Steven Lords Website

With the oil price going up it’s quite common in the mainstream news to get a roving reporter on some garage forecourt asking people filling their tanks what they think of increases in fuel duty. Good balanced reporting and is it really news when they all say they’re not happy with it? It’s always about the government picking on the poor driver. The reporter never asks or presses with challenging questions or observations. They never point out that the duty is partly to reduce petrol use and people complaining about it is a sign that it’s doing it’s job not a sign to change. I’m not sure when driving a car became viewed a right and how people can be so detached from what using all this petrol is doing.

Then yesterday the second and third paragraphs on the front page of The Times were:

The Times has learnt that key ministers, including Iain Duncan Smith, the Work and Pensions Secretary, have agreed that 5.7 million people claiming benefits for the unemployed will each lose hundreds of pounds a year.

The savings are likely to go towards the Government’s ambition to scrap the planned 3p-a-litre rise in petrol in January, which would cost £1.5 billion.

Am I the only person that finds that shocking. The Times certainly didn’t. What we are saying is we are going to take money from the poorest in society and give to the richest.  About the bottom 25% don’t own cars so clearly it’s going to the richest 3/4s. Don’t believe this stuff about the 3p a litre will bolster the economy. To the richest that change will have no impact on their spending but taking £100s from the poorest certainly will.

Did we then see the roving reporter out on the forecourt asking the drivers whether they agreed it was fair that the poorest in society may go without heat this winter or may skip meals so that they can save 3p a litre on their petrol ? Of course they didn’t but this is precisely what the above decision is doing. It is shameful for what is supposedly a civilised society.

This highlights within the UK what will become a global issue as oil prices rise. Cheap grain is due to cheap oil as prices go up so do the price of grain. What this means is that fueling your car is in direct competition with feeding the poorer populations in the world. If we allow price to decide who gets the oil when supply is below demand it is almost by definition that the car driver will be able to afford more for that oil than the poor in third world nations for their food. It may not be as clear cut as those two paragraphs in The Times but those sort of trade offs will be happening. Oil is such a precious resource that we need some method to ensure we not only all plan to reduce our dependence but also have a better allocation method than price to ensure it is put to best use.

I am not saying give up your car but do think about your use of it. Think about making a transition to minimal use and eventual to no use. The biggest preparation you can do immediately is to remove your dependence.

My father rode a camel.

I drive a car.

My son  flies a jet airplane.

His son will ride a camel.

Saudi Proverb.

Yesterday I was pointed in the direction of this post. It’s a fairly optimistic blog about the cost of solar panels. The thing that caught my eye though was the first paragraph about how much energy the sun delivered to the earth. On the face of it is sounds amazing – in 14.5 seconds it delivers all the energy humanity uses in a day. Sounds fantastic – we just need to capture it. I decided to have a play to see on our current infinite growth path how long we could continue assuming we moved to completely sustainable sources of energy. Would there be a point when we’d not have enough energy from the sun each day ?

The Infinite Growth Paradigm.

Depending on how widely you’ve read you may or may not have come across this term. It is however the underlying paradigm of virtually everything you hear by politicians, business men and the popular press. They never call it this but every time they tell you we need growth this is implicit in it. We have a recession – we need to spend our way out of it. In fact, the very definition of recession is lack of growth. Also, implicit is the fact it should keep continuing. If they believe at some stage it should stop then why not right now when there’s lots of evidence it’s unsustainable ? Since they don’t even consider this as a possibility I can only assume they think it will continue indefinitely and thus is infinite.

Now for a insanely optimistic scenario. Here’re my assumptions

1. There are no limit to resources other than energy. So we completely recycle, go to mars and mine whatever – no limits
2. We move to completely sustainable energy sources. The only truly sustainable way to use energy is by using that available from the sun. (uranium will run out and I’m not considering that cold fusion will somehow work for this experiment). For sustainability we need to on average use the suns energy at the rate it arrives. Burning oil, coal, natural gas is burning historic sunlight. Burning wood in a sustainable way is a way of storing current sunlight to be used later. All our energy ends up from capturing the suns energy eg: solar, wind, hydro, biofuels. [aside – tidal is another possibility which I’ve ignored – using this would merely add to the maximum limit we can’t exceed]
3. Many people state thats it’s efficiency that will allow us to continue to grow despite limited resources. I’ve included a 5% increase in energy efficiency every year forever !
4. I’ve done various scenarios giving a minimum that this efficiency will tend towards. It’s an optimistic scenario but not one where I can imagine that we will progress ever closer to zero energy per unit of economic activity. Current efficiency in the UK is about 6.5 megajoules per $1 of economic activity. My three scenarios are for an absolute limit of 50% (3.25 mj/$), 10% (0.65 mj/$) and 5% (0.325 mj/$)
5. I’ve assumed that when we capture sunlight we are 100% efficient (thus ignoring the laws of thermodynamics). However, I’ve assumed we’re sensible enough to not capture all of it otherwise there’d be none left for other animals, plants, heating the earth, creating wind etc… so I’ve assumed a hard limit of using 33% of the suns energy above which I’m pretty sure we’d create a whole lot of problems.

