Why fixing energy policy is so difficult

Everyone would like to fix the US energy policy, but doing so is almost impossible, in my view, primarily because we need to be planning for a much bigger change than most people can even imagine.

It seems to me that our international financial system is at this point, inching closer and closer to collapse. It needs growth to operate. Now that world oil supplies are virtually flat (and China and India and oil exporters are getting more of the oil), the financial system can’t get enough growth momentum. The US has applied various sleight of hand techniques to try to cover this problem (see my post What’s Behind US Budget Problems?), but at some time in the not too distant future, the techniques are going to stop working, and there is going to be a major financial crash, with debt defaults. This could happen when QE2 ends, or maybe QE3, QE4, or QE5. The timing may vary by country, with some countries holding out for a while longer. Continue reading

Peak Oil – April 2011 Update

The US Energy Information Administration’s January oil production figures are out, and they show record oil production. Where are we headed from here?

Figure 1. World "Liquids" Production through January 2011, based on Energy Information Administration data.

While production for January is up a bit (219,000 barrels compared to December), the monthly numbers bounce around a fair amount because of planned maintenance. They are also subject to revision. Figure 2 seems to indicate that the production amounts are trending upward a bit, probably in response to the recent higher prices.

Figure 2. Monthly average Brent Oil price and total "liquids" produced, both from US Energy Information Administration.

The amounts in Figures 1 and 2 are not entirely up to date, since they are only through January 31, 2011. All of the disruption in the Middle East started at the very end of January, and the disruption in Libya’s supplies did not start until February.  The earthquake in Japan took place March 11. OPEC estimates that OPEC and world oil supply fell in both February and March, with Libya’s production falling by 1.2 million barrels a day between January and March, with only small supply increases elsewhere offsetting this. World oil prices continue to be high. At this writing, West Texas Intermediate is about $111.50 a barrel; Brent is about $122.

So what do we expect going forward?
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Will the decline in world oil supply be fast or slow?

I wrote a post last week called Steep oil decline or slow oil decline? Since writing it, I had some additional thoughts on the subject, on reasons to expect a steep decline rather than a slow decline.

Furthermore, my article What’s behind United States budget problems? got me to thinking about the reasons for declining employment. In this post, I also try to explain the connection between declining EROEI , declining demand for oil, and lower employment. I explain why free trade with China and India tends to make the employment problem worse and increase global CO2 emissions. It also increases the chance of collapse in the developed world. Continue reading

What’s behind United States budget problems?

We see endless fighting between the Democrats and Republicans about the budget, but no real explanation as to what the issues are. My view is that there is a structural imbalance between government revenues and expense that is likely to get much worse in the years ahead. This structural imbalance is related to too few people with jobs, growing limits on oil supply, and the inability of the economy to continue growing as rapidly as required to maintain our current financial system. Let me explain the issues as I see them.

Too Few People with Jobs

Figure 1. US Bureau of Labor Statistics employer non-farm employee counts divided by US Census Bureau resident population estimates

Between 1970 and 2000, the percentage of the US population with jobs rose, at least partly because more women entered the work force. Since 2000, the percentage of people with jobs has been declining as jobs are increasingly sent to offshore locations, and economic growth stagnates.

Clearly, it is easier to keep a balanced budget when the percentage of the population employed is rising than when it is falling. When it is rising, there are more people to pay taxes, and fewer needing support benefits of various types. The reverse happens when the percentage of people employed is falling. Continue reading

Steep oil decline or slow oil decline?

Someone wrote asking the following question:

Dear Gail,

I have been reading quite a bit about peak oil recently. I get the impression (not based on data) that at some point there will be a quite steep decline in oil production/supply, and therefore we will see dramatic changes in how the world runs. However, when I look at oil depletion rates and oil production declines based on the Hubbert Curve, it seems to suggest a rather smooth decline.

How is that some people expect a serious energy crunch in about two or three years, then?

Many thanks!

Sam

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