Softpanorama Energy Bulletin, 2011

NEWS CONTENTS

• 20110910 : The Seneca Effect: Why Decline Is Faster Than Growth ( The Oil Drum )
• 20110910 : Commentary An oil shock in 2012 Energy Bulletin ( Commentary An oil shock in 2012 Energy Bulletin, )
• 20110115 : Guest Post: How Many Senators Does It Take To Screw A Taxpayer? ( Guest Post: How Many Senators Does It Take To Screw A Taxpayer? , Jan 15, 2011 )

Old News ;-)

[Sep 10, 2011] The Seneca Effect: Why Decline Is Faster Than Growth

"...oil at a high enough price and low enough energy return breaks just-in-time supply chains worldwide."

The Oil Drum

The Soviet Union was a nearly closed economy before collapsing; a "mini-world" in itself. Notice how Russian oil production went down rapidly after the peak; a classic Seneca cliff. Note also how production picked up again afterwards. At some point, the Soviet Union ceased to exist as an isolated economic system and it became part of the whole world's economic system. At that point, the simple model that we have been using does not work any longer; most likely because the capital stock received an influx of resources that came from a region outside the model.

Conclusion: a banquet of consequences

Very often, we fail to understand the delayed effects of our actions. John Sterman reminds us of this point in a talk on global warming quoting Robert Louis Stevenson as saying, "Everybody, sooner or later, sits down to a banquet of consequences." The models shown here tell us that the Seneca cliff is the result of delayed consequences.

As always, the future is something that we build with our actions and the models can only tell us what kind of actions will lead us, eventually, to a certain outcome. Used in this way, models can be extremely useful and can even be applied to systems which are much more modest than an entire civilization, for instance to a single company or to our personal relationships with other people. In all cases, the Seneca effect will be the result of trying hard to keep things running as usual. In that way, we may run out faster of the resource that keeps the system running: be it a physical resource or a reserve of goodwill. The way to avoid this outcome may be to let the system run the way it wants, without attempting to force it to go the way we want it to go. In other words we need to take things in life with some stoicism, as Seneca himself would probably have said.

Thinking of the worldwide situation and of the problems involved, global warming and resource depletion, what the models tell us is that the Seneca cliff may be the inevitable result of putting too much strain on already badly depleted natural resources. We should try, instead, to develop alternative stocks of resources such as renewable (or nuclear) energy. At the same time, we should avoid to exploit highly polluting and expensive resources such as tar sands, oil shales, deepwater oil, and, in general, applying the "drill, baby, drill" philosophy. All those strategies are recipes for doom. Unfortunately, these are also examples of exactly what we are doing.

I don't know what Seneca would say if he could see this planet-wide effort we are making in order to put into practice the idea that he expressed in his letter to his friend, Lucilius. I can only imagine that he would take it with some stoicism. Or, maybe, he would comment with what he said in his "De Providentia" "Let Nature deal with matter, which is her own, as she pleases; let us be cheerful and brave in the face of everything, reflecting that it is nothing of our own that perishes."

Thanks to Dmitry Orlov for having been the source of inspiration for this post with his article "Peak Oil is History".

Perk Earl

It's rather apparent with all the efforts being employed to get more oil, such as tar sands, deep offshore, horizontal drilling (super straws), etc. that every possible contingent effort is being employed simply to remain on a plateau of oil production (since 05). In spite of these efforts, Brent continues to be in triple digits per barrel.

Essentially the Seneca Cliff is being pushed out in front of us and in so doing its edge crisply sharpened and angled into a sharks fin. The question regarding descent isn't if, but when and how fast and hard will we fall?

RockyMtnGuy

The article ignores or discounts the effect of non-conventional oil technology (oil sands, enhanced oil recovery) as well as the effects of economics (higher prices result redrilling of old oil fields and the dragging out of oil field production in a long tail).

In reality, the amount of non-conventional oil in the world considerably exceeds the amount of conventional oil, and in the long term most oil production will be non-conventional. I can cite the example of my own country, Canada, where conventional oil production peaked during the 1970's and most of the oil production is non-conventional, with current total production now considerably exceeding the 1970's conventional peak.

RockyMtnGuy:

I wish for a systemic collapse.

That seems to be the motivation between a lot of the doomsters and their doom theories. They can't live with the concept of a slow, painful decline and desperately wish for a big crash.

In reality, geology will save the world from a Seneca cliff collapse in oil production. You really cannot produce oil fields in a Seneca-like fashion because oil fields (the majority of them) just don't work that way. Toward the end of their lives they taper off gradually and seem to last a lot longer than the producers had intended. The big oil companies sell them off to the small companies, and then the small companies sell them off to the mom-and-pop operations. Most of the world's really big oil fields will still be producing dribs and drabs of oil 100 years from now.

The Canadian production curve which I posted is really the anti-Seneca of all anti-Seneca curves. That is a result of deliberate policy. Canadian governments have regulated the oil industry with the intention of turning the typical bell-shaped oil production curve into one with a very, very long tail. Canada is still going to be a major oil producer 100 years from now.

Luke H:

he big oil companies sell them off to the small companies, and then the small companies sell them off to the mom-and-pop operations

Yeh in Oklahoma, Texas, and southern Alberta maybe, but how about deep water GOM and Brazil, the Alaska North Slope and the North Sea? More and more of our production is coming from operations like these and they will shut down suddenly well before full field depletion because of the shipping difficulty. Those type fields will forever be beyond the reach of the Mom and Pop organization.

Maybe a Seneca Cliff will desribe the first third to half of the production drop after the 'sustained peak' or plateau or whatever you choose to call what oil producition appears to be hovering at right now. But like you I do not feel oil production will completely fall off the cliff--as long as we avoid the ultimate nuclear Seneca Cliff.

Quite frankly I hope Canada is a major oil producer a century from now--that would mean many things had managed to go right for humanity and the bottleneck we look to be aimed at is at worst gently tapered. Of course I had to call my loyal little dog away from a cow and calf moose in the middle of this reply and and am watching woodpeckers come right back to my feeders the first day they have been restocked after being dry for a fortnight. I might not have so optimistic a bent if I were sitting in a browned out, hundred degree Phoenix or LA concrete and asphalt swelter.

ThisOne:

Right and wrong has nothing to do with it. If the Keystone XL isn't built then the Canadians will build a pipeline west or east, or there will be some other pipeline to get that oil to the coast where it can get full market price. The economics are there to support one of these pipelines. While I agree with the sentiment in protesting the Keystone XL, I think it's misplaced. Even if the protesters are successful in preventing the Keystone from being built, it's only going to be a temporary victory before the next pipeline is proposed. The real objective is closing down the oil sands development.

