The Long-Term Tie Between Energy Supply, Population, and the Economy

The tie between energy supply, population, and the economy goes back to the hunter-gatherer period. Hunter-gatherers managed to multiply their population at least 4-fold, and perhaps by as much as 25-fold, by using energy techniques which allowed them to expand their territory from central Africa to virtually the whole world, including the Americas and Australia.

The agricultural revolution starting about 7,000 or 8,000 BCE was next big change, multiplying population more than 50-fold. The big breakthrough here was the domestication of grains, which allowed food to be stored for winter, and transported more easily.

The next major breakthrough was the industrial revolution using coal. Even before this, there were major energy advances, particularly using peat in Netherlands and early use of coal in England. These advances allowed the world’s population to grow more than four-fold between the year 1 CE and 1820 CE. Between 1820 and the present, population has grown approximately seven-fold.

Table 1. Population growth rate prior to the year 1 C. E. based on McEvedy & Jones, “Atlas of World Population History”, 1978; later population as well as GDP based on Angus Madison estimates; energy growth estimates are based on estimates by Vaclav Smil in Energy Transitions: HIstory Requirements, and Prospects, adjusted by recent information from BP’s 2012 Statistical Review of World Energy.

When we look at the situation on a year-by-year basis (Table 1), we see that on a yearly average basis, growth has been by far the greatest since 1820, which is the time since the widespread use of fossil fuels. We also see that economic growth seems to proceed only slightly faster than population growth up until 1820. After 1820, there is a much wider “gap” between energy growth and GDP growth, suggesting that the widespread use of fossil fuels has allowed a rising standard of living.

The rise in population growth and GDP growth is significantly higher in the period since World War II than it was in the period prior to that time. This is the period during which growth in which oil consumption had a significant impact on the economy. Oil greatly improved transportation and also enabled much greater agricultural output. An indirect result was more world trade, which enabled production of goods needing inputs around the world, such as computers.

When a person looks back over history, the impression one gets is that the economy is a system that transforms resources, especially energy, into food and other goods that people need. As these goods become available, population grows. The more energy is consumed, the more the economy grows, and the faster world population grows. When little energy is added, economic growth proceeds slowly, and population growth is low.

Economists seem to be of the view that GDP growth gives rise to growth in energy products, and not the other way around. This is a rather strange view, in light of the long tie between energy and the economy, and in light of the apparent causal relationship. With a sufficiently narrow, short-term view, perhaps the view of economists can be supported, but over the longer run it is hard to see how this view can be maintained. Continue reading

True sustainability solutions

We live in a world with very limited solutions to our sustainability problems. I often hear the view, “If we would just get off fossil fuels, then our society would be sustainable.” Or, “If the price of oil would just go high enough, then renewables would become economic, and our economy would be sustainable.”

Unfortunately, our problems with sustainability began a long time before fossil fuels came around, and the views above represent an incomplete understanding of our predicament. When fossil fuels became available, they were a solution to other sustainability problems–rapid deforestation and difficulty feeding the population at that time. Getting rid of fossil fuels would likely lead to very rapid deforestation and many people dying of lack of water or food. If getting rid of fossil fuels is a solution to our predicament, it is one with very bad side effects.

A couple of different events this week reminded me about how deeply embedded our sustainability problems are. For one, I had the opportunity to read a draft of a soon-to-be published paper by James H. Brown and a group of others from the University of New Mexico and the Sante Fe Institute called, “The Macroecology of Sustainability.” This paper points out that sustainability science has developed largely independently from and with little reference to key ecological principles that govern life on earth. Instead, sustainability science is often more of a social science, looking at slightly greener approaches which are almost as unsustainable as the approaches they replace.

A second thing that reminded me of our long-term problems with sustainability was a pair of articles in this week’s issue of Science. There is a research article called, The Aftermath of Megafaunal Extinction: Ecosystem Transformation in Pleistocene Australia by S. Rule et al, and an accompanying perspective article called The Hunters Did It by M. McGlone.  The perspective article explains that there had been a controversy as to why marked changes in habitat took place shortly after humans settled Australia. Some thought that the loss of forest and animal extinctions were the result of climate change. New research shows that the changes almost certainly came from hunting and the use of fire by humans. This is further evidence that humans did not live sustainably, even when they were still hunters and gatherers. (See my earlier posts, European Debt Crisis and Sustainability and Human population overshoot–what went wrong?)

Below the fold, I will offer some ideas about truly sustainable solutions. Continue reading

World Energy Consumption Since 1820 in Charts

Figure 1 shows the huge increase in world energy consumption that has taken place in roughly the last 200 years. This rise in energy consumption is primarily from increased fossil fuel use.

Figure 1. World Energy Consumption by Source, Based on Vaclav Smil estimates from Energy Transitions: History, Requirements and Prospects together with BP Statistical Data for 1965 and subsequent

With energy consumption rising as rapidly as shown in Figure 1, it is hard to see what is happening when viewed at the level of the individual. To get a different view, Figure 2 shows average consumption per person, using world population estimates by Angus Maddison.

Figure 2. Per capita world energy consumption, calculated by dividing world energy consumption shown in Figure 1 by population estimates, based on Angus Maddison data.

On a per capita basis, there is a huge spurt of growth between World War II and 1970. There is also a small spurt about the time of World War I, and a new spurt in growth recently, as a result of growing coal usage in Asia.

In this post, I provide additional charts showing long-term changes in energy supply, together with some observations regarding implications. One such implication is how  economists can be misled by past patterns, if they do not realize that past patterns reflect very different energy growth patterns than we will likely see in the future.

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Why High Oil Prices Are Now Affecting Europe More Than the US

The world is presently sharing a limited supply of oil. When oil prices rise, oil production doesn’t rise very much, if at all.

Figure 1. Brent oil spot price and world oil supply (broadly defined), based on EIA data.

The issues then become: Which buyers get the oil? What uses get priced out of the market?  Which countries are disproportionately affected?

It seems to me that this time around, Europe, and in particular the Eurozone, is the area of the world getting hit the hardest by high oil prices. Part of this has to do with the relative level of the Euro and the US dollar. If we look at the price of Brent oil (a European oil) in Euros (Figure 2), we find that prices are as high now as they were in mid-2008.

Figure 2. Dated Brent average monthly oil prices, expressed in Euros, based on IndexMundi data.

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The Most Important Resource for Our Future: Inexpensive Oil (but its not really available)

Our economy runs on oil. Most of the tractors used for growing food run on oil. Nearly all of today’s cars and trucks run on oil. It is popular to talk about changing to some other fuel, but the practicalities are that any such change will be very slow. There is a huge cost associated with replacing cars and trucks with vehicles using other fuels, assuming we could figure out the technology to do this.

Since 2005, world crude oil supply has bumped up against what seems to be a limit of 75 million barrels of oil a day. No matter how hard companies try to extract more crude oil, and no matter how high world oil prices rise, they seem unable to extract more than 75 million barrels a day (MBD).

World Crude Oil - Quantity Extracted and Price

Figure 1. World crude oil production has been bumping up against a limit of about 75 million barrels a day (MBD) since 2005, as oil prices have gyrated wildly. (EIA data)

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