How to Read This Blog


HOW TO READ THIS BLOG:

To get the most out of this blog, I recommend beginning with the earliest post and proceeding in chronological order. For the most part this blog, like a planning document, builds on data and rationale in a linear manner. You may find value in individual posts taken in isolation, but I suspect your experience will be richer if you follow the intended progression.

Monday, June 27, 2016

WPS 5: Projection of Future Conditions- Simple Arithmetic, Peak Oil, and Collapse

Into the Future...

So now the time comes to take the information we've gathered during our inventory of existing conditions and to project a "most likely" set of future conditions.

For the history of community planning (which has only existed in its current form since the industrial revolution), one nearly sure-fire way to make projections is the good old regression equation.  Simply put, you look back over the past data and draw a best-fit line or curve, then project this line into the future.  In a case where the entire data set represents "growth," the projection mathematically MUST reflect a continuation of that growth.  Housing, population, and financial conditions are often modeled this way.

Graph with regression line

Another common approach is to build more complex models that attempt to duplicate human behavior or choices, and then use these models to make your projections.  There can be as many or as few variables as you want, and they can feed back into one another in any way the modeler desires.  Of course, when the time comes to run the model you have to begin with a reference data set, and that data set will be the various perpetually growing variables we've been exploring.  Thus the model simply adds another layer of complexity (and perhaps realism) to the linear or exponential projection.  If the past trend has been growth, the modeled future will continue to reflect that growth.  Transportation models are an excellent example of this.



What very, very few people ever attempt to do is question the sustainability of these growing variables in the first place.  Regression equations and models are generally built without any upper limit or constraint.  Here in the real world, we've never tested the limits of our resources before.  The industrial revolution and its associated explosion in growth is only 200 years old, and there is literally no precedent in the history of Earth to look at as a model for just how far this growth can extend.  It appears to us that growth is infinite; are we to assume that the resources to fuel that growth are infinite as well?

Most planning documents fail to ask one simple but very important question:  How far can the current set of growth-based arrangements proceed before encountering the limits of the physical world?  We have to know the answer to this question before we make any assumptions about the future validity of past trends.

It turns out we are not the first to ask this question, and here again is where we must refer to real experts- in mathematics, in the dynamics of growth, in natural resources and environment- to formulate our answer.  Lest skeptics question these sources, I should point out that these are not crackpot conspiracy theorists- they are respected academicians who have made substantial contributions to their fields.


Simple Arithmetic

On this quest our first visit will be at the most abstract level, the level of simple arithmetic.  Professor Al Bartlett, PhD, was a professor of nuclear physics at the University of Colorado.  He was a man who knew mathematics well.  In the 1960's, Bartlett began to question the seemingly infinite growth taking place on our finite planet, and made some shocking discoveries.

The greatest shortcoming of the human race is our inability to understand the exponential function. - Albert Allen Bartlett

Bartlett compiled his findings into a presentation called "Arithmetic, Population, and Energy" which he first gave in 1969.  In his presentation, he outlines many of the trends we have already explored in our inventory of existing conditions.  He then proceeds to show the patent absurdity that a continuation of these trends would lead to within the scale of human lifespans.  The error, he contends, comes in people's inability to comprehend the real impacts over time of exponential increases, even when they seem small.  It is absolutely worth an hour and fifteen minutes of your life to watch his presentation, here:


Introducing ideas of limited natural resources, Bartlett walks through the real impacts of exponential growth and shows that perpetual growth (in population, in consumption, in energy production, or anything else) in a finite world is an impossibility.  He evaluates historical patterns of oil exploration in a highly simplified way and shows that oil reserves should be depleting by the early 2000's, all the while mathematically disproving the statements of politicians and industry pundits to the contrary. Similarly, he takes statements about the quantity of coal reserves and historical consumption and shows that a depletion in coal reserves should occur within 100 years.  None of these arguments even take into account the complexities of economic feasibility- just raw extractability.

Ultimately, Bartlett concludes that a massive reduction in human population is coming in the near future.  He outlines two columns of factors that increase and decrease population and points out that if humans fail to choose adequate measures from the right column to reduce their own populations, nature will choose for us.



