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Why stimulus can’t fix our energy problems

Why stimulus can’t fix our energy problems thumbnail

Economists tell us that within the economy there is a lot of substitutability, and they are correct. However, there are a couple of not-so-minor details that they overlook:

  • There is no substitute for energy. It is possible to harness energy from another source, or to make a particular object run more efficiently, but the laws of physics prevent us from substituting something else for energy. Energy is required whenever physical changes are made, such as when an object is moved, or a material is heated, or electricity is produced.
  • Supplemental energy leverages human energy. The reason why the human population is as high as it is today is because pre-humans long ago started learning how to leverage their human energy (available from digesting food) with energy from other sources. Energy from burning biomass was first used over one million years ago. Other types of energy, such as harnessing the energy of animals and capturing wind energy with sails of boats, began to be used later. If we cut back on our total energy consumption in any material way, humans will lose their advantage over other species. Population will likely plummet because of epidemics and fighting over scarce resources.

Many people appear to believe that stimulus programs by governments and central banks can substitute for growth in energy consumption. Others are convinced that efficiency gains can substitute for growing energy consumption. My analysis indicates that workarounds, in the aggregate, don’t keep energy prices high enough for energy producers. Oil prices are at risk, but so are coal and natural gas prices. We end up with a different energy problem than most have expected: energy prices that remain too low for producers. Such a problem can have severe consequences.

Let’s look at a few of the issues involved:

[1] Despite all of the progress being made in reducing birth rates around the globe, the world’s population continues to grow, year after year.

Figure 1. 2019 World Population Estimates of the United Nations. Source: https://population.un.org/wpp/Download/Standard/Population/

Advanced economies in particular have been reducing birth rates for many years. But despite these lower birthrates, world population continues to rise because of the offsetting impact of increasing life expectancy. The UN estimates that in 2018, world population grew by 1.1%.

[2] This growing world population leads to a growing use of natural resources of every kind.

There are three reasons we might expect growing use of material resources:

(a) The growing world population in Figure 1 needs food, clothing, homes, schools, roads and other goods and services. All of these needs lead to the use of more resources of many different types.

(b) The world economy needs to work around the problems of an increasingly resource-constrained world. Deeper wells and more desalination are required to handle the water needs of a rising population. More intensive agriculture (with more irrigation, fertilization, and pest control) is needed to harvest more food from essentially the same number of arable acres. Metal ores are increasingly depleted, requiring more soil to be moved to extract the ore needed to maintain the use of metals and other minerals. All of these workarounds to accommodate a higher population relative to base resources are likely to add to the economy’s material resource requirements.

(c) Energy products themselves are also subject to limits. Greater energy use is required to extract, process, and transport energy products, leading to higher costs and lower net available quantities.

Somewhat offsetting these rising resource requirements is the inventiveness of humans and the resulting gradual improvements in technology over time.

What does actual resource use look like? UN data summarized by MaterialFlows.net shows that extraction of world material resources does indeed increase most years.

Figure 2. World total extraction of physical materials used by the world economy, calculated using  weight in metric tons. Chart is by MaterialFlows.net. Amounts shown are based on the Global Material Flows Database of the UN International Resource Panel. Non-metallic minerals include many types of materials including sand, gravel and stone, as well as minerals such as salt, gypsum and lithium.

[3] The years during which the quantities of material resources cease to grow correspond almost precisely to recessionary years.  

If we examine Figure 2, we see flat periods or periods of actual decline at the following points: 1974-75, 1980-1982, 1991, and 2008-2009. These points match up almost exactly with US recessionary periods since 1970:

Figure 3. Dates of US recessions since 1970, as graphed by the Federal Reserve of St. Louis.

The one recessionary period that is missed by the Figure 2 flat periods is the brief recession that occurred about 2001.

[4] World energy consumption (Figure 4) follows a very similar pattern to world resource extraction (Figure 2).

Figure 4. World Energy Consumption by fuel through 2018, based on 2019 BP Statistical Review of World Energy. Quantities are measured in energy equivalence. “Other Renew” includes a number of kinds of renewables, including wind, solar, geothermal, and sawdust burned to provide electricity. Biofuels such as ethanol are included in “Oil.”

Note that the flat periods are almost identical to the flat periods in the extraction of material resources in Figure 2. This is what we would expect, if it takes material resources to make goods and services, and the laws of physics require that energy consumption be used to enable the physical transformations required for these goods and services.

[5] The world economy seems to need an annual growth in world energy consumption of at least 2% per year, to stay away from recession.