6.2% economic growth is assumed. This sees to be largely touted figure for a healthy economy.

I stuck this all into a spreadsheet and produced the graph at the top.

Zero Energy Efficiency Gains

This scenario is all the above but energy per economic output stays the same.

Years before we run out of energy (33% of sun):  384 years

GDP at this point: 1,967 x (Current GDP)

Efficiency Gains at 5% tending to a limit of double current efficiency

Years till we run out: 419 years

GDP: 4,013 x (Current GDP)

Efficiency Gains at 5% tending to a limit of 10 times current efficiency

Years till we run out: 500 years

GDP: 19,957 x (Current GDP)

Efficiency Gains at 5% tending to a limit of 20 times current efficiency

Years till we run out: 535 years

GDP: 39,911 x (Current GDP)

WOW ! You may have noticed how the increasing in efficiency progressively gains us less time. Doubling it in this final step only gave an extra 35 years !!

Growth will trump efficiency.

Now this was really just a bit of a giggle but has a very serious side. You may laugh at so many parts of it

• the idea of capturing 33% of all sunlight that hits the earth. That can be pulled apart on so many levels
• the idea that GDP will be 1,000s of times what it is currently.
• the idea that we’ll always have enough resources to manage this
• the idea that the impacts on the worlds ecosystem would not bring this to a halt.

Yes ! This is completely insane.

BUT – this is implicit in the Infinite Growth Paradigm. This is what is implicit every time you nod in agreement that what we need is growth. Even if we manage all the ridiculous assumptions I’ve made we still hit a limit which is the energy of the sun. In fact, in my first two scenarios it takes less than five hundred years to be needing to use 100% of the energy the sun delivers to the earths surface.

You also may point out “but thats hundreds of years in the future”. Well yes, we won’t be around but lets face it thats a selfish attitude. If you plan on having descendants then some will have to face it. You may assume that at some point we’ll address this paradigm. Well yes … so why not now ? The evidence is all around we are hitting limits you just have to look.

My analysis here is crude but hopefully illustrative. It was just a few hours work to make a point. However back in 1972 a report called “The Limits To Growth” was presented to the Club Of Rome in which scientists built very sophisticated models to test out various growth scenarios. Back then they predicted we need to act immediately to bring about a smooth transition to a sustainable civilisation. They did a 20 and 30 year update with the 40 year update due in 2012. The updates really confirmed their analysis and that the world was continuing to follow their reference scenario which culminated in Collapse. Considering their study in 1972 concluded we had to start acting immediately together with the fact we’ve done nothing and the passage of time has confirmed their analysis you can imagine the urgency of a complete paradigm shift in our thinking.

Limits to Growth, The 30-Year Update is well worth a read.

I did economics at A-Level and always enjoyed it. You could sit and think scenarios through in your head. I found it a nice mix between the rigour of mathematics and an art. It seems to almost be viewed now as a science but it is not. Also the basic concepts are not difficult so don’t get pushed aside from thinking about it because you’re not an ‘expert’ or you’ve not been ‘ trained’. These two things are your biggest assets right now since at the moment the only thing you hear from economists and politicians is the same old thinking. They are locked in one paradigm.

Lets look at a most basic economic concept which anyone can understand. Supply and Demand. This is the relationship between the price of a product and its supply and the demand for that product. The picture above illustrates it. You see that supply increases as price increases and demand decreases as price increases. Note the following

1. It assumes demand will continue to decrease to zero as prices go up
2. It assumes demand will keep increasing as price comes down
3. It assumes that supply can continue increasing

Demand may decrease to zero as price goes up but certain products will be quite stubborn – eg food. The shape of the curve can reflect this. Demand continues to increase as price goes down but again there may be some limit which can be reflected in the curve.

