the present $70-$80/barrel, that $120/barrel will move the technology and economics of alternative energy into fast-forward.  Currently, the petroleum market is shielded from exposure to both the electricity market and the agricultural market.  However, upcoming electric and plug-in hybrid automobile technologies consume electricity at an equivalent cost of just $1/gallon.  Furthermore, electricity can be generated from multiple sources that exist in almost every country, eliminating the weak position that oil importers are in relative to oil exporting nations.  With gasoline at $5/gallon, consumers will migrate towards hybrids, plug-in hybrids, and electric vehicles so rapidly that the auto manufacturers will start engaging in aggressive competition to lower prices and accelerate innovation.  This will greatly widen the fronts at which the oil market is exposed to the far cheaper and decentralized electricity market.  This spells trouble for oil producers who have to compete with electricity that is 3-5X cheaper in providing the same transportation. 

Simultaneously, cellulostic and algae-derived ethanol research efforts will get supercharged, greatly increasing the probability of a breakthrough that enables the attractive math of cellulose or algae to replace the unimpressive economics of corn ethanol.  If ethanol from switchgrass or algae is more compelling than oil at $120/barrel, oil has yet another enemy in addition to electricity.  The combination of electric vehicle and cellulose/algae ethanol technologies will act as a 1-2 punch to slash the consumption of oil across both the US and China permanently within just a few short years. 

Then, the fun begins.  The terrorists and despots who got lured into profligate spending under $120 oil will eventually find that the demand for their exports is plummeting.  Furthermore, the thing about subsidies such as those that Iran doles out is that they are self-propagating.  Note that in 2005, Iran exported $44 billion in oil, but spent $25 billion in subsidies, meaning that if oil fell to $30/barrel, Iran's export revenue would effectively become zero if the same level of subsidies are maintained.  34 cent/gallon gasoline leads to more car purchases and hence more demand for gasoline, increasing the cost of maintaining the subsidies, and hence the oil price floor at which Iran's export revenues would shrink to zero.  At $120/barrel, the subsidy obligation will be so burdensome that even a drop back down to $70/barrel would lead to a revenue falling behind expenses.  At the same time, China will have no choice but to aid in the hastening of these technological advances, as they will have to shift their priorities from locking up oil contracts to reducing the crushing cost of oil imports at $120/barrel. 

On the other hand, if oil stays at or below $70/barrel for the long term, Petrotyrants will survive to continue their nefarious activities for at least another 20 years to come.  China, too, will continue their current stance of propping up Petrotyrants. 

Thus, I say bring $120 on.  We outspent the Soviet Union on defense, and we can outspend the Petrotyrants while setting them up for an inevitable cornering and collapse.  Give me $120/barrel oil by 2010, and I will give you the demise of Petrotyranny in Russia, Iran, and Venezuela by 2015.  Count on it. 

Update (10/19/07) : We're up to $90/barrel already!  While there will be ups and downs in the traded daily price, and the gloomy media coverage might appear frightening, be patient and disciplined.  The short-term pain will lead to permanent long-term gain. 

Update (5/22/08) : Oil has crossed $120/barrel, and is currently as high as $133.  Such a rapid rise usually is followed by a precipitous drop, and we need the price to stay above $120 for an extended period to realize the benefits described in the article.  I might do a v 2.0 in 2008 itself if the price stays high. 

Related :

A Future Timeline for Automobiles

A Future Timeline for Energy

Terrorism, Oil, Globalization, and the Impact of Computing

 

 

 

 

 

 

October 01, 2007 in China, Core Articles, Economics, Energy, Political Debate, Politics, Technology | Permalink | Comments (42) | TrackBack (0)

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BusinessWeek Slideshow : 10 Green Technologies That Could Change Your Life

View BusinessWeek' slideshow over here.  I must point out that my Future Timeline for Energy, written back on February 25, 2007, has described many of the items that BusinessWeek noticed some 7 months later.  In fact, the following articles go back even earlier :

CFLs and LEDs : September 25, 2006

Tesla Roadster : December 26, 2006

This is not the first time an article here on The Futurist was written months before BusinessWeek featured the same technology.  My article Terrorism, Oil, Globalization, and the Impact of Computing, from August 22, 2006, predated a BusinessWeek slideshow on the same topic released on February 20, 2007, or 6 months later.  View the slideshow here.

September 15, 2007 in Energy, Technology | Permalink | Comments (22) | TrackBack (0)

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Solar Energy Cost Curve

Forbes has a whole feature on Solar Energy this week.  Within, I found a chart that I have been seeking for a long time - a chart tracking the declining cost of electricity generated by photovoltaic surfaces. 

Solar_3It appears that cost parity with present residential electricity rates is finally imminent.  Also, migration to solar power could happen rapidly before full cost parity due to tax breaks, and the fact that solar energy is generated at the time of day when electricity rates are already the highest. 

For reference, below is a chart of US solar intensity.  It is quite possible that by 2020, many homes in the southern US will have photovoltaic surfaces on their rooftops.  This, combined with the spread of plug-in hybrids and fully electric vehicles (including those from Tesla motors, which come with their own included solar panel), will lead to a fascinating simultaneous shift from a portion of coal consumption to renewables (solar, wind), and from a portion of petroleum consumption to electricity.  So solar would indirectly eat into a small slice of oil consumption.

773pxus_pv_annual_may2004_4

Related :

A Future Timeline for Energy

August 19, 2007 in Energy | Permalink | Comments (13) | TrackBack (0)

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An Inconvenient Truth

Mn_china As you may have heard by now, in 2007, China is set to surpass the US in the emission of greenhouse gases.  This has many implications for the concept of environmentalism, and for the geopolitical landscape.

