Recessions and Paradigms

Long time, no post, I know.  I had other concerns.

Presumably you've noticed we might be on the verge of another recession?  Notice too that economists and financial folks want to cast the situation in terms they think they understand?  But perhaps there's another factor that should be considered.  In the Peak OIl Task Force's analysis in their 2010 report (http://peakoiltaskforce.net/) they claim that the data on the U.S. economy over time shows that when our energy (oil) costs hit 4% of U.S. GDP, a recession follows.  In other words, energy costs drag on the economy until a tipping point is reached and there's an adjustment.  Other people have other estimates of what percentage we must hit before triggering a recession ranging up to 6%.  James Hamilton, an economist at UC San Diego, details a long history of economic downturns following oil "price shocks".

Let's do a bit of back-of-the-envelope calculation.  We consume roughly 20,0000,000 barrels of oil per day.  In 2010 our GDP was over 14 trillion dollars.  In February, oil at the New York Mercantile Exchange (http://www.nyse.tv/crude-oil-price-history.htm) broke the $100/ barrel mark for the first time since the last recession, when it topped out at $147/barrel.  Prices recently dipped back under $100, but not by much.  Using the nice round number of 100, assuming our economy hasn't grown much since 2010 and assuming there are 365 days in a year, oil energy costs work out to about 5% of our GDP.

At the very least, $100/barrel oil has to be a significant drag on the economy as that turns into higher costs for fuels and the raw materials for plastics and petrochemicals (fertilizer, for example).  We been reading about the effects of $4 gas.  Some of you know that I expect the U.S. and other economies to go through a series of recessions as the world demand bumps maximum oil production capacity, prices soar, and recession follows. Economies shrink, demand drops, price falls.  This pattern continues until production from the big oil reserves really starts to drop, as opposed to the plateau it's on currently, forcing continuous uncontrolled shrinkage.  Alternatively, economists and governments get past denial and develop aggressive control mechanisms to support a more graceful and predictable decline phase for the oil age.

 The United States Congress went into gridlock over raising the debt ceiling, some more European nations are looking shaky, so we have some possible triggers.  So will our economies just stagnate, or will there be full scale recession?  Any bets on how many recession cycles it takes before the paradigm shift occurs and there's a reanalysis of economic history and theory based on energy costs?  It occurs to me this is like what happened in my core fields of science when I was in college in the 1970s.  Geologists admitted plate tectonics was real and there was a drastic reinterpretation of geologic and evolutionary history based on the new paradigm.

Care for a paradigm shift?

Fossil Fuels, Strange Arithmetic

I'm a member of the American Association for the Advancement of Science (AAAS).  I've been disappointed by AAAS's silence on the issues of hydrocarbon decline.  In one of the email bulletins they send out, they had a link to a panel discussion on energy.  Here are the opening two paragraphs--

Fossil fuels provide about 80% of the world’s energy and, despite dire predictions since the early 20th century, supplies will not run out any time soon, according to speakers at a AAAS discussion on meeting global energy demand.
“Oil is good for 50 years at current consumption rates, [and] could be extended longer as you go to more difficult resources,” said Steven E. Koonin, under secretary for science at the U.S. Department of Energy. “Coal—there are hundreds of years.”

This is an extraordinarily ill-thought out set of statements.

Evolved to Run

Recently, I had occasion to read the best-seller Born to Run.  I decided I needed to read the book when an acquaintance began describing the contents.  He talked about events I was a part of, since I've run with the Raramuri (Tarahumara) Indians in the Leadville 100 mile run.  While the book was a mixed bag, it makes some good points that are relevant to our current situation and our future.

Shortly after I acquired the book, I learned Micah True, one of principal figures in the account, was scheduled to give a talk at a local running shop.  I attended and enjoyed the evening.  From what I heard, running has declined amongst the Raramuri as roads and vehicular transport has penetrated to their villages.  The Raramuri have a history of putting on races that pit village against village.  Top runners are higher-status members of society.  Yet even so, easier modes of transport stop the running.

Likewise for our society.  Despite all the evidence that high levels of activity and exercise have enormous physical and mental benefits, most people will take advantage of labor-saving devices and transport.  And even among the fit, most transport uses internal combustion vehicles, not feet or bicycles.

So I'm very curious to watch the reaction and evolution of behavior as it gets more and more expensive to use vehicles.  Since so many of us are in dug into a hole of poor fitness and excessive weight due to inactivity, digging out will be difficult.

Getting Nowhere and Missing the Train

We spend a lot of our time in U.S. National Parks.  In fact, just this morning I did a 5+ mile run in one a few minutes from my house.  Our vacations tend to center around trips to national parks.  I've lost count of the number of times I've been to the bottom of the Grand Canyon--

The junction of South Kaibab, N. Kaibab and Bright Angel trails.

I've been on all, many  times.

However, most of the big famous parks are literally in the middle of nowhere.  How do you get there?  It turns out that the existence of, and access to, at least some of the national parks is intimately linked to the interests of American railroad companies in the late 19th and early 20th centuries.

Pod People

It occurred to me awhile back that I should experiment with food crops that make sense for the desert.  Since I have a yard full of mesquite trees and mesquite pods are supposed to be quite edible, that seemed like a good starting place.   See what I mean?

