Current World Oil Supply: Global Economics and the Transient Pulse

Robert H. Nelson: Rowman and Littlefield, Publishers

If every person is made better off by some change, the change (which is then called: ‘Pareto optimal’) should take place. Economists over the past 30 years have in fact had considerable success in this regard, introducing the use of economic analysis into many new areas of government such as national defense, education, health, and the environment. The possibility of an economic theory cannot be dismissed so easily. Even if economists do in fact devote most of their efforts to practical problems of economic organization, the possible existence of an economic theology is a matter of the theological significance of these efforts. If economic success is widely seen as playing an important moral and inspirational role in the affairs of man, then economic advice may become a form of theological prescription.

Material scarcity and the resulting competition for limited resources have been widely seen as the fundamental cause of human misbehavior. For many faithful of modern economic theologies, economic progress has represented the route of salvation to a new heaven on earth, the means of banishing evil from the affairs of mankind. For economists, the greatest source of influences was the iniquitous domain of ‘politics’. Modern industry has become so large and concentrated that it has found its true antecedents in the Middle Ages, now compromising a system of ‘industrial feudalism’.

Social Darwinism
Jay Hanson

According to Thomas H. Tietenberg, Energy Planning and Policy, “There is an assumption that the market system handles resource allocation in an efficient manner unless proven otherwise.” When an engineer uses the word ‘efficiently’, it means ‘efficient use’- a physical concept meaning ‘to get the most output from the lease input’. But when an economist uses the word ‘efficiently’, it means ‘efficient distribution’- a political concept known as ‘Social Darwinism. Economic efficiency means that the ‘correct people’ (those who can afford it) will get the ‘correct goods and services’ (whatever they want). Economic efficiency allocates resources to people who are the most successful at gaining social power.

Energy is the capacity to do work. The global economy is 100 percent dependent on energy- it always has been, and always will be. Available energy must be spent to transform existing energy stocks into more available energy. In a closed system, energy is conserved. In an open system, such as our economy, there is level of waste amounting to about 50% of GDP. When more energy is spent attempting to sustain a program than is created by the program, there is a serious drain of real potential wealth in the system. Ironically, this waste has been created by ‘political efficiency’, the reality that the economist’s political agenda is a curious mixture of politics and efficiency.

Transient Theory and the Olduvai Gorge
Robert L. Hickerson, 1997

“Since March 9, 1933, the United States has been in a state of declared national emergency.” Biologist Wilton Ivie, The Ecology of Man 1948, wrote that North America can no longer be occupied by a high energy civilization operating on a haphazard basis. We must plan for survival.” He argues that the current system of resource mismanagement is perpetuated by The Price System (the world’s money systems), which seeks to deplete our limited fossil fuels at the maximum rate that will yield a ‘fair return’ in the way of profits.

In 1962, M. King Hubbert sketched out what seemed at the time an unthinkably pessimistic prospect; by one path or another, humankind faced an indefinite future of near-zero rates of growth in energy use. Hubbert proposed three steady-state scenarios; I, II, and III. He projected that the year of the peak for Scenarios II and III would occur in the year 2140. At this time society would decay to the low steady-state or transient pulse state. By 1996, however, statistics were already confirming that the transient pulse state had begun emerging as early as 1980. Duncan attributes Hubbert’s error to his having used the Energy Industry estimates of the ultimate magnitude of cumulative production of the world’s nonrenewable energy that are grossly exaggerated by a factor of ten or more.

In his 1996 paper, The OLDUVAI THEORY: Sliding Toward The Post-Industrial Stone Age, Duncan quotes Sir Fred Hoyle, “It has often been said that, if the human species fails to make a go of it on Earth, some other species will take over the running. In the sense of developing high intelligence this is not correct. We have, or soon will have, exhausted the necessary physical prerequisites so far as this planet is concerned. With coal gone, oil gone, high-grade metallic ores gone, no species however competent can make the big long climb from primitive conditions to high level technology. THIS IS A ONE SHOT AFFAIR. IF WE FAIL, THIS PLANETARY SYSTEM FAILS SO FAR AS INTELLIGENCE IS CONCERNED.