There are really two parts to projecting how much energy consumption is needed:

  1. How much growth in energy consumption is required to keep up with growing population?
  2. How much growth in energy consumption is required to keep up with the other needs of a growing economy?

Regarding the first item, if the population growth rate continues at a rate similar to the recent past (or slightly lower), about 1% growth in energy consumption is needed to match population growth.

To estimate how much growth in energy supply is needed to keep up with the other needs of a growing economy, we can look at per capita historical relationships:

Figure 5. Three-year average growth rates of energy consumption and GDP. Energy consumption growth per capita uses amounts provided in BP 2019 Statistical Review of World Energy. World per capita GDP amounts are from the World Bank, using GDP on a 2010 US$ basis.

The average world per capita energy consumption growth rate in non-recessionary periods varies as follows:

  • All years: 1.5% per year
  • 1970 to present: 1.3% per year
  • 1983 to present: 1.0% per year

Let’s take 1.0% per year as the minimum growth in energy consumption per capita required to keep the economy functioning normally.

If we add this 1% to the 1% per year expected to support continued population growth, the total growth in energy consumption required to keep the economy growing normally is about 2% per year.

Actual reported GDP growth would be expected to be higher than 2%. This occurs because the red line (GDP) is higher than the blue line (energy consumption) on Figure 5. We might estimate the difference to be about 1%. Adding this 1% to the 2% above, total reported world GDP would be expected to be about 3% in a non-recessionary environment.

There are several reasons why reported GDP might be higher than energy consumption growth in Figure 5:

  • A shift to more of a service economy, using less energy in proportion to GDP growth
  • Efficiency gains, based on technological changes
  • Possible intentional overstatement of reported GDP amounts by some countries to help their countries qualify for loans or to otherwise enhance their status
  • Intentional or unintentional understatement of inflation rates by reporting countries

[6] In the years subsequent to 2011, growth in world energy consumption has fallen behind the 2% per year growth rate required to avoid recession.

Figure 7 shows the extent to which energy consumption growth has fallen behind a target growth rate of 2% since 2011.

Figure 6. Indicated amounts to provide 2% annual growth in energy consumption, as well as actual increases in world energy consumption since 2011. Deficit is calculated as Actual minus Required at 2%. Historical amounts from BP 2019 Statistical Review of World Energy.

[7] The growth rates of oil, coal and nuclear have all slowed to below 2% per year since 2011. While the consumption of natural gas, hydroelectric and other renewables is still growing faster than 2% per year, their surplus growth is less than the deficit of oil, coal and nuclear.  

Oil, coal, and nuclear are the types of energy whose growth has lagged below 2% since 2011.

Figure 7. Oil, coal, and nuclear growth rates have lagged behind the target 2% growth rate. Amounts based on data from BP’s 2019 Statistical Review of World Energy.

The situations behind these lagging growth rates vary:

  • Oil. The slowdown in world oil consumption began in 2005, when the price of oil spiked to the equivalent of $70 per barrel (in 2018$). The relatively higher cost of oil compared with other fuels since 2005 has encouraged conservation and the switching to other fuels.
  • Coal. China, especially, has experienced lagging coal production since 2012. Production costs have risen because of depleted mines and more distant sources, but coal prices have not risen to match these higher costs. Worldwide, coal has pollution issues, encouraging a switch to other fuels.
  • Nuclear. Growth has been low or negative since the Fukushima accident in 2011.

Figure 8 shows the types of world energy consumption that have been growing more rapidly than 2% per year since 2011.

Figure 8. Natural gas, hydroelectric, and other renewables (including wind and solar) have been growing more rapidly than 2% since 2011. Amounts based on data from BP’s 2019 Statistical Review of World Energy.

While these types of energy produce some surplus relative to an overall 2% growth rate, their total quantity is not high enough to offset the significant deficit generated by oil, coal, and nuclear.

Also, it is not certain how long the high growth rates for natural gas, hydroelectric, and other renewables can persist. The growth in natural gas may slow because transport costs are high, and consumers are not willing/able to pay for the high delivered cost of natural gas, when distant sources are used. Hydroelectric encounters limits because most of the good sites for dams are already taken. Other renewables also encounter limits, partly because many of the best sites are already taken, and partly because batteries are needed for wind and solar, and there is a limit to how fast battery makers can expand production.

Putting the two groupings together, we obtain the same deficit found in Figure 6.

Figure 9. Comparison of extra energy over targeted 2% growth from natural gas, hydroelectric and other renewables with energy growth deficit from oil, coal and nuclear combined. Amounts based on data from BP’s 2019 Statistical Review of World Energy.