China takes 4.3 times as much energy as the US to produce each dollar of GDP.  Thus, China, with an economy less than a fourth the size of the US, already emits more.  It is true that China's per capita emissions are much lower than the US due to China's much greater population.  However, the US is not the highest in per capita emissions either.  Small nations like Canada and Norway top that list. 

Now consider the implications of this for the near future.  By 2012, China's emissions will be a clear 20% higher than the US, which is a delta too large to ignore.  The environmental movement has some people (like Thomas Friedman) who genuinely care about reducing pollution.  However, a large subset are merely anti-US, anti-capitalism radicals who seek to mask their agenda within the altruism of environmental concerns.  A beloved non-Western, undemocratic nation being a bigger polluter than the US is simply too inconvenient of a reality for their agenda.  This will split the environmental group into two opposing factions - those who truly seek to curb emissions worldwide, and those who are merely driven by anti-Americanism and anti-capitalism.  This civil war will be interesting, to say the least, and the purging of the phonies could just be the best thing to happen to the environmental movement, making it palatable enough for greater participation from mainstream people. 

Furthermore, this is an example of point 10) in my essay on Why the US Will Still be the Only Superpower in 2030.  China is not prepared for the burdens of being the primary recipient for blame on a major global issue.  As the heat on the US reduces at China's expense, China will find that the upper rungs on the ladder to superpowerdom bring the attachment of heavy weights that make each subsequent rung increasingly difficult to scale.  Getting to the top is just not as easy as it may seem, as China will continue to discover.

June 24, 2007 in China, Energy, Political Debate, Politics | Permalink | Comments (50) | TrackBack (0)

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A Future Timeline for Automobiles

Many streams of accelerating technological change, from energy to The Impact of Computing, will find themselves intersecting in one of the largest consumer product industries of all.  Over 70 million automobiles were produced worldwide in 2006, with rapid market penetration underway in India and China.  Indisputably, cars greatly affect the lives of consumers, the economies of nations, and the market forces of technological change. 

I thus present a speculative timeline of technological and economic events that will happen for automobiles.  This has numerous points of intersection with the Future Timeline for Energy. 

Tesla_roadster2007 : The Tesla Roadster emerges to not only bring Silicon Valley change agents together to sow the seeds of disruption in the automotive industry, but also to immediately transform the image of electrical vehicles from 'punishment cars' to status symbols of dramatic sex appeal.  Even at the price of $92,000, demand outstrips supply by an impressive margin. 

2009 : The Automotive X-Prize of $25 Million (or more) is successfully claimed by a car designed to meet the 100 mpg/mass-producable goal set by the X Prize Foundation.  Numerous companies spring forth out of prototypes tested in the contest. 

2010 : With gasoline at $4/gallon, established automobile companies simultaneously release plug-in hybrid vehicles.  Hybrid, plug-in hybrid, and fully electrical cars represent 5% of total new automobiles sold in the US, even if tax incentives have been a large stimulus.  The habit of plugging in a car overnight to charge it starts to become routine for homeowners with such cars, but apartment dwellers are at a disadvantage in this regard, not having an outlet near their parking spot. 

2011 : Two or more iPod ports, 10-inch flat-screen displays for back seat passengers, parking space detection technology, and embedded Wi-Fi adapters that wirelessly can transfer files into the vehicle's hard drive from up to 500 feet away are standard features for many new cars in the $40,000+ price tier. 

2012 : Over 100 million new automobiles are produced in 2012, up from 70 million in 2006.  All major auto manufacturers are racing to incorporate new nanomaterials that are lighter than aluminium yet stronger and more malleable than steel.  The average weight of cars has dropped by about 5% from what it was for the equivalent style in 2007. 

2013 : Tesla Motors releases a fully electric 4-door sedan that is available for under $40,000, which is only 33% more than the $30,000 that the typical fully-loaded gasoline-only V6 Accord or Camry sells for in 2013. 

2014 : Self-driving cars are now available in the luxury tier (priced $100,000 or higher).  A user simply enters in the destination, and the car charts out a path (similar to Google Maps) and proceeds on it, in compliance with traffic laws.  However, a software malfunction results in a major traffic pile-up that garners national media attention for a week.  Subsequently, self-driving technologies are shunned despite their superior statistical performance relative to human drivers. 

2015 : As predicted in early 2006 on The Futurist, a 4-door sedan with a 240 hp engine, yet costing only 5 cents/mile to operate (the equivalent of 60 mpg of gasoline), is widely available for $35,000 (which is within the middle-class price band by 2015 under moderate assumptions for economic growth).  This is the result of combined advances in energy, lighter nanomaterials, and computerized systems. 

2016 : An odd change has occurred in the economics of car depreciation.  Between 1980 and 2007, annual car depreciation rates decreased due to higher quality materials and better engine design, reaching as little as 12-16% a year for the first 5 years of ownership.  Technology pushed back the forces of depreciation. 

However, by 2016, 40% of a car's initial purchase price is comprised of electronics (up from under 20% in 2007 and just 5% in 1985), which depreciate at a rate of 25-40% a year.  The entire value of the car is pulled along by the 40% of it that undergoes rapid price declines, and thus total car depreciation is now occuring at a faster rate of up to 20% a year for the first 5 years.  This is a natural progression of The Impact of Computing, and wealthier consumers are increasingly buying new cars as 'upgrades' to replace models with obsolete technologies after 5-7 years, much as they would upgrade a game console, rather than waiting until mechanical failure occurs in their current car.  Consumers also conduct their own upgrades of certain easily-replaced components, much as they would upgrade the memory or hard drive of a PC. Technology has thus accelerated the forces of depreciation. 