Clearly, if we follow the reasoning of Al Bartlett, our model of the future should not include continued exponential growth for any extended period of time.  Instead, it stands to reason that we should expect a fairly substantial shrinking event.  To determine in more detail the dynamics and timeline of this reversal of growth, we will need to look to some other models and projections.


Peak Oil and Economic/Social Collapse

Marion King Hubbert, PhD, was a geophysicist and geologist with a lifetime of experience in the oil industry, federal government, and as a professor at Stanford University and UC Berkeley.  He made a number of contributions in geophysics, but his most relevant work to this exercise is what he is best known for:  Peak Oil.

Marion King Hubbert00.jpg

Hubbert's peak theory claims that the rate of oil production in any area will follow a bell curve based on production and discovery rates.  The point at the top of the curve represents the peak of oil production.  It should be noted that reaching peak oil does not mean that there is no longer oil under the ground, just that the rate of production of oil has reached its zenith and begun to decline.

How do we know that there is any validity to this theory?  Because in 1956 Hubbert used the model he developed to predict a peak in oil production in the United States between 1965 and 1970.  At the time, his contemporaries were critical- but he was proven right when US conventional oil production peaked in 1970.

Hubbert's projection for global oil production was a peak in a half century (from 1956)- or roughly 2006- but that actions of OPEC might delay the peak for an extra 10 years to 2016.  As we have seen, global conventional oil production peaked in 2011.  Here is Hubbert's chart showing his prediction of global peak oil and the inevitable decline in production following the peak.



Hubbert's work shows us generally what to expect from 2011 into the future: the rate of conventional oil production will only decline.  It may be offset by adding petroleum liquids or other substitutes, but we have arrived at the downside of the curve.  This is a radically different picture than the models typically used in planning exercises- it has a growth side, but then a reversal and decline in the future.  It is definitely NOT infinite, progressive growth.

While this is a great start to developing meaningful projections of the future in a finite world, it is still fairly one dimensional and subject to a variety other influences.  This brings us to the work of several contemporary researchers who provide rich insight into refinements we should make to the Hubbert model, and how the coming decline in oil production will impact the rest of the economy and human factors like energy use, health, and population.

Ugo Bardi is a Professor of Chemistry at the University of Florence in Italy.  He has done work in crystallography, electrochemistry, and most importantly to us, depletion models exploring the exploitation of finite resources.  He maintains an excellent website exploring his interest in resource depletion and what it means to the future of humanity at http://cassandralegacy.blogspot.com/ .

Bardi's entire body of work on the trajectory of energy and natural resources is worth spending time with, but perhaps his most important contribution for our projections is the application of the "Seneca Cliff" to peak resource modeling.  Bardi quotes Lucius Anneaus Seneca's observation that while growth occurs slowly, ruin or collapse happens much more quickly.  In effect, this shifts the shape of the resource curve from being an even bell to something more like this:

Applying the Seneca effect, we begin to see that the impacts of a decline in oil production might occur much more rapidly than even the Hubbert curve would lead us to believe.  Further, this new curve has applicability beyond just oil.

More details about the Seneca Effect and Bardi's work with it can be found on his blog at this link:  http://cassandralegacy.blogspot.it/2011/08/seneca-effect-origins-of-collapse.html

In our interconnected system, powered by cheap energy, something dramatic like the peaking of oil production will not happen in a vacuum.  As the lifeblood of industrial civilization, a decline in the production of oil will ripple throughout the economy and have consequences for all sectors.  To help us model these complex interactions we turn to Gail Tverberg, professional actuary and resource shortage researcher.  Tverberg is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries.  She has produced incredible work on natural resource limits and their relationship to the economy and finance which can be accessed on her blog, https://ourfiniteworld.com/ .