Based on the above discussion, it seems likely that energy consumption growth will tend to lag behind 2% per year for the foreseeable future.

[8] The economy needs to produce its own “demand” for energy products, in order to keep prices high enough for producers. When energy consumption growth is below 2% per year, the danger is that energy prices will fall below the level needed by energy producers.

Workers play a double role in the economy:

  • They earn wages, based on their jobs, and
  • They are the purchasers of goods and services.

In fact, low-wage workers (the workers that I sometimes call “non-elite workers”) are especially important, because of their large numbers and their role in buying many items that use significant amounts of energy. If these workers aren’t earning enough, they tend to cut back on their discretionary buying of homes, cars, air conditioners, and even meat. All of these require considerable energy in their production and in their use.

High-wage workers tend to spend their money differently. Most of them have already purchased as many homes and vehicles as they can use. They tend to spend their extra money differently–on services such as private education for their children, or on investments such as shares of stock.

An economy can be configured with “increased complexity” in order to save energy consumption and costs. Such increased complexity can be expected to include larger companies, more specialization and more globalization. Such increased complexity is especially likely if energy prices rise, increasing the benefit of substitution away from the energy products. Increased complexity is also likely if stimulus programs provide inexpensive funds that can be used to buy out other firms and for the purchase of new equipment to replace workers.

The catch is that increased complexity tends to reduce demand for energy products because the new way the economy is configured tends to increase wage disparity. An increasing share of workers are replaced by machines or find themselves needing to compete with workers in low-wage countries, lowering their wages. These lower wages tend to lower the demand of non-elite workers.

If there is no increase in complexity, then the wages of non-elite workers can stay high. The use of growing energy supplies can lead to the use of more and better machines to help non-elite workers, and the benefit of those machines can flow back to non-elite workers in the form of higher wages, reflecting “higher worker productivity.” With the benefit of higher wages, non-elite workers can buy the energy-consuming items that they prefer. Demand stays high for finished goods and services. Indirectly, it also stays high for commodities used in the process of making these finished goods and services. Thus, prices of energy products can be as high as needed, so as to encourage production.

In fact, if we look at average annual inflation-adjusted oil prices, we find that 2011 (the base year in Sections [6] and [7]) had the single highest average price for oil.1 This is what we would expect, if energy consumption growth had been adequate immediately preceding 2011.

Figure 10. Historical inflation-adjusted Brent-equivalent oil prices based on data from 2019 BP Statistical Review of World Energy.

If we think about the situation, it not surprising that the peak in average annual oil prices took place in 2011, and the decline in oil prices has coincided with the growing net deficit shown in Figures 6 and 9. There was really a double loss of demand, as growth in energy use slowed (reducing direct demand for energy products) and as complexity increased (shifting more of the demand to high-wage earners and away from the non-elite workers).

What is even more surprising is that fact that the prices of fuels in general tend to follow a similar pattern (Figure 11). This strongly suggests that demand is an important part of price setting for energy products of all kinds. People cannot buy more goods and services (made and transported with energy products) than they can afford over the long term.

Figure 11. Comparison of changes in oil prices with changes in other energy prices, based on time series of historical energy prices shown in BP’s 2019 Statistical Review of World Energy. The prices in this chart are not inflation-adjusted.

If a person looks at all of these charts (deficits in Figures 6 and 9 and oil and energy prices in general from Figures 10 and 11) for the period 2011 onward, there is a very distinct pattern. There is at first a slow slide down, then a fast slide down, followed (at the end) by an uptick. This is what we should expect, if low energy growth is leading to low prices for energy products in general.

[9] There are two different ways that oil and other energy prices can damage the economy: (a) by rising too high for consumers or (b) by falling too low for producers to have funds for reinvestment, taxes and other needs. The danger at this point is from (b), energy prices falling too low for producers.  

Many people believe that the only energy problem that an economy can have is prices that are too high for consumers. In fact, energy prices seemed to be very high in the lead-ups to the 1974-1975 recession, the 1980-1982 recession, and the 2008-2009 recession. Figure 5 shows that the worldwide growth in energy consumption was very high in the lead-up to all three of these recessions. In the two earlier time periods, the US, Europe, and the Soviet Union were all growing their economies, leading to high demand. Preceding the 2008-2009 Great Recession, China was growing its economy very rapidly at the same time the US was providing low-interest rate rates for home purchases, some of them to subprime borrowers. Thus, demand was very high at that time.