2018 : Among new cars sold, gasoline-only vehicles are now a minority.  Millions of electricity-only vehicles are charged through solar panels on a daily basis, relieving those consumers of a fuel expenditure that was as high as $2000/year in 2007.  Even when sunlight is obscured and the grid is used, some electrical vehicles cost as little as 1 cent/mile to operate.

2020 : New safety technologies that began to appear in mainstream cars around 2012, such as night vision, lane departure correction, and collision-avoiding cruise control, have replaced the existing fleet of older cars over the decade, and now US annual traffic fatalities have dropped to 25,000 in 2020 from 43,000 in 2005.  Given the larger US population in 2020 (about 350 Million), this is a reduction in traffic deaths by half on a per-capita basis. 

2024 : Self-driving cars have overcome the stigma of a decade prior, and are now widely used.  But they still have not fully displaced manual driving, due to user preferences in this regard.  Certain highways permit only self-driven cars, with common speed limits of 100 mph or more. 

2025-30 : Electricity (indeed, clean electricity) now fuels nearly all passenger car miles driven in the US.  There is no longer any significant fuel consumption cost associated with driving a car, although battery maintenance is a new aspect of car ownership.  Many car bodies now include solar energy absorbant materials that charge a parked car during periods of sunlight.  Leaving such cars out in the sun has supplanted the practice of parking in the shade or in covered parking.

Pervasive use of advanced nanomaterials has ensured that the average car weighs only 60% as much as a 2007 counterpart, but yet is over twice as resistant to dents. 

______________________________________________________________

I believe that this timeline represents the the combination of median forecasts across all technological and economic trends that influence cars, and will be perceived as too optimistic or too pessimistic by an equal number of readers.  Let's see how closely reality matches this timeline. 

May 05, 2007 in Accelerating Change, Energy, Nanotechnology, Technology, The Singularity | Permalink | Comments (26) | TrackBack (0)

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A Future Timeline for Energy

There are many independent streams of technological progress currently underway in the field of energy.  I have written several individual articles on various breakthroughs in lighting, electic cars, ethanol, etc.  But the time has come for a 'grand unifying' article that combines these seemingly unrelated innovations into a timeline for when we can expect which advances to have a measurable impact. 

I hereby present a possible future timeline for disruptive improvements in energy technology, economics, and mass market adoption.

2007 : China's greenhouse gas emissions surpass that of the US.  China requires 4.3 times as much energy as the US to produce each dollar of GDP. 

300pxrbgled 2007-09 : Compact Fluorescent Lightbulbs and Light Emitting Diodes begin to replace incandescent bulbs across the US.  By 2010, the typical US household is saving over $100 per year in electricity costs.

2007-10 : Corn-based ethanol continues to generate only a small percentage of vehicle fuel in the US, despite the governmental support behind it. 

2009 : The Automotive X-Prize of $25 Million (or more) is successfully claimed by a car designed to meet the 100 mpg/mass-producable goal set by the X Prize Foundation. 

2010 : Hybrid, plug-in hybrid, and fully electrical cars represent 5% of total new automobiles sold in the US, even if tax incentives have been a large stimulus.  There are concerns about the load on the electrical grid from all of these new cars drawing power from ordinary home outlets, but given the massive reduction in household electricity consumed by lighting, this surplus nicely offsets the electrical demands of plug-in cars. 

2011 : Thousands of wind turbines have been erected across Alaska, Canada, Russia, and the northern waters of Europe by now.  Some European countries now derive over 25% of their electricity from wind. 

2012 : Cellulostic ethanol technology becomes cost-effective and scalable.  Biomass-derived fueling stations finally begin to find their way into most US population centers, but still displace only 15-20% of US gasoline consumption.  New oil extraction technologies continue to exert downward pressure on oil prices, resulting in a continual tussle between biomass fuel and oil-derived fuel for cost competitiveness.  All of this is bad news for oil-producing dictatorships. 

2013 : Tesla Motors releases a fully electric 4-door sedan that is available for just $40,000, which is only 33% more than the $30,000 that the typical fully-loaded gasoline-only V6 Accord or Camry sells for in 2013. 

2014 : Solar panels have become inexpensive enough for a typical house in California or Arizona to financially break even in under 5 years after installation, even after accounting for the cost of capital.  Over 3 million US single-family homes have solar panels on their rooftops by now, and many of these homes are able to charge up their plug-in hybrids or fully electric vehicles entirely free of cost. 

2015 : As predicted in early 2006 on The Futurist, a 4-door sedan with a 240 hp engine, yet costing only 5 cents/mile to operate (the equivalent of 60 mpg of gasoline), is widely available for $35,000 (which is within the middle-class price band by 2015 under moderate assumptions for economic growth).  This is the result of not only energy innovation, but also lighter, stronger nanomaterials being used in some body components, as well as computerized systems that make energy usage more efficient within the car. 

Solar_cell2016 : Large industrial-grade solar panels, enhanced with nanotechnology, achieve unprecedented conversion rates of solar energy to electricity.  The US has completed the construction of major solar farms in California, Nevada, and Arizona, collectively covering hundreds of square miles of desert land.  Similar farms are under construction in Australia, India, Saudi Arabia, Iraq, and Sahara Desert countries.  10% of world electricity demand is now met through photovoltaics. 

