From: Douglas P. Wilson <[EMAIL PROTECTED]>
>I'd like to write a program to run a simulation of the world economy,
>first to see if Jay's conclusions follow from his own data, and then
>to do a sensitivity analysis to see what are the most important
>variables.
I will save you some trouble Douglas, the most important variable is
ENERGY. Economists are trained to believe that the world runs on money --
but they are wrong. In fact, the world runs on energy. By definition,
energy "sources" must produce more energy than they consume, otherwise
they are called "sinks".
The global economy burns energy to make money-there is no substitute for
energy. Although the economy treats energy just like any other resource,
it's not like any other resource. Energy is the precondition for all other
resources.
The global economy receives almost 80% of its energy subsidies from
nonrenewable fossil sources: oil, gas, and coal. They are called
"nonrenewable" because, for all practical purposes, they're not being made
any more. The reason they are called "fossil" is because they were
"produced" by nature from dead plants and animals over several hundred
million years.
The key to understanding energy issues is to look at the "energy price" of
energy. Energy resources that consume more energy than they produce are
worthless as sources of energy. This thermodynamic law applies no matter how
high the "money price" of energy goes.
For example, if it takes more energy to search for and mine a barrel of oil
than the energy recovered, then it makes no energy sense look for that
barrel-no matter how high the money price of oil goes. It will make no
energy sense to look for oil in America after 2005.
During this coming century, the global economy will "run out of gas" as
nearly all fossil energy sources become sinks. One can argue about the exact
date this will occur, but the end of fossil energy -- and its dependent: the
global economy -- are inevitable.
A good analogy is like having a motor scooter with a five-gallon tank, but
the nearest gas station is 10 gallons away. You can not fill your tank with
trips to the gas station because you burn more than you can bring back-it's
impossible for you to cover your overhead (the size of your bankroll and the
price of the gas are irrelevant). You might as well put your scooter up on
blocks because you are "out of gas" -- forever.
It's the same with the American economy: if as a country, we must spend
more-than-one unit of energy to produce enough goods and services to buy one
unit of energy, it's impossible for us to cover our overhead. At that point,
America's economic machine is "out of gas"-forever.
OIL
Oil is the most important form of energy we use, making up about 38 percent
of the world energy supply. No other energy source equals oil's intrinsic
qualities of extractablility, transportability, versatility and cost. These
are the qualities that enabled oil to take over from coal as the front-line
energy source in the industrialized world in the middle of this century, and
they are as relevant today as they were then.
Forecasts about the abundance of oil are usually warped by inconsistent
definitions of "reserves." In truth, every year for the past two decades the
industry has pumped more oil than it has discovered, and production will
soon be unable to keep up with rising demand.
According to a March, 1998, Scientific American article by Colin J. Campbell
and Jean H. Laherrère Global oil production is expected to "peak" around
2005. See THE END OF CHEAP OIL at: http://dieoff.com/page140.htm
In November, 1997, the International Energy Agency (IEA) convened an Oil
Conference in Paris. Laherrère and Campbell presented three papers on oil
depletion (against Adelman and Lynch from MIT).
As a result of this conference, IEA prepared a paper for the G8 Energy
Ministers' Meeting in Moscow March, 31, 1998. IEA followed Laherrere and
Campbell's view and forecast a peak in conventional oil for 2010 at 78.9
Mb/d and decrease in 2020 at 72.2 Mb/d. [ Source: Laherrere personal
correspondence ] See WORLD ENERGY PROSPECTS TO 2020.
http://www.iea.org/g8/world/oilsup.htm
According to Richard Duncan, this represents a significant reversal of IEA
position: "This is a real stand-down for them because until recently they
were in the Julian Simon no-limits camp." [ personal correspondence ] See
Duncan's energy paper THE WORLD PETROLEUM LIFE-CYCLE at:
http://dieoff.com/page133.htm
Franco Bernabé, chief executive of the Italian oil company ENI SpA, expects
the world to experience 1970s-style oil shocks starting sometime between
2000 and 2005. http://www.forbes.com/forbes/98/0615/6112084a.htm . Also see
http://reports.guardian.co.uk/articles/1998/7/26/13026.html .
Jay