The 1974-75 recession and the 1980-1982 recession were fixed by raising interest rates. The world economy was overheating with all of the increased leveraging of human energy with energy products. Higher short-term interest rates helped bring growth in energy prices (as well as food prices, which are very dependent on energy consumption) down to a more manageable level.

Figure 12. Three-month and ten-year interest rates through May 2019, in chart by Federal Reserve of St. Louis.

There was really a two-way interest rate fix related to the Great Recession of 2008-2009. First, when oil and other energy prices started to spike, the US Federal Reserve raised short term interest rates in the mid 2000s. This, by itself, was almost enough to cause recession. When recession started to set in, short-term interest rates were brought back down. Also, in late 2008, when oil prices were very low, the US began using Quantitative Easing to bring longer-term interest rates down, and the price of oil back up.

Figure 13. Monthly Brent oil prices with dates of US beginning and ending Quantitative Easing.

There is one recession that seems to have been the result of low oil prices, perhaps combined with other factors. That is the recession that was associated with the collapse of the central government of the Soviet Union in 1991.

[10] The recession that comes closest to the situation we seem to be heading into is the one that affected the world economy in 1991 and shortly thereafter.

If we look at Figures 2 and 5, we can see that the recession that occurred in 1991 had a moderately severe effect on the world economy. Looking back at what happened, this situation occurred when the central government of the Soviet Union collapsed after 10 years of low oil prices (1982-1991). With these low prices, the Soviet Union had not been earning enough to reinvest in new oil fields. Also, communism had proven to be a fairly inefficient method of operating the economy. The world’s self-organizing economy produced a situation in which the central government of the Soviet Union collapsed. The effect on resource consumption was very severe for the countries most involved with this collapse.

Figure 14. Total extraction of physical materials Eastern Europe, Caucasus and Central Asia, in chart by MaterialFlows.net. Amounts shown are based on the Global Material Flows Database of the UN International Resource Panel.

World oil prices have been falling too low, at least since 2012. The biggest decreases in prices have come since 2014. With energy prices already very low compared to what producers need, there is a need right now for some type of stimulus. With interest rates as low as they are today, it will be very difficult to lower interest rates much further.

Also, as we have seen, debt-related stimulus of is not very effective at raising energy prices unless it actually raises energy consumption. What works much better is energy supply that is cheap and abundant enough that supply can be ramped up at a rate well in excess of 2% per year, to help support the growth of the economy. Suitable energy supply should be inexpensive enough to produce that it can be taxed heavily, in order to help support the rest of the economy.

Unfortunately, we cannot just walk away from economic growth because we have an economy that needs to continue to expand. One part of this need is related to the world’s population, which continues to grow. Another part of this need relates to the large amount of debt that needs to be repaid with interest. We know from recent history (as well as common sense) that when economic growth slows too much, repayment of debt with interest becomes a problem, especially for the most vulnerable borrowers. Economic growth is also needed if businesses are to receive the benefit of economies of scale. Ultimately, an expanding economy can be expected to benefit the price of a company’s stock.

Observations and Conclusions

Perhaps the best way of summing up how my model of the world economy differs from other ones is to compare it to popular other models.

The Peak Oil model says that our energy problem will be an oil supply problem. Some people believe that oil demand will rise endlessly, allowing prices to rise in a pattern following the ever-rising cost of extraction. In the view of Peak Oilers, a particular point of interest is the date when the supply of oil “peaks” and starts to decline. In the view of many, the price of oil will start to skyrocket at that point because of inadequate supply.

To their credit, Peak Oilers did understand that there was an energy bottleneck ahead, but they didn’t understand how it would work. While oil supply is an important issue, and in fact, the first issue that starts affecting the economy, total energy supply is an even more important issue. The turning point that is important is when energy consumption stops growing rapidly enough–that is, greater than the 2% per year needed to support adequate economic growth.

The growth in oil consumption first fell below the 2% level in 2005, which is the year some that some observers have claimed that “conventional” (that is, free flowing, low-cost) oil production peaked. If we look at all types of energy consumption combined, growth fell below the critical 2% level in 2012. Both of these issues have made the world economy more vulnerable to recession. We experienced a recession based on prices that were too high for consumers in 2008-2009. It appears that the next bottleneck may be caused by energy prices that are too low for producers.

Recessions that are based on prices that are too low for the producer are the more severe type. For one thing, such recessions cannot be fixed by a simple interest rate fix. For another, the timing is unpredictable because a problem with low prices for the producer can linger for quite a few years before it actually leads to a major collapse. In fact, individual countries affected by low energy prices, such as Venezuela, can collapse before the overall system collapses.