2018 : Among new cars sold, gasoline-only vehicles are now a minority.  Millions of electricity-only vehicles are charged through solar panels on a daily basis, relieving those consumers of a fuel expenditure that was as high as $2000/year in 2007.  Even when sunlight is obscured and the grid is used, some electrical vehicles cost as little as 1 cent/mile to operate. 

2020 : Gasoline fuels under one third of the passenger car miles driven in the US.  Electricity and biomass fuels account for the remaining two-thirds, with electricity being the one crowding the other two out (electricity itself is primarily derived through solar, wind, and nuclear sources by now).  US total oil consumption, in barrels, has decreased only somewhat, however, due to commercial airline flights (which still use petroleum-derived fuels).  At the same time, oil consumption in relation to total US GDP is actually under half of what it was in 2007. 

2025-30 : Electricity (indeed, clean electricity) now fuels nearly all passenger car miles driven in the US.  There is no longer any significant fuel consumption cost associated with driving a car, although battery maintenance is a new aspect of car ownership.  The average car weighs only 60% as much as the 2007 counterpart, but yet is over twice as resistant to dents.  Most cars are self-driven by on-board intelligence, so human drivers can literally sleep in the car while being delivered to their destination. 

Wind, solar, and nuclear technologies collectively generate 75% of the world's electricity needs. 

Crude oil is, however, still used to create jet fuel.  Since some passenger jets are capable of hypersonic speeds, oil consumption remains significant in this area. 

Worldwide energy consumption is now 75% higher than what it was in 2007, moving us from 0.71 to 0.74 on the Kardashev scale. 

Is this timeline too optimistic?  I found this research report from Clean Edge that goes out to 2016, and they project that renewable energy industry revenue will grow by 15% a year from 2006 to 2016.

Let's see how closely reality matches this timeline. 

Update (9/15/07) : Seven months after I created this timeline, BusinessWeek has a slideshow that predicts the impact of many of the same technologies.  In fact, CFLs, LEDs, the Tesla Roadster, Plug-in Hybrids, etc. are all items I wrote about even earlier. 

February 25, 2007 in Accelerating Change, Economics, Energy, Politics, Technology | Permalink | Comments (42) | TrackBack (0)

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Ethanol Prices May Tumble Through Termite Digestion Discovery

When most people think of termites, the reaction is predictably negative.  After all, not only do they damage homes and bore holes through books, but they have a certain ugliness that even ants do not possess.  However, this is another one of those times where a particularly formidable and vexing problem of civilizational significance meets a countering force from just about the last source anyone would expect.  The loathed termite might actually attone for all the cumulative economic damage it has caused to human society over the centuries. 

Both MIT Technology Review and BusinessWeek have, in the last 30 days, featured articles detailing how a termite's ability to digest wood is due to certain microbes in the digestive tract, which contain a gene that can be extracted and harnessed into processes to create cellulostic ethanol out of agricultural waste for a fraction of the current cost. 

America's forests, agricultural waste, and 40 to 60 million acres of prairie grass could supply 100 billion gallons or more of fuel per year—while slashing greenhouse gas emissions. That would replace more than half the 150 billion gallons of gasoline now used annually, greatly reducing oil imports. It "will happen much faster than most people think," predicts Michigan State biochemical engineer Bruce E. Dale. "And it will be enormous, remaking our national energy policy and transforming agriculture."

Recent work has lowered the cost of this step thirtyfold, to about 50 cents per gallon of ethanol produced. "We now are not far away from the goal of 10 cents per gallon," says Glenn E. Nedwin, chief scientific officer at Dyadic.

Always remember that 1.5 units of ethanol are required to produce the same energy as 1 unit of gasoline.  So far, US ethanol production has amounted to merely 7 billion gallons (enough to replace just 3% of gasoline consumption) in 2006, is barely cost-competitive with gasoline even with the agricultural subsidies the federal government has provided, and is heavily dependent on using corn which is also needed in the food industry.  But if the termite enzyme can create a process that scales up to the extent of producing 100 billion gallons a year for under $1 per gallon (already a more modest goal than what the scientists in the article are striving for) out of otherwise unused biomass, we just might tackle oil dependence, greenhouse gas emissions, and the trade deficit simultaneously. 

The progress they make between now and 2010 will enable us to determine if this is on track to becoming a technological reality by 2015. 

Update : There may also be a way to create Ethanol from trash. 

Update : Algae may also be a large source of liquid biofuels that can compete with Ethanol. 

Related :

Why $70/barrel Oil is Good for America

$70+/barrel Oil, the Non-Crisis


January 18, 2007 in Biotechnology, Energy | Permalink | Comments (17) | TrackBack (0)

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2006 Technology Breakthrough Roundup

The MIT Technology Review has compiled a convenient list of the most significant technological advances of 2006.

The Year in Information Technology

The Year in Energy : Plug-in cars, batteries, solar energy.

The Year in Biotechnology : A cure for blindness, and more.

The Year in Nanotechnology : Displays, sensors, and nanotube computers.

Most of the innovations in the articles above are in the laboratory phase, which means that about half will never progress enough to make it to market, and those that do will take 5 to 15 years to directly affect the lives of average people (remember that the laboratory-to-market transition period itself continues to shorten in most fields).  But each one of these breakthroughs has world-changing potential, and that there are so many fields advancing simultaneously guarantees a massive new wave of improvement to human lives. 

