Today’s Energy Predicament – A Look at Some Charts

Today’s energy predicament is a strange situation that most modelers have never really considered. Let me explain some of the issues I see, using some charts.

[1] It is probably not possible to reduce current energy consumption by 80% or more without dramatically reducing population.

A glance at energy consumption per capita for a few countries suggests that cold countries tend to use a lot more energy per person than warm, wet countries.

Figure 1. Energy consumption per capita in 2019 in selected countries based on data from BP’s 2020 Statistical Review of World Energy.

This shouldn’t be a big surprise: Our predecessors in Africa didn’t need much energy. But as humans moved to colder areas, they needed extra warmth, and this required extra energy. The extra energy today is used to build sturdier homes and vehicles, to heat and operate those homes and vehicles, and to build the factories, roads and other structures needed to keep the whole operation going.

Saudi Arabia (not shown on Figure 1) is an example of a hot, dry country that uses a lot of energy. Its energy consumption per capita in 2019 (322 GJ per capita) was very close to that of Norway. It needs to keep its population cool, besides running its large oil operation.

If the entire world population could adopt the lifestyle of Bangladesh or India, we could indeed get our energy consumption down to a very low level. But this is difficult to do when the climate doesn’t cooperate. This means that if energy usage needs to fall dramatically, population will probably need to fall in areas where heating or air conditioning are essential for living. Continue reading

Why a Great Reset Based on Green Energy Isn’t Possible

It seems like a reset of an economy should work like a reset of your computer: Turn it off and turn it back on again; most problems should be fixed. However, it doesn’t really work that way. Let’s look at a few of the misunderstandings that lead people to believe that the world economy can move to a Green Energy future.

[1] The economy isn’t really like a computer that can be switched on and off; it is more comparable to a human body that is dead, once it is switched off.

A computer is something that is made by humans. There is a beginning and an end to the process of making it. The computer works because energy in the form of electrical current flows through it. We can turn the electricity off and back on again. Somehow, almost like magic, software issues are resolved, and the system works better after the reset than before.

Even though the economy looks like something made by humans, it really is extremely different. In physics terms, it is a “dissipative structure.” It is able to “grow” only because of energy consumption, such as oil to power trucks and electricity to power machines. Continue reading

COVID-19 and the economy: Where do we go from here?

The COVID-19 story keeps developing. At first, everyone listened to epidemiologists telling us that a great deal of social distancing, and even the closing down of economies, would be helpful. After trying these things, we ended up with a huge number of people out of work and protests everywhere. We discovered the models that were provided were not very predictive. We are also finding that a V-shaped recovery is not possible.

Now, we need to figure out what actions to take next. How vigorously should we be fighting COVID-19? The story is more complex than most people understand. These are some of the issues I see:

[1] The share of COVID-19 cases that can be expected to end in death seems to be much lower than most people expect. Continue reading

Expect low oil prices in 2020; tendency toward recession

Energy Forecast for 2020

Overall, I expect that oil and other commodity prices will remain low in 2020. These low oil prices will adversely affect oil production and several other parts of the economy. As a result, a strong tendency toward recession can be expected. The extent of recessionary influences will vary from country to country. Financial factors, not discussed in these forecasts, are likely also to play a role.

The following are pieces of my energy forecast for 2020:

[1] Oil prices can be expected to remain generally low in 2020. There may be an occasional spike to $80 or $90 per barrel, but average prices in 2020 are likely to be at or below the 2019 level. 

Figure 1. Average annual inflation-adjusted Brent equivalent oil prices in 2018 US$. 2018 and prior are as shown in BP’s 2019 Statistical Review of World Energy. Value for 2019 estimated by author based on EIA Brent daily oil prices and 2% expected inflation.

Continue reading

Why stimulus can’t fix our energy problems

Economists tell us that within the economy there is a lot of substitutability, and they are correct. However, there are a couple of not-so-minor details that they overlook:

  • There is no substitute for energy. It is possible to harness energy from another source, or to make a particular object run more efficiently, but the laws of physics prevent us from substituting something else for energy. Energy is required whenever physical changes are made, such as when an object is moved, or a material is heated, or electricity is produced.
  • Supplemental energy leverages human energy. The reason why the human population is as high as it is today is because pre-humans long ago started learning how to leverage their human energy (available from digesting food) with energy from other sources. Energy from burning biomass was first used over one million years ago. Other types of energy, such as harnessing the energy of animals and capturing wind energy with sails of boats, began to be used later. If we cut back on our total energy consumption in any material way, humans will lose their advantage over other species. Population will likely plummet because of epidemics and fighting over scarce resources.

Many people appear to believe that stimulus programs by governments and central banks can substitute for growth in energy consumption. Others are convinced that efficiency gains can substitute for growing energy consumption. My analysis indicates that workarounds, in the aggregate, don’t keep energy prices high enough for energy producers. Oil prices are at risk, but so are coal and natural gas prices. We end up with a different energy problem than most have expected: energy prices that remain too low for producers. Such a problem can have severe consequences.

Let’s look at a few of the issues involved: Continue reading