While the Peak Oil model got some things right and some things wrong, the models used by most conventional economists, including those included in the various IPCC reports, are far more deficient. They assume that energy resources that seem to be in the ground can actually be extracted. They see no limitations caused by prices that are too high for consumers or too low for producers. They do not realize that affordable energy prices can actually fall over time, as the economy weakens.

Conventional economists assume that it is possible for politicians to direct the economy along lines that they prefer, even if doing so contradicts the laws of physics. In particular, they assume that the economy can be made to operate with much less energy consumption than is used today. They assume that we collectively can decide to move away from coal consumption, without having another fuel available that can adequately replace coal in quantity and uses.

History shows that the collapse of economies is very common. Collectively, we have closed our eyes to this possibility ever happening to the world economy in the modern era. If the issue with collapsing demand causing ever-lower energy prices is as severe as my analysis indicates, perhaps we should be examining this scenario more closely.

Our Finite World



30 Comments on "Why stimulus can’t fix our energy problems"

  1. Outcast_Searcher on Wed, 10th Jul 2019 10:58 pm 

    More nonsense from Gail.

    Try a college intro to Econ course. Supply and Demand, with the standard supply/demand graph.

    Prices too low for producers? Most will stop producing in time. Less supply, the price will rise.

    Prices too high for consumers? They will consume less, look to substitutes (like it or not there ARE lots of substitutes re different forms of energy, efficiency, or doing without. People don’t LIKE doing without but they don’t need to be perfectly happy to survive).

    Over time, supply vs. demand will seek an equilibrium point. That may bump around a lot with a volatile commodity like crude oil, but despite all the angst and cries of doom, somehow the price manages to be at a level that works, even if some find it inconvenient.

    Same as it ever was. Same as it is for virtually all commodities.

    The reason doomers have such terrible track records, IMO, is they ignore things like the laws of economics and just make stuff up to try to fit their theories of doom. Wrong guesses. Then more guesses. Rinse and repeat.

    Great for selling endless random advice to those who never learn, apparently.

  2. Antius on Thu, 11th Jul 2019 5:29 am 

    Gail is correct. Outcast is wrong.

    The economy is a thermodynamic machine that produces wealth (things of use to human beings) through the action of energy on matter – changing its form, transporting it, etc. The economy is structured to require a certain number of units of energy in particular forms (heat, mechanical motion, electronic calculation) to produce a certain amount of wealth. There are hard limits imposed by the laws of physics as to how much energy is needed to carry out certain processes.

    If energy production requires more and more resources simply to maintain it, then the amount of surplus wealth in the economy is constrained, since wealth is really just a function of surplus energy. The distribution of wealth within the economy is not equal. But people generally need a certain level of surplus wealth to survive; to be able to afford food, clothing, transport to employment, mortgage costs, etc. So energy costs cannot rise very high above historical norms without creating demand destruction. Debt tends to introduce time lags into this relationship, but it does not circumvent the laws of physics. Demand destruction tends to impact the bottom of the economic pyramid more acutely, because these people have less wealth to spare before their lifestyles literally collapse; they draw income from wages rather than ownership of assets and more of their wealth is spent on consumable goods rather than assets and services. So an expected side effect of energy stress on an economy is rising wealth inequality – something that we are seeing in the real world.

    Energy sources do have a limited amount of substitutability. But there are practical constraints. Intermittent renewable energy sources produce mechanical or electrical power, not liquid fuels. They are also intermittent, making them a poor substitute for mechanical or electrical energy derived from fossil fuels, since they need a lot of extra infrastructure to make them useful. Hydropower is also a mechanical energy source, though far more controllable and power dense than wind and solar. But it is limited by the abundance of suitable rivers. Nuclear power is a source of heat and mechanical energy. It is power dense and controllable, but has been rendered ineffectual by institutional obstacles created by people that are ideologically opposed to nuclear energy or terrified of radioactivity. So in the real work, we are largely stuck with whatever energy we can get from fossil fuels.

  3. Darrell Cloud on Thu, 11th Jul 2019 6:47 am 

    The fascinating thing about the Federal Reserve monetary system is that debt based money created out of thin air can run unsustainable operations for a very long time. Fiscal responsibility in this environment is a mirage.

    Shale oil producers can continue to produce vast quantities of oil at a loss because they are propped up by the exponential debt machine.

    We know this system will unravel when the dollar implodes. We simply do not know when that implosion will take place.

    A great read is When Money Dies.