This scorching pace of innovation is entirely predictable, however.  To internalize the true rate of technological progress, one merely needs to appreciate :

The Milli, Micro, Nano, Pico curves

The Impact of Computing

The Accelerating Rate of Change

We are fortunate to live in an age when a single calendar year will invariably yield multiple technological breakthroughs, the details of which are easily accessible to laypeople.  In the 18th century, entire decades would pass without any observable technological improvements, and people knew that their children would experience a lifestyle identical to their own.  Today, we know with certainty that our lives in 2007 will have slight but distinct and numerous improvements in technological usage over 2006. 

Into the Future we continue, where 2007 awaits..

December 30, 2006 in Accelerating Change, Biotechnology, Computing, Energy, Nanotechnology, Science, Technology, The Singularity | Permalink | Comments (3) | TrackBack (0)

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The Tesla Roadster - A Glimmer of Energy Hope

Why would a car company want to operate out of Silicon Valley?  For starters, consider that about 20% of a car's value is now comprised of electronic components, and this could reach 40% by 2015 - in true compliance with The Impact of Computing.  This is already greater than the dollar value of steel or rubber in the typical car, and signifies the gradual shift of yet another technology into an information technology.

Tesla_roadsterSilicon Valley's first car company, Tesla Motors, was founded in 2003.  Their first product, the Tesla Roadster, was unveiled in July 2006, and is a fully electric $100,000 car that can accelerate from 0 to 60 mph in just 4 seconds.  The cost of the electricity consumed is estimated to be as little as 1 cent per mile.  Pre-ordered units will be delivered to customers in early 2008.   

However, the initial Tesla Roadster is merely a symbolic product exercise for Tesla Motors.  The real market-shaker is the subsequent 'White Star', a 4-door family sedan using the same electrical technology that could be released as early as 2009.  It is expected to be priced at $50,000 to $70,000, and compete with BMW, Lexus, and Mercedes sedans.  It is possible that by 2012-13, a 4-door sedan that reaches middle-class pricepoints could be available in substantial quantities, along with Tesla's service support infrastructure to go with it. 

The benefits of a fully electric car that consumes just 1 cent of energy per mile are numerous, of course.  From a decline in the quantity of oil imported from the Persian Gulf, to an increase in the purchasing power of the average American, to a contraction of the US Trade Deficit, to a reduction of atmospheric pollutants, there are many benefits to our society if this technology can scale into replacing a significant slice of US automobile sales by 2015. 

Tesla Motors has a blog with a lot of good information as well, including the rate at which they expect cost efficiencies to manifest themselves. 

Whether Tesla Motors succeeds in its long-term vision remains to be seen, but they have done well enough so far to merit watching closely. 

Update (3/15/07) : Tesla is opening 5 dealerships across the United States.  Go see one, if you are in the same areas.

December 26, 2006 in Accelerating Change, Energy, Technology | Permalink | Comments (19) | TrackBack (0)

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The Lighting Revolution - An Update

On September 5, we had an article titled The Imminent Revolution in Lighting, and Why it is More Important Than You Think, which described the massive change the economics of lighting will experience in the next few years. 

I would like to also add this article from MIT Technology Review, about advances in silicon-based white-light LEDs.  The article explains how the low cost of silicon, combined with the massive infrastructure already in place to process silicon into electronic and solar-cell products, provides a catalyst for this innovation to reach mass-market adoption sooner than others.  These LEDs could potentially use just one tenth the electricity of traditional incandescent bulbs, yet last 50 times longer. 

The point that many miss, however, is not whether this technology supplants compact fluorescent bulbs (CFLs), or whether another form of LED technology wins out.  The point is that there is rapid innovation in many unrelated technologies trying to address the same goal.  This much competition and participation inevitably leads to high-impact innovations that benefit society immensely. 

As stated before, the energy problem will be killed by a thousand cuts, of which this is one. 

October 07, 2006 in Economics, Energy, Technology | Permalink | Comments (1) | TrackBack (0)

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The Imminent Revolution in Lighting, and Why it is More Important Than You Think

There are many technological revolutions of varying impact that we will see in the next decade, in fields ranging from entertainment to automobiles to longevity to nanotech to telebusiness.  One of the largest revolutions, however, with the potential to improve fuel costs, electricity bills, greenhouse gas emissions, dependence on foreign oil, workplace productivity, and consumer confidence will happen where you least expect it - in the humble light fixtures of your home and workplace. 

Bulb There are two technologies that have existed for decades, but are reaching cost and quality levels that can displace traditional incandescent lightbulbs.  Compact Fluorescent Lightbulbs (CFLs) and Light-Emitting Diodes (LEDs) are both reaching prices of under $2.50 each per unit. CFLs and LEDs not only consume only about 20% of the electricity of a traditional bulb, but can last up to 8 times as long, saving the time and hastle of 8 bulb purchases and replacements. 

Of the 2 billion bulbs sold in the US each year, CFLs have jumped from just 1% of the total in 2000 to about 5% in 2005, or 100 million units.  To accelerate adoption, Wal-Mart, often a critical catalyst for technology adoption, will start a major education and marketing campaign to sell another 100 million CFLs in the next 12 months. 

Let's run some numbers to illuminate the magnitude of this.

