An Energy-Related Reason Why US Healthcare Outcomes are Awful

Back in January 2013, the US Institute of Medicine published a report called U.S. Health in International Perspective: Shorter Lives, Poorer Health. This poor health outcome for US citizens is in spite of the US spending twice as much as a percentage of GDP on healthcare as other high-income nations.

As an example of the problems the US has, the report showed the following exhibit, pointing out that the US has made much smaller advances in life expectancy since 1980 than other high-income nations.  The US is now seventeenth of the seventeen countries analyzed in male life expectancy, and sixteenth out of seventeenth in female life expectancy.

Figure 1-6 Female life expectancy at birth

I am sure I do not know all of the reasons for the US divergence from patterns seen elsewhere, but let me try to explain one energy-related reason for our problems. It has to do with a need to get a wide variety of nutrients at the same time we need to balance (Energy In) = (Energy Needed for Life Processes), in a period of time when the food we eat is increasingly of the “processed” variety. There may also be an issue of eating too much animal protein in our food mix, thanks to today’s ability to ramp up meat production using grains grown and shipped around the world, using fossil fuels.

An Overview of Energy-Related Modifications to Food

If we look at primates in general, it is pretty clear that all of the nutrients such animals need come prepackaged in the food that they gather with their limbs. They get the level of exercise they need from gathering this food and from their other daily activities. They have a pretty good balance between (Energy In) = (Energy Needed for Life Processes), without any special effort. Continue reading

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Update on US natural gas, coal, nuclear, and renewables

On August 6, I wrote a post called Making Sense of the US Oil Story, in which I looked at US oil. In this post, I would like to look at other sources of US energy. Of course, the energy source we hear most about is natural gas. We continue to be a net natural gas importer, even as our own production rises.

Figure 1. US natural gas production and consumption, based on EIA data.

Figure 1. US natural gas production and consumption, based on EIA data.

US natural gas production leveled off in 2013, because of the low level of US natural gas prices. In 2013, there was growth in gas production in Pennsylvania in the Marcellus, but many other states, including Texas, saw decreases in production. In early 2014, natural gas prices have been higher, so natural gas production is rising again, roughly at a 4% annual rate.

The US-Canada-Mexican natural gas system is more or less a closed system (at least until LNG exports come online in the next few years) so whatever natural gas is produced, is used. Because of this, natural gas prices rise or fall so that demand matches supply. Natural gas producers have found this pricing situation objectionable because natural gas prices tend to settle at a low level, relative to the cost of production. This is the reason for the big push for natural gas exports. The hope, from producers’ point of view, is that exports will push US natural gas prices higher, making more natural gas production economic.

The Coal / Natural Gas Switch

If natural gas is cheap and plentiful, it tends to switch with coal for electricity production. We can see this in electricity consumption–natural gas was particularly cheap in 2012:

Figure 2. Selected Fuels Share of US Electricity - Coal, Natural Gas, and the sum of Coal plus Natural Gas

Figure 2. Selected Fuels Share of US Electricity Production – Coal, Natural Gas, and the sum of Coal plus Natural Gas, based on EIA data.

Coal use increased further in early 2014, because of the cold winter and higher natural gas prices. In Figure 2, there is a slight downward trend in the sum of coal and natural gas’s share of electricity, as renewables add their (rather small) effect. Continue reading

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Energy and the Economy – Twelve Basic Principles

There is a standard view of energy and the economy that can briefly be summarized as follows: Economic growth can continue forever; we will learn to use less energy supplies; energy prices will rise; and the world will adapt. My view of how energy and the economy fit together is very different. It is based on the principle of reaching limits in a finite world. Let me explain the issues as I see them.

Twelve Basic Principles of Energy and the Economy

1. Economic models are no longer valid, as we start getting close to limits.

We live in a finite world. Because of this, the extraction of energy resources and of resources in general operates in a way that is not at all intuitive as we approach limits. Economists have put together models of how the economy can be expected to act based on how the economy acts when it is distant from limits. Unfortunately, these economic models are worse than useless as limits approach because modeled relationships no longer hold. For example:

(a) The assumption that oil prices will rise as the cost of extraction rises is not necessarily true. Instead, a finite world creates feedback loops that tend to keep oil prices too low because of its tight inter-connections with wages. We see this happening right now. The Telegraph reported recently, “Oil and gas company debt soars to danger levels to cover shortfall in cash.”