  4. marmico on Thu, 11th Jul 2019 7:32 am 

    If energy production requires more and more resources simply to maintain it, then the amount of surplus wealth in the economy is constrained, since wealth is really just a function of surplus energy.

    BS. Even if the argument is correct that there is less surplus energy in the economy than there was 50 years ago, the energy intensity of the economy relentlessly declines swamping any alleged minor decline in surplus.

    Tverberg is full of it. US energy consumption per capita is the same as it was 50 years ago yet GDP per capita has risen by 130%. I would guesstimate that the Euro area is similar to the US.

  5. Hello on Thu, 11th Jul 2019 8:04 am 

    >>>>> US energy consumption per capita is the same as it was 50 years ago yet GDP per capita has risen by 130%

    Yes, but that’s because the HIGH INTENSITY energy industries have been outsourced to the 3rd world. What remains is some computer this, computer that economy, mostly banking, entertainment, movies, apps etc.

    It’s unrealistic to assume the whole world can be in this “fluff” economy, because somebody has to do the dirty work and provide the basics. And that needs energy. And lots of it.

    PS: reminds me of the clever Swiss who boast to have a low carbon footprint, conveniently forgetting that most of the dirty industrial goods are imported from china.

  6. Sissyfuss on Thu, 11th Jul 2019 8:27 am 

    Gail always makes the cornies restless with her “War and Peace” style missives. I find them quite relaxing, in a somnambulant manner.

  7. jef on Thu, 11th Jul 2019 8:58 am 

    >>>>> US energy consumption per capita is the same as it was 50 years ago yet GDP per capita has risen by 130%

    This is because the economy has been dominated by Debt/financialization, money making money making money, without even touching the real economy.

    Global gdp has barely grown over the last 20 years where global debt has gon exponential to the moon.

  8. Davy on Thu, 11th Jul 2019 9:01 am 

    Hello, the US has two of the largest highest intensity industries in the world and that is defense and petrochemical complex so your point is only partially true. It is also a fact the US is one of the biggest manufacturers in the world. Yes there is a lot of fluff too but not all of that is low energy intensity.

  9. Antius on Thu, 11th Jul 2019 9:44 am 

    ” BS. Even if the argument is correct that there is less surplus energy in the economy than there was 50 years ago, the energy intensity of the economy relentlessly declines swamping any alleged minor decline in surplus.

    Tverberg is full of it. US energy consumption per capita is the same as it was 50 years ago yet GDP per capita has risen by 130%. I would guesstimate that the Euro area is similar to the US.”

    US Primary energy consumption has risen 50% since 1968. Natural gas consumption has almost doubled; petroleum consumption is up about 30%. Coal consumption is up about 10%, though was recently much higher. Nuclear generation increased from virtually nothing to provide about 1/5th of electricity.
    https://www.eia.gov/energyexplained/images/charts/primary-energy-consumption-by-source-history.png

    US electricity consumption is somewhere between double and triple what it was in 1968. Electricity consumption tends to rise in proportion to economic growth because its exergy efficiency is close to 100%.
    https://www.statista.com/statistics/201794/us-electricity-consumption-since-1975/

    There have been some impressive improvements in efficiency, especially in the electricity generating sector, largely due to the replacement of coal with natural gas, burned in combined cycle units, which generates nearly twice as much electric power per MJ of fuel. And automotive efficiency has improved somewhat. US exergy consumption, i.e. harvested work energy, probably doubled in the past five decades. Many of these gains in energy efficiency have been achieved by switching to more efficient fuels – i.e. coal to natural gas.

  10. Hello on Thu, 11th Jul 2019 9:51 am 

    >>>> defense and petrochemical

    I don’t get your point, Davy.
    I didn’t claim the US doesn’t have any industry anymore. But I claim the decline in energy intensity with rising GDP is the result of fluff economy. The butter&steel economy did not become much more efficient over the last 50 years. Certainly not to the point of 130% as stated in marmicos post.

    I once read the amount of fuel (in gallons) one US solder needed during WW2, for the complete supply chain supporting his fighting ability. This amount kind of increased by a factor of 10 for the gulf wars. So if any, the defense industry became even more energy intensive than it used to be.

    The gain was made in the service economy. But the problem is, not everybody can be in the service industry. Somebody has to do the work, which remains energy intense. So claiming the US economy grew by 130% while the energy used declined is cheating in the same way as claiming low carbon footprint while importing steel from china.

  11. Davy on Thu, 11th Jul 2019 10:04 am 

    Sorry Hello. I get real defensive whenever anybody says something bad about the USA. It’s a wounded ego thing of mine.