That's a flowering agave in the foreground, but notice lots of mesquites behind it?  The native mesquite around here is Prosopis velutina.  Well, I'm getting a lesson in the uncertainties of agriculture.  We had a cool spring and lots to plants, including mesquites, had a delayed flowering.  No problem, I thought.  I talked to my horticulturist friend Gene while I waited.  He said that nutritional quality of pods varied widely.  Pods with reddish highlights are supposed to have a higher sugar content.

Is Oil Reefer Madness?

How many times have you heard someone talk about "our addiction to oil"?  I'm getting a bit tired of it.

Physiological addiction occurs when you consume a pharmacologically active substance such as opiate narcotics, alcohol, nicotine, or caffeine in sufficient quantities with sufficient regularity that you crave the substance and have withdrawal symptoms if you don't get the compound often enough and in sufficient quantity.  Once past the withdrawal phase, your body and brain may not need the substance and may function better.  The tetrahydrocannabinol (THC in marijuana) referenced in the famous poster from the pot exploitation film Reefer Madness may actually be less dangerous and more beneficial than some of the other addictive substances.  I leave that to the reader to decide...

None of this is true of oil.  Oil is like air--we need it to function and there's no good alternative.  The United States consumes more than any other nation.  We could probably consume less and still maintain the world's highest Gross Domestic Product (GDP) and our economic and military dominance.  But not a lot less without big changes.  Morgan Downey has a great interactive graph on his blog, scarcewhales which he hasn't posted to in a while, unfortunately.  He's busy on other projects.  What you'll see on that graph is pretty strong evidence that America's oil consumption per person has overall risen much less than many other nations in the world.  We've also maintained our position as the nation with the highest per capita GDP.

I would suggest that we are the world's dominant power precisely because we consume and process more energy from oil and other sources than any other nation.  We convert that energy into a fabulous array of goods and services, incredible air and land transportation systems,  and a military machine that can project all over the globe at a moment's notice.

If that's an addiction, it's tough to overcome.  Since we don't have much choice as oil supply tightens, I'd very much like to see us using the power and wealth we now possess to leverage new energy sources, transmission systems, and transportation infrastructures so that we can maintain as much as possible.  I'd also like to see as many as you as possible out of your cars and planes so that we can save as much oil as possible for the tractors, mining trucks, trains, and jets that support all the things we need and use.  We should our feet, bodies, and brains more.  The real addiction is to inactivity.  A fit population would feel better, work harder and smarter, and produce more value.

Any chance I'll see a few more folks on my bike rides to work soon???

Growing Fuel? Not with food crops.

Notice I'm not piling on and writing about the Gulf Oil Spill.  It is worth noting in passing that even if the spill amounts to several million barrels over several months, that will still only come to a tiny sliver of the world's 85 million barrels per day of consumption.  And that ties to my real topic for this post.

I asked a friend of ours who studies the world food supply how much food in calories the world produces.  Joel sent me some numbers and a recent report by the Food and Agriculture Organization of the United Nations.

In 2009, the world produced 2.2 billion metric tons (mt) of cereal grains, 0.4 billion mt of oil seeds, 0.16 billion mt of sugar, 0.29 billion mt of meat, and 0.14 billion mt of fish.  Since most of the meat was made by feeding the cows and pigs the cereal grains, lets drop those out.  And I'm skipping dairy, since it's mostly water.  So the world produced about 2.9 billion mt of food in 2009.  I wondered how much of that is usable energy.  A study I came across at the University of Florida, puts the metabolizable energy in wheat, corn, and soybeans all at about 1500 calories per pound.  Since those grains make up the biggest share of the 2.9 billion mt, that gives us a ballpark figure of 9.57 quadrillion calories produced in 2009.  A barrel of oil has approximately 1.39 million calories of energy.  So at about 31 billion barrels of oil a year st current rates of consumption, that's 43 quadrillion calories of oil per year.

That means there's over 4 times as much energy in the oil we burn in a year compared to the food we grow in a year.  Can we expect ethanol produced from food crops like corn or even sugar cane to provide a significant fraction of our transportation energy requirements?  David Pimental, a respected ecologist at Cornell University, has performed extensive analyses of biofuels, especially corn.  He summarized his work last year in the Harvard International Review.  You should go read the article for yourself, but he calculates that if all the corn grown in the U.S. in a year could be made into corn ethanol, it would provide only 4% of our energy consumption.  But that's not taking into account the whole energy budget, I think.  Last year, we used 33% of our corn production to produce 9 billion gallons of ethanol, which only has about 2/3 the energy of gasoline.  The works out to the equivalent of 143 million barrels of oil, which sounds decent.  However, since the most optimist estimates of the amount of energy put into corn versus energy back is 1.3 to 1, that means we burned 109 million barrels of oil to get the corn ethanol.  That leaves 34 million barrels of oil equivalent.  The U.S. uses 20 million barrels of oil per day.  So we used 1/3 of a year's corn crop to produce slightly less than a 1.5 days of transportation energy.  Using all the corn would only give us 1.3% of our energy needs for the year.

Obviously, trying to pour our food into our gas tanks won't get us very far.