While I agree that putting any more CO2 into the atmosphere at this point is evil, I don't think it's going to change the outcome one bit. Those who use fossil fuels have more power than those who do not. If the Canadians don't tap the oil sands, they will taken over by a country that will. If you don't agree with me, google 'the carter doctrine'.

Evil is banal.

ewak

So is goodness or heroism:

"We may now entertain the notion that most people who become perpetrators of evil deeds are directly comparable to those who become perpetrators of heroic deeds, alike in being just ordinary, average people. the banality of evil shares much with the banality of heroism. Neither attribute is the direct consequence of unique dispositional tendencies; there are no special inner attributes of either pathology or goodness residing within the human psyche or the human genome. Both conditions emerge in particular situations at particular times when situational forces play a compelling role in moving particular individuals across a decisional line from inaction to action. There is a decisive decisional moment when a person is caught up in a vector of forces that emanate from a behavioral context. Those forces combine to increase the probability of one's acting to harm others or acting to help others. Their decision may or may not be consciously planned or mindfully taken. Rather, strong situational forces most often impulsively drive the person to action. Among the situational action vectors are: group pressures and group identity, the diffusion of responsibility for the action, a temporal focus on the immediate moment without concern for consequences stemming from the act in the future, presence of social models, and commitment to an ideology."

--The Lucifer Effect, Phillip Zimbardo

Right and wrong has everything to do with it. All these actions are moral as well as economic. Might makes right? The dollar decides? I am helpless and inconsequential, so I cannot affect change? Shall I profit from the banality of evil? It's BAU, can't stop it, don't try.

Oct:

To get that product you have to rob the economy elsewhere, which I think makes the claim difficult. You'd have to model the increase in capital outlay for unconventional and determine the pollution factors on the backside.

But unconventional oil is a stop-gap and not a cure for this disease. Hard to imagine Canada supplying much net oil growth per capita as conventional sources around the world wind down.

From my reading Canada will in the end offset declines in Mexico.

Ghung

Sorry I missed this one, but I'll jump in up top. This first thread, all about "unconventional oil", paying taxes, jobs, etc., really misses the point. Forcing oil (liquid fuel) production, whether conventional, NG liquids, biofuels, whatever, blows bubbles and forces consumption of arguably more necessary resources. Current levels of liquid fuels production enables depletion of every other finite and limited resource. Further, it enables the mother of all unsustainable progressions: population growth. Just askin': What happend to the big picture here?

I'm pretty much in agreement with Ugo's post. When it rains, it pours. Oil cuts both ways. Better pack your parachutes.

jeppen:

Actually, current and increasing levels of liquids fuel production enables the only non-starvation-and-war based path to population stabilization and shrinkage there is. If it goes down, the risk is high that the fertility rates will go up again.

Perk Earl:

Alright Rocky, but even if Canada has incredible amounts of non-conventional, the flow rates are less than crude, the energy needed to extract is greater, the cost to extract is greater and as much as Canadians would like to think that tar sands will save them from post peak oil, the economic reality is we'll probably all be in the same sinking ship. Once the world economy has tanked, squeezing non-conventional will probably not be cost effective.

So I think your idea of a positively-skewed bell-shaped curve on the back side is at best, fantasy.

x:

Seneca background video: (3 parts)

http://www.youtube.com/watch?v=hJ0g7IKWG7E

He believed people are too optimistic. Things going wrong should be expected, prepared for and accepted.

drillo

Ugo, thanks for this interesting posting.

I think it depends mainly on "timing" if there will be a rapid decline or a smooth transition:
If mankind will find and apply solution for the challenges of peak oil, climate change etc. then a smooth transition to a post-fossil world is possible. But if we are too late then we will eventually get to a point where we cannot stop the unsteerable wagon from rushing down the spiral.

For example the British were lucky that they had coal at hand when they had cut down all the trees on their island, so they could continue with their industrial growth. Otherwise they would have soon declined again to oblivion.

The timing issue is also described in the less-known second Hirsch "report": Mitigation of maximum world oil production: Shortage scenarios - Energy Policy Volume 36, Issue 2, February 2008, Pages 881-889

From the abstract:

Examination of a number of future world oil production forecasts showed multi-year rollover/roll-down periods, which represent pseudoplateaus. Consideration of resource nationalism posits an Oil Exporter Withholding Scenario, which could potentially overwhelm all other considerations. Three scenarios for mitigation planning resulted from this analysis: (1) A Best Case, where maximum world oil production is followed by a multi-year plateau before the onset of a monatomic decline rate of 2–5% per year; (2) A Middling Case, where world oil production reaches a maximum, after which it drops into a long-term, 2–5% monotonic annual decline; and finally (3) A Worst Case, where the sharp peak of the Middling Case is degraded by oil exporter withholding, leading to world oil shortages growing potentially more rapidly than 2–5% per year, creating the most dire world economic impacts.

In a nutshell he thinks: A plateau period might give us some time to avoid a collaps. Whereas we wouldn't have this chance in case of a sharp peak.

Ironborn

We probably are at the point where we cannot effectively stop the downward spiral. The plateau will last few more years, but it will end sooner or later and the descent will then be accelerating with passing time.
The current civilization is stagnating and I´m afraid that it´s the best it can do. There is no impetus that would send us forward. Renewables are not enough or they are rather too little too late.
Technology does not provide the solutions, only postpones the consequences.
When thinking about our problems, I often recall the following words of Q about the Borg from Q Who Star Trek episode:

"You can't outrun them, you can't destroy them. If you damage them, the essence of what they are remains. They regenerate and keep coming. Eventually you will weaken. Your reserves will be gone. They are relentless!"

Our reserves are not yet gone, but the systems are weakening.

Jedi Welder:

The thing that worries me wich I have been thinking about lately is that we have many "slow declines" happening at once. Population growth, climate change, oil decline, economic contraction, etc. Each of those happen slowly, but when they occur at the same time, the burden of all those combined slow faliures adds up to one big collapse.

Mamba:

Jedi Welder said

... all those combined slow failures adds up to one big collapse.