In the Olduvai Theory, Duncan tabulates various estimates of the Life-Expectancy of Industrial Civilization. He quotes 12 experts including such notables as Bertrand Russell, J.W. Forrester, Donella Meadows, Richard Leakey and others. The predominant number is about 100 years. Few economists can bring themselves to accept that the global oil supply is geologically finite. The next paralyzing and permanent oil shock will not be solved by any redistribution patterns or by economic cleverness, because it will be a consequence of pending and inexorable depletion of the world’s conventional crude oil supply. A sudden crude oil shortage of 5% will signal the gradual and impending decline. [See Attachment of 42 countries].

Practical Applications of Ecological Economics
Joseph A. Tainter, 1996 Island Press

Historical Knowledge is essential to practical applications of ecological economics. The factors responsible for social collapse take centuries to develop. To design policies for today and the future we need to understand social and economic processes at al temporal scales, and comprehend where we are in those historical patterns. Historical knowledge is essential to sustainability. No program to enhance sustainability can be considered practical if it does not incorporate such fundamental knowledge.

‘In this era of global environmental change we face what may be humanity’s greatest crisis. The cluster of transformations labeled global change dwarfs all previous experiences in its speed, in the geographical scale of its consequences, and in the numbers of people who will be affected.” (R.B. Norgaard, 1994) One might expect that in a rational, problem-solving society, we would eagerly seek to understand historical experiences. In actuality, our approaches to education and our impatience for innovation have made us averse to historical knowledge. While we have a greater opportunity than the people of any previous era to understand the long-term reasons for our problems, that opportunity is largely ignored.

A recurring constraint faced by previous societies has been a complexity in problem solving. It is a constraint that is usually unrecognized in contemporary economic analyses. For the past 12,000 years human societies have seemed almost inexorably to grow more complex. One of the reasons for our success as a species has been our ability to ‘rapidly adapt new behaviors’. A society that is more complex has more sub-groups and social roles, more networks among groups and individuals, more horizontal and vertical controls, higher flow of information, greater centralization of information, more specialization, and greater interdependence of parts. Increasing any of these dimensions requires biological, mechanical, or chemical energy.

The development of complexity is thus an economic process: complexity levies costs and yields benefits. It is an investment and it gives a variable return. Simple, inexpensive solutions are adopted before more complex, expensive ones. Assuring sustainability by extending the modern agenda will require, by several orders of magnitude, more data collection, interpretation, planning, political decision-making, and bureaucratic control

(Norgaard 1994). It is not that research, education, regulation, and new technologies cannot potentially alleviate our problems. With enough investment perhaps they can. The difficulty is that these investments will be costly, and may require an increasing share of each nation’s gross domestic product. With diminishing returns to problem solving, addressing environmental issues in a conventional way means that more resources will have to be allocated to science, engineering, and government. In the absence of high economic growth this would require at least a temporary decline in the standard of living.

Sliding towards a Post-Industrial Stone Age
Richard C. Duncan, Ph.D. 1996

Global Industrial Civilization has no cycles at all: Exponential Growth followed by Exponential Decline and that’s all. The broad sweep of human history can be divided into three phases:

1. The first or pre-industrial phase was a very long period of equilibrium when economic growth was limited by simple tools and weak machines.

2. The second or industrial phase was a very short period of non-equilibrium that ignited with explosive force when powerful new machines temporarily lifted all limits to growth.

3. The third, or de-industrial phase lies immediately ahead during which time industrial economies will decline toward a new period of equilibrium, limited by the exhaustion on non-renewable resources and continuing deterioration of the natural environment . (Duncan, 1989)

Scientific America released an article in September of 1973 showing that the world average energy-use per person had peaked in about 1973, and had since gone into deep decline. In 1978, the British Petroleum and United Nations data confirmed that world per capita energy-use had peaked in about 1978 and subsequently had declined (Duncan,1993). Only the Olduvai Theory could explain the peak and decline. In contrast, both the “exponential growth theory” (mainstream economics) and “steady-state” theory (utopian economics) failed.

The Olduvai Theory is arbitrated by historic data only. The descent into the Olduvai valley will be steep and swift. Phase 3 (Transient Pulse) is the Post-Industrial Phase. The Olduvai Theory cannot be scientifically rejected by outrage or indignation. However, it can be overthrown by either (1) Demonstrating that the historical data is in error, or (2) gathering additional data over the next few decades and demonstrating that the Olduvai theory cannot explain the data. In any case the data will be the final arbiter.