The 110 million US households have an average of 20 incandescent bulbs in operation, each lasting a year on average (hence the 2 billion bulbs sold a year).  If all 2.2 billion household bulbs are replaced with CFLs, the estimated 8-year average life of a CFL will ensure that replacement sales are only one-eighth of incandescent bulbs, or 250 million CFLs a year.  Since a 60 Watt/hour incandescent can be replaced with a CFL that consumes only 15 Watt/hours of electricity, we can calculate :

If the typical household's 20 bulbs average 60 watts (.06 kWh) each and are used for an average of 4 hours a day each, and electricity costs 10 cents per kilowatt/hour, the household spends (20 x .06 x 4 x 365 x $.1) = $175.2 a year.  CFLs would save 75%, or $131.4 in electricity costs for such a household each year.  Since the electricity consumption curve is not linear and demand is somewhat inelastic, this benefits lower-income households greatly. 

At the macro scale, if each of the 2.2 billion bulbs in operation in 110 million households is aggregated, they consume (110m x $175.2) = $19.3 billion in electricity a year.  CFLs would save 75% or $14.5 billion for consumers per year. 

But wait, it gets better.

In an age of fears about oil imports and atmospheric pollution, people are very wary of the amount of gasoline they consume, but usually have no idea how much oil and coal go into producing the electricity they use.  A single 60 Watt bulb used 4 hours a day for a year requires the burning of about 70 pounds of coal.  2.2 billion incandescent bulbs would require 77 million tons of coal per year, and CFLs could reduce 58 million tons out of that, or 6% of total US coal consumption.  The emissions savings alone would be the equivalent of reducing US automobile driving by 15%, or about 25 million cars. 

LEDs offer similar benefits in energy savings, and while they are not going to benefit from a push by Wal-Mart, are still a neccesary presence as a rival technology to CFLs, each mutually forcing the other to keep up the rate of innovation.  One of these two, if not both, will sweep across the world in the next 24 months. 

Beyond the lighting revolution in the home, there is also one in the offering for the office, where tubelights, rather than bulbs, are currently used.  This brings us to the third technology of this discussion.

A company called Sunlight Direct has a brilliant product that distributes sunlight indoors, no matter how far from a location is from a window.  The solar lighting system consists of a roof-mounted 40-inch light-collecting disc that moves to follow the sun during the course of a day, and plastic fiber-optic cables that distribute the light throughout the interior of the building.  After the costs of the initial installation, this will not only save businesses the cost of artificial lighting during the day, but will greatly increase the quality of life of employees who can be freed from their tubelit torture.  Large retailers stand to save over 20 cents per square foot per year in electricity through the use of this system.  Wal-Mart, for example, has about 3000 stores averaging 150,000 square feet each.  This amounts to (3000 x 150,000 x $.2) = $90 million in electricity potentially saved per year. 

Solar_1The product will be commercially available by 2007, with the possibility of a residential version by 2009.  Of course, some geographies stand to benefit more than others, as we can see from this handy map of US solar energy intensity (from Wikipedia).  But taking the marketing even further, we can note that some fast-emerging economies with acute energy shortages also have abundant sunlight, much greater than even in the Southwestern US.  A product like Sunlight Direct's is very compelling in India, VietNam, Thailand, and Taiwan, where electricity costs are often much higher than in the US, but near-continuous tropical sunlight is the norm. 

All three of these new technologies, and their descendants, will combine into a gale of creative destruction that will shake up a part of daily life that has been essentially unchanged for several decades.  Unlike many other such disruptive technologies, the displacement and digestion process will be almost painless and nearly seamless.  We all will be the richer for it. 

Update (5/29/07) : A CNet article has more details on various lighting technologies.

September 05, 2006 in Energy, Technology | Permalink | Comments (19) | TrackBack (0)

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Terrorism, Oil, Globalization, and the Impact of Computing

Three things have happened in the last few years, which are now converging with a fourth inexorable trend to make major changes in consumer behaviour, mostly for the better. 

1) September 11, 2001 showed the world the destruction that a small number of terrorists could cause by hijacking unsuspecting passenger planes.  The subsequent increase in security almost did not stop 10 other UK to US flights from being exploded above the Atlantic by British-born terrorists disguising liquid bomb ingredients in soft-drink containers.  The terrorists will continue to get more and more creative, and will eventually destroy an airliner in an act of terror.  This fear now hangs over all passengers.  At the same time, security at airports is increasing pre-flight periods to up to 3 hours in duration.  Multiply this by the millions of business passengers per year, and the loss of billions of dollars of productivity is apparent. 

2) Oil at $70/barrel is making air travel more expensive for cost-conscious businesses.  I happen to believe that $70/barrel is the optimal price for oil for the US, where the economic drag is not enough to cause a recession, but the price is high enough for innovation in alternative energy technologies to accelerate.  Nonetheless, economic creative destruction always has casualties that have to make way for new businesses, and airlines might bear a large share of that burden. 

3) At the same time, globalization has increased the volume and variety of business conducted between the US and Asia, as well as between other nations.  More jobs involve international interaction, and frequent overseas travel.  This demand directly clashes with the forced realities of items 1) and 2), creating a market demand for something to ease this conflicting pressure, which leads us to...

4) The Impact of Computing, which estimates that the increasing power and number of computing devices effectively leads to a combined gross impact that increases by approximately 78% a year.  One manifestation of the Impact is the development of technologies like Webex, high-definition video conferencing over flat-panel displays, Skype, Google Earth, Wikimapia, etc.  These are not only tools to empower individuals with capabilities that did not even exist a few years ago, but these capabilities are almost free.  Furthermore, they exhibit noticeable improvements every year, rapidly increasing their popularity.