I think most thinking people have already come to this conclusion and are planning their lives accordingly. In my case this has amounted to:

Having only one child and advising him to have none (he's 30 now); Learning all I can about permaculture and growing my own food; Buying some rural land in an area not likely to be devastated by climate change (ie not Texas); Taking early retirement; Buying essential tools, clothing and various things (eg bikes and ancillary equipment) to last the rest of my life (and my wife's life); Investing in precious metals (300% gain in last few years); etc BTW, this is yet another excellent article by Ugo Bardi, one of the most thoughtful modern commentators.

lengould:

You're right about gold bugs, that valuation is way out of proportion, an original speculative bubble. Compare gold to silver, platinum, diamonds, etc.

michaeld

``Wind was 2.5% of world electricity production in 2010." and electric energy was 16% (roughly) of the total mix ..

thus indeed a tiny contribution! even with your impossible growth numbers ..

just look at saturation effects in growth in Germany

Yvan Dutil

Seneca effect is a consequence of an increase in production efficiency and a simultaneous increase in extraction difficulty. Production efficiency is a power law function of the capital (ex: Cobb-Douglas), while extraction cost will increase exponentially at some point. Then you end up with a Pareto-Malthus resources extraction model.

Perk Earl :

Seneca effect is a consequence of an increase in production efficiency and a simultaneous increase in extraction difficulty.

Very well described, and in that description it's easy to see the progression is towards a cliff, almost like the crest of a wave that will subsequently fall. The increase in efficiency accelerates the top of the wave forward, while the increasing extraction difficulty puts the brakes on the lower part of the wave, causing a crest, a graphed shark fin shape.

enicar:

"Very well described, and in that description it's easy to see the progression is towards a cliff, almost like the crest of a wave that will subsequently fall. The increase in efficiency accelerates the top of the wave forward, while the increasing extraction difficulty puts the brakes on the lower part of the wave, causing a crest, a graphed shark fin shape."

That is what scares me the most - because even as a "prepper" - I realize how much ancient knowledge I have lost to become a modern man. To provide an example" firewoood in the NorthWest corner of Wisconsin. Yes - the house was heated via an outdoor fireplace - built on high technology - dependent upon water pressure- dependent upon an electrically operated well, dependent upon an electrically operated blower.

Wood was delivered off of a semi-trailer, unloaded via a crane mounted upon the trailer. They stacked the logs in a nice pile - which I then cut into manageable logs with a gas -powered chainsaw. I did split the logs with a hand operated axe - and stacked them by hand - but imagine if it was without machines.

First: I have no idea/knowledge of the tools required to take down a tree without a gas chainsaw - much less maintenance/construction of such machines. How to get the quantity of logs to my place? No knowledge of horses/skids/harnesses.... not even having access... How to cut the logs into pieces - without a chainsaw - no idea. If the Ax handle breaks - no idea....Of course - no electricity - no water circulation - no blower - what then?

If I even had all the tools - how would I manage to sharpen/maintain/replace them.

I have provided the above for thought, from actual experience. It does lead me to believe that in any situation where power, electric/petroleum fuel was absent for a period of time - I might not want to be present any longer.

lengould:

I grew up in (cold!!) Northern Canada with no electricity, gas or other fossil fuels available. We cut trees with a swedesaw and an axe. Skidded them to a road with a horse. Sledged them to the farm with horse-drawn sleigh. Bucked with the swedesaw, split with an axe.

Takes about three man-months work to provide a family with heating and cooking counting a man-month as a current working month, eg. 21 x 8 hour days (of course we worked 12 to 14 hour days 30 days per month, and I was doing a mans work by age ten to twelve, so it only took us perhaps 5% to 10% of available time.)

Dad could, with the proper tools, precisely sharpen and set the saw teeth so it could run in green wood. Use a hand set and files. I know the theory but never learned how. I could probably figure it out. I can replace an axehandle very quickly, and could make one from ash with a drawknife fast too.

We bought a chainsaw the first year they were developed. (actually a gas-powered reciprocating Wright even before that)

RickM

German military perspective

Drawing from Feasta's excellent "Tipping Point" (March 2010), the Bundeswehr analysts point out how an economic tipping point could lead to runaway effects:

"In the medium term, the global economic system and all market-oriented economies would collapse.

1. Economic entities would realise the prolonged contraction and would have to act on the assumption that the global economy would continue to shrink for a long time.
2. Tipping point: In an economy shrinking over an indefinite period, savings would not be invested because companies would not be making any profit. For an indefinite period, companies would no longer be in a position to pay borrowing costs or to distribute profits to investors. The banking system, stock exchanges and financial markets could collapse altogether.
3. Financial markets are the backbone of global economy and an integral component of modern societies. All other subsystems have developed hand in hand with the economic system. A disintegration can therefore not be analysed based on today's system. A completely new system state would materialise" (p. 58 of new translation).

Few systems in our world respond faster than financial markets, nor with greater oscillation/volatility, so it is easy to imagine how some runaway effects could quickly be set in motion. The Bundeswehr authors place a heavy emphasis on human factors like awareness and expectation, and what the likely human responses to those perceptions would be.

By the way, a complete English translation is now available from Bundeswehr, so perhaps our media will finally examine and report on this unique, credible study.

http://www.energybulletin.net/stories/2011-08-30/complete-english-transl...

phil harris

Thanks for the link to Bundeswehr doc

... a so-called "tipping point" is exceeded where linear developments become chaotic ... For example, if the global economy shrinks for an indeterminate period of time, a chain reaction that might destabilise the global economic system is imaginable.

Depending on point in time and the level of dependence of the affected society, such a peak-oil-induced, economic tipping point might have such severe systemic implications that only a few general statements as to economic, political, and social developments beyond the tipping point can be made.

Indeed

ian807

Specifically, oil at a high enough price and low enough energy return breaks just-in-time supply chains worldwide. I'm pretty sure that this will be our first ratchet down and yes, it will happen suddenly. The first oil producing country that decides to hoard oil for domestic consumption (civilian and military), will take a large proportion of the world's oil off the market suddenly. If more than one country does so at the same time, the supply chain could fall very rapidly thereafter.

Sudden supply shocks will the first domino. First they break supply chains, and then the economy. International commerce will probably never recover to previous levels.

Oct

As I have come to understand supply chains, we are using China as a petrochemical source for many industries including processed foods, fertilizers, electronics, paints and other consumer items. These feedstocks from China can make lower end items that can be assembled in say Japan or Germany. So the question will be how well China can export fertilizer and other essential petrochemical stocks. It seems the world is using China to do the lower level petrochemical stuff -- is it a greenwashing? Yep. We are shifting this pollution to Asia. So would Seneca's cliff appear first in China? Well if that is true then the entire industrial base would collapse in a single shot. If China collapses, industrial production is essentially toast.

metalRules

The first oil producing country that decides to hoard oil for domestic consumption...

