Thursday, May 24, 2007

Denial. A powerful force, that. Einstein once famously remarked that: “compound interest was the most powerful force in the Universe” (of course he was referring to the exponential function, the most common representation of which is known as compound interest). Perhaps it is. I'm gonna go with denial.

Denial shapes our politics and policies, our parenting, our planning, our view of the future, and our recollection of the past. Denial shapes our relationships (a second marriage, after all, has oft been said to be the triumph of hope over experience) with our spouses and lovers, our families, our friends and co-workers. Without it there would be many days that many of use would be unable to cope. Denial has its positive attributes. But denial of the magnitude of our (think you and your family) dependence on oil, natural gas, and coal and of the CERTAINTY that, at some point, we will deplete these resources is not one of these. And it is a certainty – probability = 1.00. Not up for debate.

The lead story for all of 2006 and 2007 in the mainstream media has been energy (prices). Let’s connect the dots, shall we?

The President of the United States says we must reduce oil usage by 20% by 2017 (gonna happen anyway as there will be less oil available). D’ya think he knows something?

Worldwide inventories of the major foodstuffs – wheat, corn, rice, milk and dairy – are at their lowest levels of “days of supply” in over 30 years. Inventories of processed, preserved, or fresh foods, the stuff Americans have come to rely on, can be measured in DAYS (got that? The food you are going to eat next week is, for the most part, a work in progress today. I worked in the Fulton Fish market one summer where the saying went: “sell it or smell it”. If the trucks and farm equipment can’t roll because of a lack of diesel… Or if the electricity goes out - no refrigeration - local food supplies will not be what we have come to expect, to say the least.)

Inventories of crude oil, motor gasoline and distillates are at multi decade lows when measured in days of supply (does any other measure really matter?).

America has not built a new refinery in over 30 years, although we have expanded capacity at the existing refineries. What does the industry need with a new refinery if our oil supply is decreasing?

Oil companies are investing their record earnings by increasing dividends and buying back stock, rather than expanding exploration and production. Makes sense if their is little oil to find.

The average American has a 0% savings rate, and the U.S. runs a budget and trade deficit in the trillions (how can this improve if we borrow $1 BILLION per day just to buy the oil we import?).

The U.S. $ is falling in value relative to gold and our major trading partners' currency (Iran and Venezuela no longer wish to take U.S. $ and are now taking payment for their oil in Euros).

The average American lives in a car dependent environment. He needs a car to get to and from his home, collect food, and perform his livelihood.

America has less arable farmland in production than in 1950 (but we do have a bunch of soon to be worthless housing divisions on that former farm land).

U.S. population is over 300 million (considering our immigration issue, this is most certainly an understatement) at this time, up from 151 million in 1950. World population has followed a similar trajectory.

80% of the cost of food is fuel inputs. As fuel prices rise (supply falls), food prices will also rise (supply falls). Less oil = less food.

Almost 2 years of data show that, despite rising prices and their incentive on producers, oil production has been in decline (not population though, that continues to grow).

China is a net importer of coal, and the U.S. coal production PEAKED in 1998, in terms of BTU’s (not tonnage; all coal is not created equal in it’s energy content). Only 15% of the WORLD’S coal production is available for import (85% of it is used where it is produced).

Natural Gas production peaked in North America in 2002, with drilling activity up 100% since that year. Although Natural Gas can be imported, it is far more difficult to do so than oil or coal.

COnsidering the previous 2 "dots": The U.S. has increased, and will increase, its dependence on foreign energy sources. (Unfortunately, these sources will no longer be there to import and depend on in the first place. See "dot" number 1.)

Human population growth tracked the rise in Oil use since 1859 (Colonel Drake's oil well), compounding already advancing population growth brought on by the use of coal in the industrial revolution.

Prior to the industrial revolution (marked by the use of hydrocarbons) very little financial capital, in proportion to the general population, existed. The growth in financial capital, fiat currency, bonds, stocks, mortgages, debt obligations, etc… closely mirrored man’s increased use of hydrocarbon’s.

Here is how I connect these dots:

The industrial revolution was made possible by hydrocarbons. As hydrocarbon availability declines, so will industrial output. At the end of the hydro carbon era, which for all intents and purposes to the common person will be 75 years, more or less, mankind will find the end of hydrocarbon industrial output. Over the next 40 years or so, we are going to rewind most of the industrial revolution. I find this disconcerting, as it does not bode well for my 401k.

Financial capital will decline with the decline of energy usage, and will be back to its pre-industrial revolution level at the end of hydrocarbons. Its decline will track the decline in hydrocarbon usage.

Population levels will decline with the decline in energy usage. Given a variable population number at the end of hydrocarbon availability, i.e. 1 billion, 2 billion, 3 billion, and given a time period certain, i.e. 75, 85, or 100 years, it is not a terribly complicated equation to arrive at an average number of excess deaths over births to arrive at that population target.

For instance, if one were to model a 2 billion person carrying capacity of the planet at the end of oil age, and that date would be 75 years hence, excess deaths over births would be 6.5 billion - 2 billion/(75*365) or 164,000 excess deaths over births per day, every day, for 75 years. This would be a hell of a shock to a world that is used to 300,000+ excess births over deaths per day. To put this in context, the Nazi genocide against European Jews, Roma, Gays, the Disabled, Catholic Poles, and other groups (no disrespect meant to any group not specifically mentioned, a la'shalom) resulted in roughly (using data points from 6500 excess deaths (murders) per day.

I have 2 young sons. This issue will likely be settled in its entirety within their lifetimes. However, this progression lends itself to a bell chart, with the maximum excess deaths over births occurring sometime around 2030 – a mere 23 years from now. In case you think I have flipped my lid, this is not an original line of thinking. Several excellent white papers have been written on the subject and I am merely boiling down the salient points here.

Here comes the denial. I can feel it. You think : "SOMETHING WILL SAVE THE DAY"... Bio-fuels, hydrogen, nuclear power, tidal power, hydro, wind, prayer, little green men... Sorry, even when taken together, these energy sources/sinks will supply no more than a small fraction of the BTU's we get from fossil fuels (guess what percentage of American voters know; a: what BTU stands for, and b: what measurement BTU represents?).

I am not running for office. No American politician at this time in our history is going to run on a platform of catastrophe. But there are alot of people in our federal government that know this issue well. Just Google the term "peak oil congressional caucus", or the former Director of the CIA "James Woolsey, Peak Oil". It is not just me.

Think my math is wrong? The modeling is not an exact science (but the math is). Ask yourself 2 questions:

What is the population carrying capacity of the planet in the absence of oil?

How many years between today and the end of oil (the peak date does not really matter in this context)?

Even if you stretch the final date out 100 years (NAFC - "not a freaking chance", is a technical term in hospital triage) and use a 3 billion-population figure (about double the pre oil human population) the number of excess deaths over births is mind-boggling. You can then slope the graph any way you see fit. Guess what? No matter how you slope that graph, or how much margin of error you give to the final date and final population, the excess deaths over births each and every year during all model periods is horrific (ever hear of Easter Island?).

There is no macro (society wide) solution. “They” are not going to be able to come up with a solution to this conundrum under any circumstance. "They" are going to take care of their own. Many of "them" are preparing for this as we speak. There are going to be less people, a lot less people, on G-d’s (formerly) green earth in the coming decades. The people who make the right decisions and take the right actions (whatever that may be), right now, will be far better off than the rest.

Have a nice day!

mentatt (at) yahoo (dot) com

No comments: