Cola-Is-Petroleum wrote:The sh*t really starts to hit the fan when the current major exporters become net importers themselves (which is were the world is heading).
Cola-Is-Petroleum wrote:Now couple these diminishing returns to efficiency with declining oil supplies AND Jevon's Paradox. What do you get? A big problem.
Cola-Is-Petroleum wrote:Things may be alright when oil production is increasing by a factor of 1.4 or what have you, but when it starts to decrease not only continually but at an accelerating rate , that is when things really start to difficult. The sh*t really starts to hit the fan when the current major exporters become net importers themselves (which is were the world is heading).
You yourself have even made an allusion to the diminishing returns of efficiency increases in your post. The first improvements to efficiency are easy, but then they get harder and more expensive, because the lower fruits are typically picked first, so to speak. Now couple these diminishing returns to efficiency with declining oil supplies AND Jevon's Paradox. What do you get? A big problem.
Doly wrote:Like many people have said before, Jevon's Paradox only applies when energy supply is plentiful. And it won't be after peak oil.
My understanding is that production does not strictly follow a bell curve but falls off somewhat more slowly than it increased. So, if it peaks in 2010, we can expect the 1973 level to be reached again some time past 2040, say 2050. By that time, efficiency will have seen spectacular improvements.
robsmith wrote: Oil per unit of GDP has been plummeting for 31 years! Increasing efficiency of oil usage (production or consumption divided by real GDP) has kept us well ahead of the game.
robsmith wrote:Even in the USA, the most technologically advanced major country, where further advances are most difficult, efficiency has increased by a factor of 2.1.
MonteQuest wrote:Some false assumptions going on here. Much of the US per capita use has declined due to outsourcing of industrial production.
MonteQuest wrote:Increases in efficiency have resulted in an increase in consumption negating the gains of efficiency. Jevon's paradox. We have also diversified our energy use over this time.
MonteQuest wrote:And most important, 40% of recent GDP growth is financial speculation, not the production of real goods and
services.
MacG wrote:Ha, ha, ha. Talk about hubris. You have appearently never visited Japan.
The argument goes like this (I generalize it from all these multiple sources):
Because our economy requires a lot less oil circa 2005 for each dollar of GDP that it generates than circa 1973, therefore it (the economy) is much less vulnerable to oil supply disruptions and oil price spikes than it was 30 years ago.
It is just incredible to me to hear this argument again and again in our enlightened age from such a diverse group of seemingly intelligent people (although I suspect that, say, Dick Cheney may have much more insight into the nature of our energy predicament than he is letting on). If our economy, for the sake of the argument, doubled in terms of dollars of GDP since 1973 (let's measure everything in constant dollars, adjusting for inflation), and (again, for the sake of the argument) our annual oil consumption did not change from back then, we have twice as many dollars of GDP riding on the same barrel of oil we consume, do we not? Doesn't it make the economy twice as vulnerable (as expressed in the monetary impact) to the same amount of oil shortage (as expressed in barrels), instead of less vulnerable?
Let me use this example. Let's say, thirty years ago I started a business leasing out a circa 1973 Buick as a taxi. By 2005, my business has doubled in size and revenue, and currently I lease out two super energy efficient Toyota Priuses as taxis, which together consume the same amount of fuel as the old Buick consumed alone, but produce double the revenue amount (again, in constant dollars). Say, an oil supply disruption grounds my taxi fleet. What will have a bigger impact on the economy in terms of lost revenue -- one stalled taxi or two stalled taxis? Which economy has more capacity to optimize its energy usage and find reserves for growth, instead of shrinking its GDP -- an energy inefficient economy or an energy efficient economy? Which economy is more likely to contract in the face of shortages?
PhilBiker wrote:from Dmitry Podborits' LiveJournal Blog, as linked to by Jim Kunstler this week:The argument goes like this (I generalize it from all these multiple sources):
Because our economy requires a lot less oil circa 2005 for each dollar of GDP that it generates than circa 1973, therefore it (the economy) is much less vulnerable to oil supply disruptions and oil price spikes than it was 30 years ago.
It is just incredible to me to hear this argument again and again in our enlightened age from such a diverse group of seemingly intelligent people (although I suspect that, say, Dick Cheney may have much more insight into the nature of our energy predicament than he is letting on). If our economy, for the sake of the argument, doubled in terms of dollars of GDP since 1973 (let's measure everything in constant dollars, adjusting for inflation), and (again, for the sake of the argument) our annual oil consumption did not change from back then, we have twice as many dollars of GDP riding on the same barrel of oil we consume, do we not? Doesn't it make the economy twice as vulnerable (as expressed in the monetary impact) to the same amount of oil shortage (as expressed in barrels), instead of less vulnerable?