Such hoarding would be grim for the world economy, but I wonder how likely it is on a wide scale? Many of the current oil exporting countries are economic and/or political basket cases, so I'd question if they have the capacity reduce their revenue to any great extent by hoarding

BillH:

Hi, Ugo -- good article. You might be interested in Out of Gas: A Systems Perspective on Potential Petroleum-Fuel Depletion I did for Pegasus Communications back in 2003 (http://pegasuscom.com/aar/model5.html). It exhibits much the same behavior as your model.

What I discovered in later experimentation is that the shape of the fall-off is rather sensitive to the shape of the nonlinearity in the model. So anyone working on a softer landing might look both at ways to replace petroleum resources and at ways to modify the effective shape of that function.

Ugo Bardi:

Thanks, Bill. I'll look at your model as soon as I have a moment. I received several notes by people who had developed models similar to mine. It seems that what I did was, mostly, to give a name to something that was already well known!

dmiller:

Ugo, the Seneca effect sounds an awful lot like Jack Alpert's "death spiral". As resources, mainly food, become more scarce the rich divert more of those dwindling resources to protecting their own resources. Nobody ever said the downside had to be a smooth transition. And my gut tells me that things will go south very, very quickly.

Ugo Bardi on September 1, 2011 - 2:27am Permalink | Subthread | Parent | Parent subthread | Comments top This kind of gut feeling is shared by many, many people, apparently!

Magnus Redin on September 1, 2011 - 11:57am Permalink | Subthread | Parent | Parent subthread | Comments top Aye, and it is a bad feeling leading to depressed activity.

Ulpian

I wonder what Seneca was referring to? He built a lifetime on rhetoric and education, both taking time and effort to perfect, and finally he was ordered to commit suicide. That's an abrupt end and definitely a Seneca Effect. If he was referring to the end of his civilization, well, the decline of Rome can be debated for ever but I would not say it took three hundred years to collapse, more like a hundred if you take it from the lost battle of Adrianople to the formal end of the empire in the west. I don't include the eastern empire because I consider it another polity. I really don't believe that the late Romans believed their civilization would come to the relatively abrupt end that it did, or even end at all; like us they were very complacent and believed in themselves utterly, and like us they saw no alternative - and they were also contemptuous of those different from themselves: big mistake.

Plagues, like the Black Death, certainly have a Seneca ring. If our current civilization, dependent on fossil fuels, has taken roughly four hundred years to develop; from the first ordinance in England to burn coal rather than wood to save trees in the early seventeenth century (and this may be stretching it a bit I know), I wouldn't expect the chaos and reversals resulting from our inability to sustain our current way of life, based on fossil energy resources, to take more than the next twenty years or so to complete - so that's pretty Seneca too - if it happens as I think it might. But I am just guessing here.

dohboi

Good points. It is good to keep in mind that the Eastern Roman/Byzantine Empire lasted quite a while, and, in spite of rotating dynasties, the complex bureaucracy that kept Egypt and China running lasted millennia.

But we are like an Egypt that loses the Nile, or a China that loses its Yangtse and Huangho. FFs are the life blood of the modern economy, and we have to walk away from them because:

a) they are running out anyway and in the mean time are taking more and more energy input to get the energy out;

b) they cause devastating local and regional harms and are due to cause ever more as we go into the ever more risky stuff; and

c) and most damningly, their effluents are causing the planet to swing out of the 'goldilocks' comfort zone that humans (and most other life currently on the planet) evolved in.

It is (c), AGW, that really has the likelihood of taking on a 'live of its own' hurtling us toward a hellish unlivable world in a remarkably short time. Paleo-climatologists now have found numerous cases of the climate shifting suddenly, in decades or less, from one state to another very different one. Most PO'ers that think CC is always slow so we don't have to worry about it are not up to speed on this research.

Multiple feedback, some already kicking in, and some of enormous power, and all feeding back on themselves and each other, can/will turn our relatively small initial forcing into a runaway train--our pebble (relatively speaking) becoming an avalanche...and we all live at the bottom and on the sides of the hill with no where to run.

Ugo Bardi:

The Roman Empire was peaking at the time of Seneca. It had not yet started to decline, but I think the writing was on the wall and that Seneca himself perceived it.

Ulpian:

I'm not so sure about that. No empire lasts forever but the moment when irreversible decline sets in can only be known with hindsight. Rome needed to keep pedalling to maintain revenue, which meant conquering new lands and using their wealth to feed its treasury. Unfortunately the world outside the rich Mediterranean had little to offer and became a drain on revenue, much like Africa was to Britain. Dacia was probably the last territory to be conquered that brought huge wealth, and Dacia was incorporated after Seneca lived. Pessimism is another matter of course and can colour many things, including approaches to energy and PO. I am a pessimist!

geek7:

Seneca had studied Greek Stoic philosophy, which was developed starting 3 centuries before he lived. The thought he expressed in the letter may not have been original with him. Maybe he had read something in the Greek and was translating to his Latin speaking relative. Pessimism is something else than stoicism.

Constantinople was called Byzantion in Seneca's time and had not yet fallen to the Romans. I think it fell early in the 2nd century CE, but can't quickly find clear statement on the web. The Roman Empire was very much still growing in Seneca's time. Constantinople remained the capital of eastern Rome until it was captured by the Ottoman Turks in 1453 AD. Collapse of Constantinople was very sudden and very final, but surely not forseen by Seneca.

I think the quotation is not at all about collapse in the Grand Sweep of History, but rather a simple observation about collapse of buildings, fall of cities to a besieging army, crops ruined by a rainstorm, etc. We can put our own interpretation on the words. They certainly hold a special significance to us, after it has been suggested by Ugo, but what significance they held for Seneca is open to speculation. And really, if you don't see their truth in our time from your own observation of today then you have a very different world view than I have. Or are you trying to pick apart Ugo's blog by questioning the meaning of the words? Think of it as a literary reference not to be taken literally but to set the scene for the following discussion.

Ulpian:

I was taking none of it literally. That is my whole point. Sudden collapse is the point here and I was merely responding to using the empire as an illustration of collapse. I disagreed that it took three hundred years and would, as I stated, prefer to call it more like one hundred years. This might be called a quick decline and follow the Seneca curve. And I am the pessimist by the way; I don't confuse stoicism with pessimism, although I do believe there are overlaps.

As for Byzantium it was conquered for Rome in 64BC and I reiterate that I did not include the eastern - Byzantine - empire in my observation. The eastern Roman empire can either be called a great success as it maintained the fiction of Roman polity for a thousand years, or it might be seen as the slowest dying of all empires and therefore the antithesis of the Seneca idea.

hinson:

"Collapse of Constantinople was very sudden and very final"

On the contrary. The Byzantine Empire waxed and waned over many centuries, but its road to eventual destruction was via the Crusades, during which it suffered blow after blow over a period of about 250 years. In fact, at then end of the Crusades it was virtually a partitioned rump state. It began to get back on its feet somewhat by the time the Turks arrived, but just was too weak to resist.