While the life blood of business is the firm handshake, face-to-face meeting, and slick presentation, the quadruple inflection point above might just permanently elevate the bar that determines which meetings warrant the risks, costs, and hassle of business travel when there are technologies that can enable many of the same interactions.  While these technologies are only poor substitutes now, improved display quality, bandwidth, and software capabilities will greatly increase their utility.

The same can even apply to tourism.  Google Earth and WikiMapia are very limited substitutes for traveling in person to a vacation locale.  However, as these technologies continue to layer more detail onto the simulated Earth, combined with millions of attached photos, movies, and blogs inserted by readers into associated locations, a whole new dimension of tourism emerges. 

Imagine if you have a desire to scale Mount Everest, or travel across the Sahara on a camel.  You probably don't have the time, money, or risk tolerance to go and do something this exciting, but you can go to Google Earth or WikiMapia, and click on the numerous videos and blogs by people who actually have done these things.  Choose whichever content suits you, from whichever blogger does the best job. 

See through the eyes of someone kayaking along the coast of British Columbia, walking the length of the Great Wall of China, or spending a summer in Paris as an artist.  The possibilities are endless once blogs, video, and Google Earth/WikiMapia merge.  Will it be the same as being there yourself?  No.  Will it open up possibilities to people who could never manage to be there themselves, or behave in certain capacities if there?  Absolutely.

Related :

The Next Big Thing in Entertainment

100 Mbps Broadband for $40/month by 2010

August 22, 2006 in Accelerating Change, Computing, Economics, Energy, Politics, Technology | Permalink | Comments (7) | TrackBack (0)

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Oil Prices May Drop Soon, But This May Postpone Energy Innovation

There is an article from Larry Kudlow today predicting a drop in oil prices in the near future.  Kudlow's prediction is derived from economic data indicating higher oil supplies in the near future, an increase in exploration and drilling by oil companies, and new legislation favoring drilling.  Given that Kudlow is usually right about most of his near-term economic predictions and points to several factors contributing to the possible drop, rather than just one, this could very well turn out to be accurate. 

However, if prices were to return to lower levels, it is actually not very good for the United States in the long term.  I believe that $70/barrel for oil is the optimal price at which energy innovation can accelerate without tipping the US economy into recession.  Technologies such as ethanol and tar-sand refineries become cost-effective when oil is above $70, but if oil returns to lower prices, this innovation will stagnate once again.

A chart of oil prices (wikipedia) indicates that in the last 120 years, only for a 4-year period from 1977 to 1981 was the real price of oil higher than it is today.  Today's price is higher than it has been for 116 of the last 120 years.  While the 1977-81 price spike caused a painful recession, it fostered significant innovation in engine efficiency and alternative energy.  As oil prices dropped and remained low during the 1980s and 90s, innovation slowed.   Click on the chart to make it bigger. 

Oil_3   

The US economy will not be able to reduce our dependence on foreign oil, and significanly reduce the pollution of oil consumption, without a multi-year period of oil above $70/barrel.  This will be painful, but is the only way to enable the free market to achieve this necessary goal. 

Related :

$70+/barrel oil, the non-crisis.

The coming jump in energy technology.

June 27, 2006 in Energy | Permalink | Comments (8) | TrackBack (0)

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$70+/Barrel Oil, the Non-Crisis

Humans are not rational beings.  This is evidenced by how much agony there is over having to pay $500 more per year on gasoline than initially expected, against the relatively muted criticism towards real estate agents charging $10,000 to $60,000 for their services, or income tax preparation consuming over 10 hours of time per household per year (is 10 hours worth so much less than $500)? 

I have written before about why $70/barrel oil is good for America, as it will accelerate technological progress in energy.  In fact, it already has begun to do this. 

But yet another interesting thought arises.  Expensive oil affects the price of many things, as it inherently raises the cost of moving an object from one place to another.  Corporations that need to do a lot of this, such as Wal-Mart, Federal Express, or United Airlines, see their costs rise, and have to both raise their prices and trim their staffing levels. 

This seems like bad news for the US economy, until one considers the following :

Other countries also have such industries, and are also hit by higher oil prices.  Countries that many fear will overtake the United States, such as India and China, have economies even more dependent on oil than the US.  Sectors like automobiles, steel, aluminum, airlines, and concrete are actually growth industries in India and China, where the majority of people are yet to become consumers.  If half of the people who have cars today did not have cars five years ago, then the increase in gasoline costs is a much larger percentage of their income than it is for an American.  $500 a year more for gasoline actually is a lot for those who make $10,000 a year and just bought their very first car.  Chinese and Indian consumer spending is much more sensitive to $70 oil than US consumer spending is. 

At the same time, US corporations such as Google, Yahoo, Goldman Sachs, Pixar, Citigroup, or Oracle are much less vulnerable to high oil prices.  Yet, these knowledge-based businesses are the ones that have created most of the new wealth in the US during the last 25 years, and are the industries in which America's dominance over the rest of the world is the largest. 

So in conclusion, high oil prices hurts some of our industries, but it hurts those industries in other countries to the same degree if not more, and the industries which are less affected by high oil prices are already the industries in which America is ridiculously far ahead of the rest of the world. 

So high oil prices actually increase the gap between the US economy and those that would seek to catch up to it.  If oil hits $100/barrel, US GDP growth may drop from 3.5% to 2%, but China's GDP growth may drop from 10% to 4%.

Food for thought...

April 25, 2006 in Economics, Energy | Permalink | Comments (16) | TrackBack (0)

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The Coming Jump in Energy Technology - More Updates

I have two prior posts on what I believe is a new climate ripe for major advances in energy technology.  Refer to :

Why $70/barrel oil is good for America.