Tverberg's work illustrates how oil production costs, finance, debt, and price interact to power the modern industrial economy (see previous posts exploring these topics as "existing conditions").  She attributes the 2008-2009 financial crisis to reaching the limits of oil supply, and observes that various forms of debt (personal, corporate, national, derivatives, quantitative easing, zero-interest rate policies, etc.) have been used to prevent the collapse of the economic system.  Her projections anticipate a worsening of the financial crisis that reaches a critical tipping point into rapid collapse.  A full treatment of this subject is available on her website, and was published in the journal Energy in 2012:

https://ourfiniteworld.com/oil-supply-limits-and-the-continuing-financial-crisis/

Tverberg adopts the rationale applied by Bardi in the development of a Seneca Cliff style decline, and predicts future energy production will follow the curve shown below.  This dramatic drop in energy production will be accompanied by a rapid collapse of civilization, and all of the factors identified in our evaluation of existing conditions.

Figure 4. Estimate of future energy production by author. Historical data based on BP adjusted to IEA groupings.


While the source material generated by Bardi and Tverberg should be consulted for a full comprehension of the factors influencing the dynamics of energy and economics in the future, I would summarize in the following very big-picture general terms:

1.  Industrial civilization is powered by fossil fuels, which are finite.  For the global economy to work, it must grow- always and forever.  There are no examples of steady-state or shrinking economies.
2.  The huge amount of energy returned on energy invested provided by fossil fuels has allowed explosive growth in agriculture, technology, and population.
3.  Because fossil fuels are finite, their production follows a curve that inevitably will peak.  This peak may occur as a result of physical scarcity, but is more likely to occur when it becomes uneconomical to continue to grow production.
4.  As time progresses fossil fuel resources become more difficult to extract and process, providing a lower energy return on energy invested.  As a result, more of civilization's energy goes into producing energy and less is left for the rest of the economy.
5.  We are at a point where fossil fuel energy is peaking or has peaked, and the consequences are visible in the form of entropy:   falling wages, inflation for some goods, deflation for others, loss of jobs, overall slowed economic growth, and increasing levels of pollution.
6.  The governing world institutions have delayed the consequences of peak energy through various economic means, such as using debt to pull additional societal investment into energy infrastructure.
7.  We have reached or are reaching the limits of debt's ability to perform this function.
8.  It is highly likely that when the next economic shock occurs (recession, debt crisis, unwinding of derivatives, major terrorist event, etc.) there will be few remaining options that will delay a rapid "Seneca Cliff" style reduction in economic activity.
9.  With the reduction of economic activity, workers will not be able to support energy consumption and energy companies will not be able to afford to extract high-cost resources.  This will lead to a permanent contraction in energy use and economic activity.
10.  Industrial civilization cannot function in a period of prolonged contraction because investment requires a promise of future increased returns.  In a contracting environment, all investment ceases and the monetary system collapses.
11.  Without investment in energy production, the production of energy will cease.  Without energy, industrial civilization will collapse.


Next

In the next post we will continue our exploration of future conditions by discussing the seminal study modeling these complex interactions and projecting future conditions:  The Limits to Growth.  We will also examine the consequences of climate change in the future and draw some conclusions about likely timelines.



3 comments:

  1. Dear Froggman:

    I've just read through your entire posting. I saw your link on OFW. Over the past several years I have awakened as a Doomster and wanted to say that I admire the serious effort you've made here to present a clear and concise understanding of the reality of our predicament. I am a retired Architect and can see the planning approach to your presentation and how it adds clarity, I haven't made such an effort to understand, just find myself acting as a sponge. I read OFW, Bardi and others but have never felt that I could add to the conversation in the comments; still don't but just wanted to tell you that I appreciate the work you have started here. Please continue. As you and others have stated it is difficult to "come out" to friends and family as a Doomster, especially people with children, so I don't, and instead find a sense of community and comfort reading Blogs such as yours; Blogs that don't offer false Hopium by selling fiction, prepper material or gold. Thanks, Snaveyrag

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    1. Thank you Snaveyrag. I've spent quite a few years silently reading as well. I agree there is great comfort in knowing there are others out there who think and feel like we do. Feeling a connection to others, even through a medium like the internet, is one of the great gifts of our human existence. I try to cherish it.

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  2. Number 10 is wrong. Zero and negative return investments are made all the time. All an investment needs is that it beats inflation. Look at the real returns in bank accounts or most government debt. In Sweden there was recently even a mortage with a negative nominal interest rate. Also a contracting economy is not uniform, and some investments will provide positive returns even in a contraction.

    Good blog and analysis, though.

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