I strongly recommend the 3-volume history (or the shorter 1-volume version!) "Byzantium" written by John Julius Norwich, a fascinating history wonderfully written. It was a great shame that this Christian/Roman/Greek civilization was lost so thoroughly, and that we in the West have almost completely forgotten about it. The Crusades represented an awful "Civil War" within the European sphere.

Feunfeun:

I think our civilization has a greater possibility of quick panic than any other civilization before. It all depends on how fast information travel amongst the various structures that compose it. At the core we have a financial infrastrucutre where 80 % of the transaction are executed within milliseconds. On those transcations and their equilibrium depends our entire hierrachy of what valuable and not . On the fringe of this infrastructure we have the fact that most of the people in the west own a smartphone or watch information continously trough a media outlet. So if a truly negative information which destroy the precarious equilibrium appears, it will then spread very quickly to the fringe affecting everyone in the system ...

YvesT

Yes agree on that, another thing is that more and more some key systems rely on just a few guys having the knowledge to run them (at least in IT), and all this is very poorly documented, and it is in fact getting worse over time with ever increasing complexity, a good set up for a domino effect ...

RalphW

I am the sole surviving IT employee at my organisation. We used to be 7. I hold together a disparate system of servers and desktops and websites that is essential to every job here, jerry-built together over a decade. Everything is bespoke, no two systems have the same OS and patch level. When I take a week off the other 30-odd employees cross their fingers and pray that nothing major goes down.

YvesT

1, 2011 - 12:49pm Wow, and is there a plan for at least another guy for backup and knowledge transfer or is it seen as "normal situation" ? Do you still do some modifications/"improvments" ? The organisation I work for is much bigger (a telco), but there are so many f#àking systems it's truly amazing, many outsourced here and there with so many layers of specifications or whatever between users and developers, and in the end plenty of key systems with one or two guys able to modify/repair them. Not to mention that we keep on adding some while saying we should reduce ...

FMagyar

1, 2011 - 2:05pm True story: I know of a situation in the corporate finance department of a large hospital where the sole surviving IT person with the requisite level of knowledge to keep the whole system up and running actually died of a heart attack while on the job... They had a hell of a time and enormous expense for hiring outside expertise to come in and figure out what that one guy knew... They could have hired help, given the poor guy a thorough physical and given him a raise and a vacation and it probably would have been a lot cheaper! That's what you get when bean counters get to run organizations that depend on systems which they do not understand, nor do they get why those systems are so important.

notanoilman

1, 2011 - 3:50pm I used to contract in to cover people. Winging it doesn't even start to cover it. Organisations really have no idea of the financial value of such people. Companies should at least take out 'key man' insurance cover to pay for what it would take in an emergency. Having another trained person is a must. Oh, the companies used to whinge about how much they had to pay me, IMHO it was nowhere near enough.

NAOM

eric blair

1, 2011 - 7:51pm It all depends on how fast information travel amongst the various structures that compose it

Except information flow is controlled. Or even faked.

Twitter shutdowns, things like BART blocking cell phones, historical things like "Remember the Maine" "The Lusitania did not carry weapons/ammunition" "Gulf of Tomkin" "Lavion Affair" Deletions of posts on web forums.

So if a truly negative information which destroy the precarious equilibrium appears, it will then spread very quickly to the fringe affecting everyone in the system

Not if the control of information is applied. Like the 80% of the transaction are executed within milliseconds shows there is not a viable 'hand of the market' - there is not an effective open information system.

Doomer_Dan

This was a great post until the end:

We should try, instead, to develop alternative stocks of resources such as renewable (or nuclear) energy. At the same time, we should avoid to exploit highly polluting and expensive resources such as tar sands, oil shales, deepwater oil, and, in general, applying the "drill, baby, drill" philosophy.

Good lord, man! Nuclear!?! You just want to move the pollution problem from fossil fuels to something even more dangerous!? The entire post up to that point was a warning about the consequences of pollution!

Every nuclear plant needs to be shut down before the collapse occurs, or we may not be able to shut them all down when we need to. Loss of capital virtually guarantees that we will be unable to properly manage these plants at some point after we hit that Seneca cliff.

DD

DoomInTheUK

1, 2011 - 11:59am Maybe the term "Parasitic Losses" would be more apt than pollution. In this model anything that chokes the flow from the resource is "pollution". So bureaucracy can be just as much a detrimental effect as conventional ideas of pollution as CO2 emissions and industrial waste or even soil erosion or over-fishing.

Nuclear would fit within an idea initial low parasitic loss, the decommissioning is a problem though. I can imagine a time when all our energy needs to be diverted to safely decommission the ageing fleet of reactors.

forbin

unlikely , the scenario will be that will be plenty of "serfs" or "dole people" to manually dig and move all that radio active stuff to a "safer" place, away from anything the local "king" decides is his. think feudal ......

Forbin.

YvesT

"I can imagine a time when all our energy needs to be diverted to safely decommission the ageing fleet of reactors."

Personnally I cannot, in that case that would be chaos for sometimes already, and the energy left would for sure be used to heat houses or cook food and not to decommission reactors, reactors that would be left doing whatever they "want" ...

On the other hand I cannot imagine keeping a somehow modern society without nuclear

DoomInTheUK

2, 2011 - 3:41am OK, for the literal minded amongst us, I know it's an absurd extrapolation to suggest all our energy production would go to decommissioning. The point was intended to show that in Ugo's model, the long time lag of the cost of the pollution from nuclear power allows the downslope to be less severe. It's just another type of kicking the can down the road.

-- note to self....remember that on TOD, irony means a bit like iron ---

notadoomerwellmaybe

1, 2011 - 1:34pm The model described seems rather too linear to me. In the real world things are often more digital and this creates the Sencea effect.

For example we build parts in our factory, there is about 20 subcomponents. Ramping up production is slow, 20 suppliers have to ramp up their production, people have to be trained, problems solved etc. On the downside however if even one of these components is missing production stops immediately.

In the larger world if one input becomes unavailable (food, rare earth metals etc) then production of many other things also becomes immediately impossible in a cascade of failures. How does this model capture this behavior?

AlanfromBigEasy

1, 2011 - 2:49pm An excellent article that I forwarded to a modeler friend of mine (from Milano).

Upon reflection, a non-complex system (hunting whales, cutting down forests, expanding cultivated fields in virgin land) should show some rough symmetry between rise and decline. If you will, a one dimensional problem.