The Coming Jump in Energy Technology Advancement

My prediction is that the burden of high energy prices and reliance on unsavory regimes that we currently face will have some serious scares in the next few years, but will abate and no longer be a major crisis by 2015, due to rapid advances in many new areas of technology. 

I claim that there will be no single technology that saves us, but rather many fields of innovation that slay the monster with a thousand small cuts.

Some more examples of promising advances :

A new method of converting previously unusable husks and stalks to ethanol.   

A business renting out biodiesel cars in Los Angeles sets up shop.

A battery breakthrough.

GE has created a machine that cuts the cost of producing hydrogen fuel by more than half. 

Solar energy costs are dropping quickly.  The reason this is happening now instead of at any time over the last 30 years is because solar cells are made of the same materials that computational chips are made of, and thus inevitably converge into The Impact of Computing. 

A startup attempting to make a 330 MPG hybrid.  Another attempting to reach 250 MPG.  While this may be unrealistic, if they make even moderate progress, their IP would be sold and used elsewhere.

None of these will singlehandedly change the world.  However, each bit of innovation makes the economics of the whole ecosystem a tiny bit better, which cumulatively adds up to a lot.

I have no hesitations in predicting that the average-priced 2015 model family sedan, with a 240 hp engine, will deliver 60 MPG.  On top of this, the fuel itself may have a large ethanol component, and will contain much less gasoline per gallon than today. 

Keywords : Ethanol, oil price, energy innovation, solar power, wind power, energy technology, tar sands, oil shale, hybrid car, hydrogen car

February 27, 2006 in Energy, Technology | Permalink | Comments (23) | TrackBack (0)

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The Coming Jump in Energy Technology Advancement

Some people say ethanol is the answer.  Others say solar.  Still others say wind, while yet others say that more sophisticated technology in the car itself and big light-emitting-diodes in the home can reduce oil consumption to the point that it doesn't matter.

Will any one of them revolutionize the world in ten years?  Probably not. 

The point is, there is not just one thing being worked on to kill the monster of US oil dependency, but many.  The monster will be killed by a thousand cuts. 

An article on Winds of Change about the 8 possible alternative energy technologies. 

An article in Fortune about ethanol. 

Many people are pessimistic, after the lack of progress over the last 30+ years.  However, the amount of energy-related murmurs in the blogosphere is trending higher, and the number of public and private energy initiatives, including venture capital going to energy, is much higher than even a couple of years ago. 

There is a more than fair chance that the cocktail of accelerating, exponential innovation, market forces, and renewed political interest in energy innovation is building a head of steam.  I have commented recently on why $70 oil is good for America. 

I'm convinced that the world of 2015 will have had substantial jumps in energy technology from where we are today, not the least of which will be the typical 2015-model middle-class family sedan offering 60 mpg despite having a 240 hp engine. 

It is always darkest before the dawn..

February 02, 2006 in Energy, Technology | Permalink | Comments (47) | TrackBack (0)

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Why $70/barrel Oil is Good for America

After President Bush's SOTU address last night, his Energy Initiative may not be what gets the mainstream excited.  After all, every President since Nixon has announced a desire to free America from dependence on foreign oil, and while there have been tiny steps of progress towards this, it has taken so long that few will believe that it will be any different this time.

However, I will come out and say that the next 10 years will, in fact, be different.  Here's why.

When oil spiked in 1973 after the Yom Kippur War to a price that would be the equivalent of $90/barrel today, this caused a world-wide recession, including a very deep recession in the US.  Most of the US economy was still dependent on manufacturing, with information technology being a miniscule sector.

However, at $67/barrel today, we are only seeing a slight economic slowdown, and even if prices were to rise to $90/barrel today, we still would not dip into recession through that alone, as the US economy has evolved to the extent of being only about one-third as intrinsically bound to oil consumption as 32 years ago.

The US economy produces 2.5 times as much economic output per barrel of oil, as in 1973.

We are already evolving towards making our vulnerability to oil prices an asymptotically dwindling problem.  This is accelerating as advances in information technology accelerate.  This is why world economic growth is accelerating at ever-increasing speeds.

High oil prices today are not triggering one solution to the problem, but many.  At a sustained $70/barrel, numerous alternatives, like ethanol, Canadian tar sands, Colorado oil shale, solar power, etc. become much closer to cost-competitiveness.  They were not options in 1973. 

In addition, this market force has caused the stagnant innovation we have seen in automobile technology during the era of cheap gasoline to awake from its slumber.  The real story behind all the buzz behind hybird vehicles is that the cost delta between a hybrid and traditional vehicle is now under 15% of the vehicle's price, and dropping.  In about 10 years, the term 'hybrid' will not exist at all, as that technology will merely be a standard feature in all cars. 

Credit goes to President Bush for increasing funding for basic research in energy technology.  While this will not deliver benefits during his remaining time in office, it will bring us large dividends by 2015.

Prediction : Despite several scares in the next 2-4 years, by 2015, oil prices will not worry people nearly as much anymore, whatever the price of oil at the time.  A much smaller portion of the US economy will be tied to oil prices.  This new reality will be visible in many places, such as the typical 2015-model family car yielding 60 MPG (highway) despite having a 240 hp engine. 

Gas at $4/gallon is not so bad, if you only need 5 gallons a week. 

Turn that frown upside down. :)

February 01, 2006 in Economics, Energy, Technology | Permalink | Comments (23) | TrackBack (0)

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