  12. Duncan Idaho on Thu, 11th Jul 2019 10:17 am 

    ”I would rather hear about a live American Bum than a dead Greek god.”

    — Charles Bukowski

  13. JuanP on Thu, 11th Jul 2019 10:42 am 

    OOps, I am JuanPnot Davy. This is my id theft:

    Davy on Thu, 11th Jul 2019 10:04 am
    Sorry Hello. I get real defensive whenever anybody says something bad about the USA. It’s a wounded ego thing of mine.

  14. More Davy Identity Theft on Thu, 11th Jul 2019 10:47 am 

    JuanP on Thu, 11th Jul 2019 10:42 am

  15. Davy on Thu, 11th Jul 2019 10:51 am 

    “>>>> defense and petrochemical I don’t get your point, Davy.”
    I didn’t claim the US doesn’t have any industry anymore. But I claim the decline in energy intensity with rising GDP is the result of fluff economy.
    Did I say I didn’t agree? I am just pointing out there is still plenty of high intensity energy activity going on and that activity is more efficient and potent due to technology and business practices.

    “ The butter&steel economy did not become much more efficient over the last 50 years. Certainly not to the point of 130% as stated in marmicos post.”
    I agree but still it has significantly improved per marmi’s post

    “I once read the amount of fuel (in gallons) one US solder needed during WW2, for the complete supply chain supporting his fighting ability. This amount kind of increased by a factor of 10 for the gulf wars. So if any, the defense industry became even more energy intensive than it used to be.”
    Not really because one jet or bomber can wipe out a who company with just a little jet fuel needed. In fact, today lots of extra fuel is used to try to prevent collateral damage. The defense industry has probably increased it efficiency far more than other sector by the fact that competition has made higher kills at lower cost important. In WW2 the concern was attrition. Today it is about logistic yielding a high kill ratio.

    “The gain was made in the service economy. But the problem is, not everybody can be in the service industry. Somebody has to do the work, which remains energy intense. So claiming the US economy grew by 130% while the energy used declined is cheating in the same way as claiming low carbon footprint while importing steel from china.”
    You are arguing the extreme points, hello.

  16. Davy on Thu, 11th Jul 2019 11:00 am 

    BTW, anything bad about the USA I call extremist Hello. Just one more reason why everyone here knows I’m delusional.

  17. marmico on Thu, 11th Jul 2019 11:52 am 

    The butter&steel economy did not become much more efficient over the last 50 years.

    You look up butter. It takes 50% of the energy to produce one unit of steel in 2018 than it did in 1968.

    https://www.worldsteel.org/en/dam/jcr:f07b864c-908e-4229-9f92-669f1c3abf4c/fact_energy_2019.pdf

  18. Antius on Thu, 11th Jul 2019 12:08 pm 

    The steel industry in developed countries (Europe and US) is substantially more efficient now than it was just a few decades ago, because two-thirds of new steel is derived from recycled steel that is reprocessed using electric arc furnaces. These are effectively resistance heaters and do not suffer energy losses due to incomplete combustion or heat trapped in flue gases. Given that most steel is already produced in this way, the industry is now about as efficient as it could be. It is a good example of how switching to more efficient fuels (especially electricity and natural gas) provided a big one-time efficiency gain after the high energy prices of the 1970s.

    The high efficiency of electricity also helps to explain why on a global level, economic growth and electricity consumption tend to rise in linear proportion to each other. Many of the perceived benefits of improving energy intensity on a global level are a direct result of switching to more efficient fuels.

  19. Antius on Thu, 11th Jul 2019 12:37 pm 

    On the limited topic of crude steel, energy consumption per tonne dropped until about 2005; whereupon it stabilised. Diminishing returns became evident around the mid 1990s.

    https://tinyurl.com/y5eeebla

    Until 2000, improving technology and switching fuels allowed industrial countries to continue growing at a rate that outstripped increases in raw energy supply, because efficiency was growing and declining EROI was not significant until then.

  20. Davy on Thu, 11th Jul 2019 12:42 pm 

    got any proof juanpee?

    JuanP id theft:
    “Davy on Thu, 11th Jul 2019 11:00 am
    BTW, anything bad about the USA I call extremist Hello. Just one more reason why everyone here knows I’m delusional.”

  21. marmico on Thu, 11th Jul 2019 12:52 pm 

    Until 2000, improving technology and switching fuels allowed industrial countries to continue growing at a rate that outstripped increases in raw energy supply, because efficiency was growing and declining EROI was not significant until then.