However, complexity in just two dimensions means that growth is constrained to the most limiting factor, even if both factors interact. So a two dimensional system grows much like a one dimensional "system".

However, in a two dimensional system, if the two dimensions are equally sized and interact equally, the decline should decline at x^2. If one dimension dominates, the decline is somewhere between the symmetric decline and x^2.

Real world systems, such as the Soviet Union decline, are mufti-variate and decline is x^Y and looks much like a complete collapse "off a cliff".

The severity of the Seneca Effect may be directly related to the complexity of the system.

Thanks for Your Efforts,

Alan

ROCKMAN

1, 2011 - 3:13pm Excellent points Alan. But I would go one step further. I made the point a few days ago: just look at one portion of the model: Hubbert. Hubbert's curve is not a single function. The global flow of max oil flow potential at any point in time is a function the decline of existing fields and the gains from new discoveries. And to a large degree these two factors are independent. Had I the data I could generate a fairly accurate decline curve of all EXISITNG global production. Many folks have offered models of future oil discoveries. A much more difficult task to predict what you'll find before you find it. But even many of those efforts, however accurate or not, offer just future volumes of new discoveries…not their timing nor their production rates as they come on. Consider the many billions of bbls of oil discovered in DW Brazil. Lots of oil for sure…in the ground. But have you seen a credible forecast of Bz oil production rate for the next 40 years? I haven't.

So the future shape of the Hubbert curve would be the composite of the decline curve and the discovery curve. And even as it would be so difficult to generate that composite curve it wouldn't really tell the future story accurately IMHO. Let's say by some great magic we can predict the future oil POTENTIAL global production curve between 2025 and 2040...what would that tell us about the availability of oil to the US economy? Perhaps the KSA has the capability to produce 10 million bopd in 2030. But how much will they be exporting…50%....10%? And at what price? And let's say it's 50%: how much will be exported to the US…80%...20%?

Granted no matter how difficult it might be to predict the right side of the Hubbert curve with great accuracy, how important is that physical relationship compared to the very complex and wholly unpredictable (IMHO) of the above ground factors? Having an adequate air supply in a sub is very important if someone is chocking you to death.

AlanfromBigEasy

1, 2011 - 3:48pm I think that there is one prediction that one can make about the "above ground factors" during the decline phase that you claim are "unpredictable".

To wit - The "above ground factors" will be more active and chaotic in the decline phase than during the growth phase.

Outside of TOD and fellow travelers, growth is not just seen as desirable but absolutely essential. Our economic and social systems, and our psychology, are all well adapted to growth.

These systems dysfunction, and interact in their dysfunction, when growth turns to shrinkage.

Personally, I see the Tea Party as a dysfunctional response to a lack of growth. Their dysfunction breeds additional dysfunctionality. And this dysfunctionality increases the rate of decline due to "above ground factors".

Best Hopes for Creating Efficient, Durable, Stable Subsystems,

Alan

writerman

1, 2011 - 4:21pm I don't post much anymore because... well, I think the chance of us dealing with Peak Oil is about as likely as a socialist party candidate becoming president of the United States. So I'm following Princes advice and am partying like it's 1999, spending everything I have on buying my daughters the very best education money can buy, and letting them travel as much as they like, on my platinum card. Easy come, easy go.

Seneca's cliff, or something like it, is refered to in an amazingly well-argued, detailed, and thorough report by the German Bundeswehr's Future Analysis Department, which is a military think tank. It's about peak oil, which they calculate occured in 2010. It's like the Hirsh Report but pulls no punches.

One of the central arguments is that for complex reasons the fall in economic activity will probably be far, far, steeper, and not mirror the Hubble bell curve. That's the Seneca bit.

The German report, which one can find on the web in full and through Der Spiegel, is interesting for a number of reasons. Firstly it's the best military report so far, as far as we know, as it fearlessly confronts the enromous economic, political, social, and security challenges we face. It almost reads like science fiction, or a doomsday report. It's the military going public with the bad news, regardless. It's also interesting that the military has 'leaked' the report in an attempt to give it a life of its own and put pressure on the politicians to begin getting the public ready for what's just around the corner. That is waking them from their induced slumber.

The report also puts the Nato attack on Libya in a proper perspective.

pi

1, 2011 - 11:37pm But people are strong and resiliant...I see a Seneca's cliff of maybe money, economic activity (trade), banking transactions, airline travel, advertising, retail space rented, plastic packaging generated, miles driven, etc and other things that are more on the surface.

But that will mean that the world is throwing off or casting off its oil-induced capitalist, commercial mantle. There will be a great deal of desperation if such a thing occurred. The desperation would find a focus on producing food and on getting the government to procure it, even just a little. All of that commercial activity that was knocked out by the financial cataclysm would leave a lot of oil for governments to play around with.....and they would start focusing on food production. I think population might decline more slowly than we think. If this sort ofthing happens in different places at different times, it could be slow.

flametree

1, 2011 - 6:19pm I live in southern Tasmania, I can tell you whale hunting and tree cutting don't stop slowly. It takes time to gear up, import machinery etc. There were several thousand people involved in hunting and tree cutting. Cockle creek had six pubs. Now it does not exist. Whale hunting stopped because of a sudden fallen in whales. You harpoon a baby whale drag it to where you want the adults to go and then kill the adults. Easy. For 10's of years you get 1000's of whale. One or two years you you get 100's next you get about none.

Trees go just as quickly, they good ones take hundreds of years to grow. A generation or two to cut down.

Cheers

Hide_away

1, 2011 - 7:39pm After reading all the comments from people about the seneca cliff, it is not easy to form an opinion of what is likely to happen. Lots of talk of feedback loops "above ground factors" and the like, yet no realistically possible examples.

So here is one..

Given that Westexas is correct in the ANE or close to it, then a country like Australia will run into big problems very quickly in a few short years. Australia produces just over 300,000 b/d (falling) and imports ~600,000 b/d. Of those imports ~178,000 b/d are diesel fuel. These figures from this source....

http://www.ret.gov.au/resources/fuels/aps/pages/default.aspx

If/when Australia's imports are suddenly stopped/greatly reduced the effect will reverberate around the world. The diesel here is used for agriculture, mining and heavy transport in the main. The curtailment of wheat, coal and uranium exports will have massive implications for the importing countries of those commodities. Countries in the middle east import a lot of wheat from Australia. If the price there suddenly skyrockets, how stable will those 'still stable' remain.