(b) The assumption that greater investment will lead to greater output becomes less and less true, as the easy to extract resources (including oil) become more depleted.

(c) The assumption that higher prices will lead to higher wages no longer holds, as the easy to extract resources (including oil) become more depleted.

(d) The assumption that substitution will be possible when there are shortages becomes less and less appropriate because of interconnections with the rest of the system. Particular problems include the huge investment required for such substitution, impacts on the financial system, and shortages developing simultaneously in many areas (oil, metals such as copper, rare earth metals, and fresh water, for example).

More information is available from my post, Why Standard Economic Models Don’t Work–Our Economy is a Network.

Continue reading

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Making Sense of the US Oil Story

We frequently see stories telling us how well the United States is doing at oil extraction. The fact that there are stories in the press about the US wanting to export crude oil adds to the hype. How much of these stories are really true? If we believe the stories, the US is now the largest producer of oil liquids in the world. In fact, it has been the largest producer since the fourth quarter of 2012.

Figure 1. US Total Liquids  production, including crude and condensate, natural gas plant liquids, "other liquids," and refinery expansion.

Figure 1. US Total Liquids production, including crude and condensate, natural gas plant liquids, “other liquids,” and refinery expansion.

Oil “Extenders”

One of the issues is that a few years ago, the US created a new oil-related grouping, combining valuable products with much less valuable (lower energy content, less dense) products. Using this new grouping, the US was able to show much improved growth in total “oil” supply. The US EIA now calls the grouping “Total Oil Supply.” I refer to it as “Total Liquids,” a name I find more descriptive. Besides “crude and condensate,” the mixture includes “other liquids,” “natural gas plant liquids,” and “refinery expansion.” Continue reading

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World Oil Production at 3/31/2014–Where are We Headed?

The standard way to make forecasts of almost anything is to look at recent trends and assume that this trend will continue, at least for the next several years. With world oil production, the trend in oil production looks fairly benign, with the trend slightly upward (Figure 1).

Figure 1. Quarterly crude and condensate oil production, based on EIA data.

Figure 1. Quarterly crude and condensate oil production, based on EIA data.

If we look at the situation more closely, however, we see that we are dealing with an unstable situation. The top ten crude oil producing countries have a variety of problems (Figure 2). Middle Eastern producers are particularly at risk of instability, thanks to the advances of ISIS and the large number of refugees moving from one country to another.

Figure 2. Top ten crude oil and condensate producers during first quarter of 2014, based on EIA data.

Figure 2. Top ten crude oil and condensate producers during first quarter of 2014, based on EIA data.

Relatively low oil prices are part of the problem as well. The cost of producing oil is rising much more rapidly than its selling price, as discussed in my post Beginning of the End? Oil Companies Cut Back on Spending. In fact, the selling price of oil hasn’t really risen since 2011 (Figure 3), because citizens can’t afford higher oil prices with their stagnating wages.

Figure 3. Average weekly oil prices, based on EIA data.

Figure 3. Average weekly oil prices, based on EIA data.

The fact that the selling price of oil remains flat tends to lead to political instability in oil exporters because they cannot collect the taxes required to provide programs needed to pacify their people (food and fuel subsidies, water provided by desalination, jobs programs, etc.) without very high oil prices. Low oil prices also make the plight of oil exporters with declining oil production worse, including Russia, Mexico, and Venezuela.

Many people when looking at future oil supply concern themselves with the amount of reserves (or resources) remaining, or perhaps Energy Return on Energy Invested (EROEI). None of these is really the right limit, however. The limiting factor is how long our current networked economic system can hold together. There are lots of oil reserves left, and the EROEI of Middle Eastern oil is generally quite high (that is, favorable). But instability could still bring the system down. So could popping of the US oil supply bubble through higher interest rates or more stringent lending rules.

Continue reading

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