The supply side is more interesting. It assumes that if prices keep increasing that more will be supplied. The argument being that as prices increase more people will enter the market to make the product and resources will be moved from elsewhere to increase the supply.

All sounds good and logical so far. What about a non renewable resource. This is not something that is made it’s something thats extracted in one way or another. The total amount available has a limit. OK, increases in technology can allow more extraction (so say with oil you go from getting 50% from a well to 60%) but these increases in efficiency have a limit which is at 100% efficiency. It will likely be lower than that since costs of increasing efficiency may become prohibitively expensive. In the case of oil once it takes more oil to extract than what you get then it will stop. This is the nail in the coffin of plant based ethanol (more on that in a later post).

Lets look at oil. This diagram shows a theoretical supply and demand curve. The blue is supply which plateaus out at maximum extraction rate. It shows that if the demand curve moves up from Dt1 through Dt2 to Dt3, say reflecting increase world demand, the price will move from P1 to P2 and finally P3.

However, historically the oil price has been fairly stable by the OPEC countries (mainly Saudi Arabia) increasing supply as required to keep prices stable. So instead of P2 being a price increase the supply curve is moved to the right (ie increasing supply) in such a manner to maintain a stable price. In effect OPEC turned on the taps to meet the increased demand.

This is all well and good as long as you have surplus capacity. With a finite resource there must come a point where this is not possible. I would expect this to be self evident but it clearly is not. Many people don’t believe this at all. I won’t go in to the details here but if you’re interested just google “Peak Oil” or wait till I blog on it.

Through the late 80s and 90s we saw relatively stable oil prices (with an increase during the first Iraq war) as it was possible to increase supply to meet increasing demand. We also experienced a period of enormous growth. People my age have only ever experienced this so the belief of endless growth is backed by experience, we belief our pension funds will be valuable, our houses will increase in price, we’ll get pay rises. However, during this period also:

1. The world population has increased due to ever cheaper food produced using oil
2. Most nations in the world pursue western growth and western lifestyles – the promise of cars and massive consumption.

Both these have meant that oil demand kept shifting to the right – more demand at every price level.

At the same time oil has got more expensive to extract. This should be self evident as we see ever more deep water extraction, tar sands and endless talk of getting the stuff from the Arctic. It’s also completely sensible that the easiest and cheapest oil will be extracted first. Thus the Supply curves are moving leftwards – ie less supply at each price point since these more expensive supplies become uneconomical as prices drop so that supply is removed.

As we decline down Hubberts Peak the maximum rate of oil extraction will come down. This will be exacerbated by domestic demand in oil exporting nations resulting in even less available for importers. Most oil producers heavily subsidise petrol to their populations. For example here are some recent  prices of petrol at the pumps:

• $3.99 per gallon – USA
• $8.54 per gallon – UK
• $0.85 per gallon – Saudi Arabia
• and per Wikipedia Venezuala has been at $0.02 per litre for a long long time.

With subsidised prices these markets are operating under completely different supply curves to us. All this only accelerates the decline in peak production capacity available for importing nations.

The diagram illustrates this. You can argue about at what point the limits I’ve put on supply will apply but apply they will at some point. The trends are correct. Demand for oil is ever increasing (just think of the talk of the billion Chinese all wanting cars when there’s estimated to be only 700 million cars in the world now).

The recent price rises have shown that no longer can Saudi Arabia just turn on the taps to keep the oil price stable. Prices have rocketed. If you see in my diagram – demand from Dt1 to Dt2 and supply from St1 to St2. We see that the price increases along with the supply.

However what happens when demand starts to exceed the maximum supply (which some commentators say it already has) ? Hopefully it’s obvious – prices go through the roof. When that happens there will not enough oil whatever the price. In my diagram it shows how when we’re at Dt3 and St3 the price has gone up to P3 but the supply at that price is less than at previous times. At that point it’s not just that everything that requires oil (eg food, transport) goes up in price but some needs for oil won’t be met.

At that point you’ve gotta hope that either you have a convenient replacement in place for those needs or they’re not essential.

So start buying local

Start buying organic

By supporting your local producers now you start to improve on your food security in the future. These non oil based local suppliers will be where you get your food from in years to come so please use them now to ensure they’re still around.