Assumptions are made by many that the price mechanism will continue to allocate oil, yet it is becoming abundantly clear that the bigger stick has a lot of sway. Countries like Australia have small sticks, yet missing out on the oil will have massive effects. Examples of slow collapse are very hard to find (I haven't found any), yet examples of fast collapse or the seneca cliff are very easy to find.

metalRules

1, 2011 - 8:28pm I'm hoping Australia's massive commitment to LNG will mitigate this. By next decade the plan is that Australia will rival Qatar as an exporter of LNG. Should the Woodside, Shell, and other LNG projects succeed, Austalia may in fact be in a relatively good position.

Hide_away

1, 2011 - 8:48pm The point about the seneca cliff and my post is that what is used now is diesel, the equipment to run things now is what is important. Massive LNG production will not happen if there is a sudden drop in diesel supplies.

Westexas has ANE dropping from ~35 mbpd down to ~23 mbpd from 2010 to 2015. That does not give us "By next decade the plan". Given a nice gentle BAU approach then the long term plans will probably happen, the seneca cliff implies that those plans may not reach fruition.

metalRules

1, 2011 - 9:23pm re: "Massive LNG production will not happen if there is a sudden drop in diesel supplies." For the current plans not to come to fruition due to diesel supply alone the Seneca Cliff would need to be almost vertical, and total, (and pretty soon) otherwise any remaining resource would be poured into completion of the LNG projects. Yes, that is definitely a possibility, but I'm just more optimist that that.

That still leaves the question of what happens when LNG production declines, but being the eternal optimist I hope the message of the inevitable and permanent decline of world resources will of got through by then. Otherwise we face the mother of all Seneca Cliffs.

Hide_away

2, 2011 - 1:50am MetalRules,

If the LNG sector gets all the fuel they need when there is a crunch, then who misses out? Is it going to be the farmers? or perhaps other miners? Heavy transport cannot miss out because that is needed to move the materials to build the LNG plants.

While being optimistic is nice, it does little in helping to understand and prepare for what is about to hit us. A sudden fuel crisis will inevitably have the politicians bring in fuel rationing, with motorists feeling the pinch. Yet that will save petrol, not diesel. Rationing diesel means some miss out, while price rises and delays kick in.

The Seneca cliff will happen because people do not understand the immediacy of the problem and the multiple feedback loops of constrained fuel supplies.

metalRules

2, 2011 - 6:52am Really, I'm quite confident of completion of several major LNG projects such as Pluto (Woodside) and Gladstone (Santos, Petronas, Shell) because they are under development and will be completed with a few years. Personally I do not believe we'll be hit by a Senaca Cliff senario due to PO within that timeframe. If you think the SWHTF earlier, then yes, you are right on (would be very nasty indeed, since we would be totally unprepared)

Just so I don't sound like I'm being a total optimist, I'll give you an example of a 'feedback loop' that paints a darker picture for Australia. The way Woodside (and others I think but I can't recall the details) funded, or where able to get approval, for these hugely expensive projects was to forward sell much of next decade's LNG supply to China. So while at first glance Australia's dependence on imported fossil fuels may seem to be highly mitigated, the reality could be a significant proportion of LNG production will actually be exported, while we could suffer domestic fuel shortages.

National economies are so interwtined now I don't see how anyone can divine with certainty what will happen when resource shortages start to hit (oil will probably be the first, but not the last, shortage we will face). I don't think it's gonna be pretty, but I don't know if we will inevitably face a Senaca cliff.

EDIT: since I mention particular projects I should declare I've got a small share holding of Woodside, and a larger holding of a small spec oil and gas explorer that could do well if a Queensland LNG facility is built (both stocks doing crap now, but hey, ever the optimist)

RalphW

2, 2011 - 9:12am Australia is a major energy exporter. It will ALWAYS be able to out-compete other diesel importers for the remaining world supply of diesel exports.

Australia will not collapse unless the collapse is global. Here in the UK, on the other hand...

Hide_away

2, 2011 - 7:49pm I would fully agree with you if price was the only criteria for obtaining fuel.

However I feel this is a false assumption. In a world of declining oil production other factors will come into play besides price.

westexas

1, 2011 - 9:45pm Strictly speaking, I outlined some scenarios. Note that there are three key variables for what I define as ANE (Global Net Exports less Chindia's combined net oil imports):

The rate of change in production for the top 33 oil exporting countries;

The rate of change in consumption for the top 33 oil exporting countries;

The rate of change in Chindia's net oil imports.

If we see a 2%/year production decline rate from 2010 to 2015, and if internal consumption continues to increase at the current rate and if Chindia's net oil imports increase at their current rate, then ANE would be down to around 23 mbpd, versus 35 mbpd in 2010 and versus 40 mbpd in 2005. Basically, the volumetric ANE decline rate would accelerate from an average rate of one mbpd per year, 2005 to 2010, to about 2.4 mbpd per year, 2010 to 2015.

Hide_away

2, 2011 - 1:27am Thanks Jeffrey, I really wish your numbers were totally incorrect, however the realist in me knows that you are right. They are scary numbers that have many just turning a blind eye to them. I cannot see any fault in them other than you may be to optimistic. Sudden "above ground factors" like what is happening in Libya could easily accelerate the decline and are far more likely as ANE decline.

I believe you work on GNE and ANE are close to a best case scenario. It really is the business as usual case, yet people do not want to believe it.

westexas

2, 2011 - 7:08am I think that there is a certain level of denial, even among Peak Oilers, regarding "Net Export Math." I frequently get qualitative objections to what is basically a quantitative argument. My usual response is, show me some counterexamples, to-wit, find an example of an oil exporting country, showing a sustained production decline, with a meaningful level of consumption, that has cut that consumption sufficiently so that the net export decline rate is the same as, or less than, the production decline rate.

Note that 20 of the 33 top net oil exporters in 2005 showed lower production in 2010, versus 2005.

Given an ongoing production decline rate in an oil exporting country, unless the country's rate of change in consumption falls at the same rate as, or at a rate faster than, the rate of decline in production, the resulting net export decline rate will exceed the production decline rate and the net export decline rate will accelerate with time.

Jedi Welder

2, 2011 - 7:11am I am not sure how long India will keep growing. More and more news are comming out about how they are struggling with their electric grid. If you don't grow electric supply, you don't grow the economy. Also it apears lots of the growth in the economy has been on the credit card. Such a development is not sustainable. My guess is China will outrun India vary fast in the grouth run ahead of now.

westexas

As Yogi reportedly said, "It's tough to make predictions, especially about the future." But the recent numbers do indicate some deceleration in India. India's 2002 to 2010 rate of increase in net imports was 5.4%/year, but in 2010 they showed only a very slight increase in net imports over 2009, partly because of an increase in production. China's 2002 to 2010 rate of increase in net imports was 12%/year, with a year over year rate of increase of 12.5%/year from 2009 to 2010. "Chindia's" overall 2002 to 2010 rate of increase in net imports was 9.4%/year from 2002 to 2010.

lumina

After reading this post and the BBC article below, I think I saw a potential Seneca cliff in the "projected number of functioning LEO orbiting satellites":

Space Junk at Tipping Point, Says Report

Some computer models show the amount of orbital rubbish "has reached a tipping point, with enough currently in orbit to continually collide and create even more debris, raising the risk of spacecraft failures," the research council said in a statement on Thursday.