Let me use this example. Let's say, thirty years ago I started a business leasing out a circa 1973 Buick as a taxi. By 2005, my business has doubled in size and revenue, and currently I lease out two super energy efficient Toyota Priuses as taxis, which together consume the same amount of fuel as the old Buick consumed alone, but produce double the revenue amount (again, in constant dollars). Say, an oil supply disruption grounds my taxi fleet. What will have a bigger impact on the economy in terms of lost revenue -- one stalled taxi or two stalled taxis? Which economy has more capacity to optimize its energy usage and find reserves for growth, instead of shrinking its GDP -- an energy inefficient economy or an energy efficient economy? Which economy is more likely to contract in the face of shortages?
robsmith wrote: The assumption that rapid drop-off will occur depends, I think, on (1) the belief that improvements in technology will give us the ability to exhaust oil fields much more quickly and (2) the importance of a few massive oil fields (violating one of the constraints of that mathematical theorem), where oil production some (eg, Matt Simmons) expect to drop off rapidly.
MonteQuest wrote:And most important, 40% of recent GDP growth is financial speculation, not the production of real goods and
services.
MonteQuest wrote:Not a belief, but a fact that improvements in technology and water cut have increased the rate of extraction, especially in the larger fields like Ghawar. So, the decline rate will be higher than the lower 48 experience due to this factor alone. Cantarell at 15% and the North Sea at 17%.
MonteQuest wrote:No, 40% of GDP growth has resulted from spending via the Refi-ATM courtesy of "inflated" assets not supported by the fundamentals. This wealth generation is "smoke and mirrors" and an illusion. When it disappears back into the thin air from which it came, the house of cards falls.
In other words, we largely borrowed from the Chinese in order to sell our houses to each other and we are spending the proceeds into the ecomomy.
robsmith wrote:MonteQuest wrote:Not a belief, but a fact that improvements in technology and water cut have increased the rate of extraction, especially in the larger fields like Ghawar. So, the decline rate will be higher than the lower 48 experience due to this factor alone. Cantarell at 15% and the North Sea at 17%.
Why should the Saudis pump out their oil at a faster than optimal rate? With prices heading up over the longer term, why not hold back your oil to get the much higher prices that will exist in the future?
You expect that peak oil will NOT mark the half-way point in oil, but a point well beyond the half-way point. This is not usually how peak oil people present the situation, but it is surely possible. Am I understanding you?
MonteQuest wrote:No, 40% of GDP growth has resulted from spending via the Refi-ATM courtesy of "inflated" assets not supported by the fundamentals. This wealth generation is "smoke and mirrors" and an illusion. When it disappears back into the thin air from which it came, the house of cards falls.
In other words, we largely borrowed from the Chinese in order to sell our houses to each other and we are spending the proceeds into the ecomomy.
No, 40% of GDP growth has resulted from spending via the Refi-ATM courtesy of "inflated" assets not supported by the fundamentals.
MonteQuest wrote:robsmith wrote:Why should the Saudis pump out their oil at a faster than optimal rate? With prices heading up over the longer term, why not hold back your oil to get the much higher prices that will exist in the future?
To meet demand for one. Improvements in technology have not necessarily exceeded optimal productions rates, but they do hasten the rate of decline. The lierature is replete with documentation on this.
MonteQuest wrote:robsmith wrote:You expect that peak oil will NOT mark the half-way point in oil, but a point well beyond the half-way point. This is not usually how peak oil people present the situation, but it is surely possible. Am I understanding you?
No, I do not. I'm saying the rate of decline may very well exceed historical rates.
MonteQuest wrote:If you spend this inflation into the economy buying goods and services it most certaintly shows up as GDP growth.
robsmith wrote: Why would the Saudis "meet demand" rather than maximize their profits?
robsmith wrote:Take a bell curve. Half the area under the curve is to the left of the peak, half to the right. Now, make the rate of decline from the peak higher than the rate of ascent to the peak. Now you will have more than half the area under the curve to the left of the peak. Therefore, you <i>are</i> implying the peak will occur after the mid-point in production. Aren't you?
MonteQuest wrote:If you spend this inflation into the economy buying goods and services it most certaintly shows up as GDP growth.
It shows up as growth in nominal GDP, not in real GDP. You agree, don't you?
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