Economic growth with declining energy?

yesplease · Fission Joined: Oct 03, 2006 Posts: 2312

I'm just saying...

<rant>The average passenger vehicle is something like 15% efficient, if we calculate efficiency as the ability to move a few tons of vehicle and an order of magnitude less human/stuff. According to this paradigm a SUV is more efficient than a corvette with the same engine even though the corvette gets better mileage, because, by virtue of gasoline engine fundamentals, the more an engine works the more efficient it tends to be. Of course, doubling consumption to increase efficiency by 20% still means the driver is using ~60% more fuel to do the same thing, but we won't mention that. Wink

Otoh, if we calculate efficiency as the energy cost of moving a human or few and some stuff, the average passenger vehicle is quiet possibly one of the most inefficient uses of energy in recorded history.</rant>
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energycity · Heavy Crude Joined: Apr 22, 2008 Posts: 124

anarky321

capitalism itself imo cannot survive permanently declining energy, thus every capitalist country in the world is as of now doomed to political instability and revolt

economic growth is nothing more than a representation of available energy, as is population growth, both go up in times of energy abundance and both come crashing down in times of energy shortage; everything stems from energy, civilization itself it a result of a surplus of energy (originally from the surplus of food that we acquired when first taking up agriculture)

this is why a world of permanently declining energy is so scary to the people that cling onto the status quo for security; the status quo cannot survive such an event, and with the current world population im questioning whether civilization itself can make it through this in any coherent form

im just rambling because i dont feel like looking up figures right now but lets just say that an economic depression in the US is the best you can hope for at this point
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cube · Fusion Joined: Mar 12, 2005 Posts: 3574

cube's explanation of "energy efficiency"

Suppose consuming 1 unit of energy creates 10 units of economic wealth.
As the energy crunch hits we'll eventually be forced to only use half as much == 0.5 units of energy.
Can 0.5 units of energy create 10 units of wealth through efficiency gains?
If yes then why didn't we start with 1 unit of energy to create 20 units of wealth?
Society always wishes to maximize wealth so the fact that we didn't start off with a 1 to 20 ratio is proof that it cannot be done.
Therefore it is impossible to maintain economic wealth with diminishing energy consumption.

simple logic Wink

MrBill · Expert Joined: Sep 15, 2005 Posts: 5394 Location: Eurasia

Cube, since when does society maximize its wealth? Quite the opposite. We often witness society consuming its wealth. Sometimes in an unsustainable manner.

When energy is cheap and abundant there is no economic need to improve efficiency. There is no pay-off to do so. Let someone else do it and then reap the benefits as a free rider. It is scarcity and economic need that drives improvements in efficiency.

Creating wealth stems from combining land, labor, natural resources, capital, technical know-how and intangible assets into something of greater value. Something that someone else wants or needs and is able to pay for.

That may mean using more energy, but as energy declines the remaining energy becomes more valuable. Therefore, wealth can be generated by being able to produce renewable energy as other sources of non-renewable decline and become more expensive.

Producing food has become a low value-added, high volume industry. As energy becomes more expensive and prices for food, fuel and fertilizer rises in tandem that dynamic may change. There may be plenty of wealth created by growing food again. Or by owning the land on which it is grown as labor relative to energy will become cheaper.

What is sure that declining conventional sources of energy will change the economic relative-value between the remaining land, labor, natural resources, capital, technical know-how and intangible assets creating winner and losers. Probably resulting in lower living standards with more losers than winners. That scarcity and economic need will in turn drive innovation as well as the search for substitutes and alternatives.
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yull

Without energy there is no economy, it's as simple as that. The world economy is 100% dependent on energy, it always has been and it always will be, as without energy nothing happens.

The economy can grow for a short period with declining energy but it will be only temporary. Less energy = less economy, in the long run.

MrBill · Expert Joined: Sep 15, 2005 Posts: 5394 Location: Eurasia

yull

yesplease · Fission Joined: Oct 03, 2006 Posts: 2312

MrBill · Expert Joined: Sep 15, 2005 Posts: 5394 Location: Eurasia

BIC Syndrome - bureaucracy, incompetence and corruption - African-style claims another victim.

TonyPrep

MrBill · Expert Joined: Sep 15, 2005 Posts: 5394 Location: Eurasia

Yes, as measured by GDP output per energy input. As well OECD energy consumption delcined in the past 12-months, while the economy(s) posted positive economic growth. That growth cannot survive in the absence of energy inputs, but it is clear that we can do more with less. Cutting out recreational uses of energy does not materially affect production except in the services sector. One could plausibly argue that most of the service sector consumes wealth rather than creates it. That is not to say it is not important. Somewhere I read that we need just 15% of the working population to cater to all of our material needs. The rest of the 85% are taken up in service related industries out of necessity. The economy expands to include workers. They are not necessarily needed to keep it running. My job included.

UPDATE: although bottling water creates jobs, income and therefore consumption and economic growth I would hesitate to call it wealth creation. more like wealth consumption.

isgota · Tar Sands Joined: May 31, 2008 Posts: 21 Location: Spain

In a short answer, yes, you can have economic growth with declining energy.

And not just in short-term but also in long-term, even if OECD consumption had fallen last 12 months, some countries are performing flat or falling energy consumption patterns for about a decade:

BP Statistics since 1965 (Excel format)

- Denmark and Germany had been reducing slightly their energy consumption since mid 90's, and their pace it's accelerating right now amazingly. New Zealand as well.

- The UK is been almost flat since the end of 90's in a period of strong economic growth (no wonder that in a weaker economic growth it's energy consumpion felt near 4% last year).

- Japan was almost flat as well since the beggining of the century with a weak economic growth (but about 4% unemployment rate). Right now, it is starting to reduce its oil and energy consumption with little damage to their economy I guess.

And I bet this year we are going to see more broad consumption reductions in almost all OECD countries (unless we see 80$/barrel in the second half of 2008 Rolling Eyes

).

Best regards.

TonyPrep