...

The situation is critical, said Mr Kessler, a retired Nasa scientist, because colliding debris creates even more of the junk.

"We've lost control of the environment," he said.

geek7

"We've lost control of the environment," he said.

Of course, we never had control of the space environment. What is happening is that it is becoming painfully obvious that we never really had control and that all planned activity based on the supposition on control is now at risk.

Look for calls to develop spider web type sticky strands that work in space. Yah, right!

augjohnson

I wish I could remember the Science Fiction story I read maybe a couple decades ago. Seems that we earthlings had lost the ability for space travel because of so much space junk that any additional flights got hit and destroyed. Some alien race came along and offered, for a huge fee, to clean out all the space junk so we could again have access to space flight.

geek7

Ugo, Thanks for a brilliant article. Unfortunately, some readers missed your point. Comments like "Your model is too simple, it doesn't include (whatever)." and "Your model is too complicated. You made a mistake, which I don't have time to identify.". But keep up the good work. This isn't your first attempt, and I'm sure it won't be your last.

One more substantive comment. Malthus and Verhulst models were models of stocks and flows, but of one stock only, namely people. Subsequent authors cast their models in terms of differential equations, but historically there is a remarkable uniformity to how we model nature. What changes over time is the number of stocks and the number of flows, which always seems to increase. Trying to keep the model simple enough for the reader to understand is, I think, a useful innovation. But something is still needed to reach the whole audience.

Cheers

Ugo Bardi

Thanks, geek. The point I was trying to make has to do exactly with this point: after having studied the whole story of "The Limits to Growth" I was surprised to see how many people had criticized the study without understanding it. Entire academic papers had been written by people who didn't have the smallest idea of what they were talking about. And they were world-renown economists!

So, I think there is a strong need for mind sized models but, also, the other point which maybe I should have stressed more in my post is that the models must also be based on thermodynamics. This is a point that the authors of "The Limits to Growth" failed to mention with sufficient strength - although they did say it. So, I hope that this approach moves something, even though, I am afraid, it won't so much!

Picarita_Basura

Great article, great discussion. Since most people don't know that much about the less salacious parts of ancient Roman history, how about changing the name, Seneca Effect, to one more well-known in popular culture: the Wiley Coyote Effect? You know, he runs off a cliff and his legs keep churning as if he could keep running?

Ugo Bardi

Wiley Coyote was mentioned in an earlier version of the post; I deleted it to make the post shorter but - yes - you have a good point. The Seneca effect starts when the Coyote suddenly discovers that he is walking on thin air!

browning

Excellent article. I've been passing it around.

I do wish the system dynamics math were a bit clearer. The y-axis values appear mixed up. I tried to replicate the second chart, and succeeded only after applying multipliers to each of the stocks and rates. It would have been nice to provide the small amount of additional information, for those like me who want to replicate these damn things.

This is good stuff.

AlanfromBigEasy

One of my areas of interest :-) is rail - intercity and urban.

I noted that many economic functions would decline, at varying rates, as oil declined and economic dysfunctions spread.

However, what if an economic function - two subsets of transportation - expanded and dramatically increased efficiency (with virtually no oil use) in the midst of an overall economic decline ?

My thought is that the remaining economic activity would reform around the more efficient, oil free technologies and the last half, 2/3rds or 1/3rd of the Seneca decline would be aborted and converted into either a much more moderate decline or even a steady state economy.

Any thoughts ?

Alan

2ndlawrules

H.T. Odum would be quite pleased with your simple storage components/flows/dissipation-to-entropy model. He was a great proponent of simple models to enhance understanding of very complex systems. In reviewing your numerous articles on TOD, I think that I perceive the hand of H.T.Odum in your understanding of energy-materials systems. Were you at one time one of his graduate students?

Having been such, on a regular basis I see on TOD the reverberations of projections that Odum made time and again almost 40 years ago. Keep up the good work Professor Bardi.

Commentary An oil shock in 2012 Energy Bulletin

The price of oil is once again daily in the news. The Western Europe benchmark Brent crude has hovered near $100 / barrel for much of the last month, and the IEA is again warning of the burden of oil consumption. Is this a harbinger of things to come, or a mere statistical blip in a market that is "well supplied"? How will events play out in oil markets in the coming year or two?

Certainly, oil prices have surged on the back on strong demand, of which some is structural, and some transient. The northern hemisphere has seen a strikingly cold winter, leading to increased heating oil usage. And the global economy is recovering from a deep recession, with demand bouncing off the recessionary trough. These are, to an extent, passing events. But in many respects, increased prices fundamentally reflect an oil demand that is increasing faster than supply.

Indeed, the recent growth of demand has been described as "astonishing". While it is not unexpected from our perspective, demand growth is still impressive. According to the EIA, world petroleum liquids consumption was up 2.8 million b/d, that is 3.2 percent, in the three months through January 2011, compared to the same three months a year earlier. While this is a high number, it is not unprecedented. In the twelve years to 1972, world oil consumption increased by 30 million b/d, representing 150% demand growth over the period and 2.7 million b/d average annual demand growth.

And demand increased by 7-8 million b/d in the three years of recovery following the oil shock of 1973 and the 2001 recession. (These recessions were arguably the most comparable to the recent one. After 1973, the western world was still continuing the process of motorization, and thus demand recovered quickly. This was also true after 2001, when China first made its impact on global oil markets.) Today, as after 1973 and 2001, the pace of motorization continues-indeed, has accelerated-in the developing world, and thus demand growth at a pace of 2.5 million b/d / year through 2012 should not be surprising.

Nor should oil demand growth compared to other energy sources be a surprise. Natural gas and coal consumption increased by 3.2 percent and 5.1 percent per annum, respectively, from 2002 through 2008, the start of the recession. It is hard to imagine that oil consumption would forever lag other fuel sources if the oil were available.

[Jan 15, 2011] Guest Post: How Many Senators Does It Take To Screw A Taxpayer?

A bipartisan group of 15 senators signed a letter in late November demanding an extension of U.S. ethanol subsidies.

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