    BS. World energy intensity has continued to decline since 2000 swamping any alleged decline in energy surplus.

    https://www.eia.gov/todayinenergy/detail.php?id=27032

  22. Energy Investor on Thu, 11th Jul 2019 12:55 pm 

    Great post marmico. I’ve invested heavy in the butter@toast economy myself and my gains have far outperformed all the idiots investing in stupid windmills and solar. In the bakken alone, butter@toast output is expected to rise 200,000 slices a day by 2020.

  23. Hello on Thu, 11th Jul 2019 1:13 pm 

    >>> It takes 50% of the energy to produce one unit of steel in 2018 than it did in 1968.

    That’s great. But we need 130%, as per your initial claim.

    >>> more efficient fuels (especially electricity

    Electricity is not an efficient fuel for heating purposes. Heating is usually done through direct burning of coal/gas/wood/oil etc.

    I’m glad we discussed steel at a gain of 50% over 50 years. We need to get to 130%. What about all the rest of the industrial output? How much of an efficiency gain did we achieve in 50 years?

    construction, transport, manufacturing, refining, food, medicine, etc, etc.

    We now know that steel increased by 50%, which is way short of the target, 130%. To pick up the slack something else must have efficiency gains way above 130%. Maybe cement manufacturing? Or black-top? Or 2x4s?

    cheers

  24. marmico on Thu, 11th Jul 2019 1:26 pm 

    In the bakken alone, butter@toast output is expected to rise 200,000 slices a day by 2020.

    Too funny. The Bakken may get to 1,500,000 slices a day at some future date, but a 200,000 increase in slices in 2020 seems very remote.

    https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats.pdf

  25. marmico on Thu, 11th Jul 2019 1:42 pm 

    That’s great. But we need 130%, as per your initial claim.

    It’s a 100% productivity increase. Twice the steel output for the same energy input. Energy intensity is the obverse of energy productivity.

    Where’s the butter? Energy Investor is passing around the toast.

    cheers

  26. Hello on Thu, 11th Jul 2019 2:00 pm 

    >>> Energy intensity is the obverse of energy productivity.

    Yes, you’re right.
    energy intensity = energy/gdp

    But you claimed:
    >>>> GDP per capita has risen by 130%

    Granted, capita != energy, and maybe I jumped too far to assume capita == energy.

    But we know that the output of steel/energy increased by 50%. How much did the output of steel increase per capita? Is it 130%?

    BTW I looked up efficiency increase in aluminum production. Again, way short of 130%. And not only way short, but practically flatting out.

  27. Cloggie on Fri, 12th Jul 2019 12:41 am 

    Slow lane no more.

    Holland to build a second 1.52 GW wind farm in the North Sea, again without a dime tax money:

    https://www.nu.nl/economie/5963579/vattenfall-gaat-tweede-subsidieloze-windpark-in-zee-bouwen.html

    Holland has long been the European taillight in all matters of renewable energy, for the simple reason they owned the largest natural gas field in Europe. That field hasn’t depleted, but further large scale extraction has become hazardous because of soil subsidence.

    But that long wait is paying off, now that wind farm developers are competing for the privilege of installing the wind farms for free (provided they can sell the kWh’s via it’s Dutch daughter and electricity distributor NUON).

    Swedish Vattenfall has been awarded the contract to build the giant wind farm “Hollandse Kust” (“Dutch Coast”) with no subsidy whatsoever. They even agreed to pay 2 million a year lease. The project is expected to be completed in 2023.

    The other 1.5 GW project “Borssele I-V” is now under construction and scheduled for completion in 2021 and (for a brief moment) will be the largest offshore wind farm in the world.

    https://nl.wikipedia.org/wiki/Windpark_Borssele

  28. I AM THE MOB on Fri, 12th Jul 2019 7:18 am 

    IMF sees prolonged anemic growth in euro zone, urges ECB stimulus

    https://www.reuters.com/article/us-imf-eurozone/imf-sees-prolonged-anemic-growth-in-euro-zone-urges-ecb-stimulus-idUSKCN1U61X9

    Europe is finished!

    Print baby print! It worked for Wiemar..

  29. Hello on Fri, 12th Jul 2019 8:07 am 

    >> It worked for Wiemar.

    It’s Weimar.

    And since the world is finite, I think having NO GROWTH is a pretty good thing.

  30. Duncan Idaho on Fri, 12th Jul 2019 9:32 am 

    OPEC 14 crude only production was down 68,000 barrels per day in June.

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