Message-ID: <001401bdac25$c057f840$55745ecc@jay95> Date: Fri, 10 Jul 1998 07:11:16 -1000 From: Jay Hanson <mailto:j@QMAIL.COM> Subject: ENERGY AND THE GLOBAL ECONOMY To: mailto:DEVEL-L@AMERICAN.EDU
>transfer and communication. I believe the world economy of the the next
>century will be
>defined by information and access to that information. It is critical that
Remember that people can not eat "infoburgers".
The world is defined by access to energy -- not information. One can not run a computer by hand, or make steel, or fly a plane.
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ENERGY AND THE GLOBAL ECONOMY by Jay mailto:Hanson-j@qmail.com, 7/8/98
By definition, energy "sources" must produce more energy than they consume, otherwise they are called "sinks".
The global economy burns energy to make money-there is no substitute for energy. Although the economy treats energy just like any other resource, it's not like any other resource. Energy is the precondition for all other resources.
The global economy receives almost 80% of its energy subsidies from nonrenewable fossil sources: oil, gas, and coal. They are called "nonrenewable" because, for all practical purposes, they're not being made any more. The reason they are called "fossil" is because they were "produced" by nature from dead plants and animals over several hundred million years.
The key to understanding energy issues is to look at the "energy price" of energy. Energy resources that consume more energy than they produce are worthless as sources of energy. This thermodynamic law applies no matter how high the "money price" of energy goes.
For example, if it takes more energy to search for and mine a barrel of oil than the energy recovered, then it makes no energy sense look for that barrel-no matter how high the money price of oil goes. It will make no energy sense to look for oil in America after 2005.
During this coming century, the global economy will "run out of gas" as nearly all fossil energy sources become sinks. One can argue about the exact date this will occur, but the end of fossil energy-and its dependent: the global economy-are inevitable.
A good analogy is like having a motor scooter with a five-gallon tank, but the nearest gas station is 10 gallons away. You can not fill your tank with trips to the gas station because you burn more than you can bring back-it's impossible for you to cover your overhead (the size of your bankroll and the price of the gas are irrelevant). You might as well put your scooter up on blocks because you are "out of gas"-forever.
It's the same with the American economy: if as a country, we must spend more-than-one unit of energy to produce enough goods and services to buy one unit of energy, it's impossible for us to cover our overhead. At that point, America's economic machine is "out of gas"-forever.
OIL Oil is the most important form of energy we use, making up about 38 percent of the world energy supply. No other energy source equals oil's intrinsic qualities of extractablility, transportability, versatility and cost. These are the qualities that enabled oil to take over from coal as the front-line energy source in the industrialized world in the middle of this century, and they are as relevant today as they were then.
Forecasts about the abundance of oil are usually warped by inconsistent definitions of "reserves." In truth, every year for the past two decades the industry has pumped more oil than it has discovered, and production will soon be unable to keep up with rising demand.
Global oil production is expected to "peak" around 2005, natural gas between 2010 and 2020, and domestic coal will be depleted by 2040.
OIL MARKETS: NO WARNING The oil market is like the float in a carburetor, as the engine demands more gas, the float falls and allows more gas to flow in from the tank. But the float has no information concerning the amount of gas left in the tank until the fuel line is unable to keep up with demand.
So it is with the market. As the demand for oil increases, the increase in price signals oil companies to pump more oil out of the ground. But the market will have no information about the amount of oil left in the ground until production is unable to keep up with demand.
References at: www.dieoff.org/page143.htm
Jay