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The Problem of Growth
Friday, 21 Mar, 2008 – 10:00 | No Comment

Stuart Staniford proposed a “way forward” for humanity in his article Powering Civilization to 2050. This article proposes an alternative vision: instead of trying create continual, technological stop-gaps to the demands of growth, we must address the problem of growth head on. Infinite growth is impossible in a finite world–a great deal of economic growth may be possible without a growth in resource consumption, but eventually the notion of perpetual growth is predicated on perpetual increase in resource consumption. This growth in resource consumption causes problems: it brings civilization into direct conflict with our environmental support system. Growth is also one way of improving the standard of living for humanity by creating more economic produce, more material consumption per human. Growth, however, produces very unevenly distributed benefits, and there is little convincing evidence that the poorest, most abused 10% of humanity is actually better off today than the poorest, most abused 10% of past eras. Furthermore, if you accept my statement above that infinite growth is impossible in a finite world, then employing growth today to “solve” our immediate problems incurs the significant moral hazard of pushing the problem—perhaps the greatly exacerbated problem—of addressing growth itself on future generations.

With that in mind, my intent here is to propose one possible means for humanity to directly address the problem of growth itself. I am attempting to take what I see as an inherently pragmatic approach—one that does not rely on the universal cooperation of humanity, nor on the assumption of yet-to-be-developed technologies. My approach to the problem of growth is to stop trying to address its symptoms—overpopulation, pollution, global warming, peak oil—and attempt instead to identify and address the underlying source of the problem.
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That source is the hierarchal structure of human civilization. Hierarchy demands growth. Growth is a result of dependency. The solution to the problem of growth, then, is the elimination of dependency. This essay will elaborate on each of those points, and then propose a means to effectively eliminate dependency by creating minimally self-sufficient but interconnected networks that I call Rhizome. It is my hope that this topic, while not directly involving crude oil reserves or some similar topic, will be highly relevant within the context of Peak Oil and Peak Energy. Infinite growth requires, eventually, infinite energy. Assume that we develop a perfect fusion generator, or that we cover the entire surface of the Earth with 100% efficient solar panels. None of this actually solves the problem of growth—it just shifts the burden of dealing with that problem onto our grandchildren, or perhaps even 100 generations from now. It’s easy to take the self-centered perspective that such burden-shifting is acceptable, but I find it fundamentally morally unacceptable. This essay will begin and end with that understanding of morality, and attempt to find a way forward for humanity that balances the quality of life demands of both present and future generations. This essay isn’t about how to find more oil, how to recover more oil, or how to use energy in general more efficiently so that we can keep on growing. It is an opinion piece, not a data-driven scientific paper. It is about living well, now and in the future, individually and collectively, without growth.

I. Hierarchy Must Grow, and is Therefore Unsustainable

Why must hierarchy continually grow and intensify? Within the context of hierarchy in human civilization, there seem to be three separate categories of forces that force growth. I will address them in the order (roughly) that they arose in the development of human civilization:

Human Psychology Drives Growth

Humans fear uncertainty, and this uncertainty drives growth. Human population growth is partially a result of the desire to ensure enough children survive to care for aging parents. Fear also drives humans to accept trade-offs in return for security.

One of the seeds of hierarchy is the desire to join a redistribution network to help people through bad times—crop failures, drought, etc. Chaco Canyon, in New Mexico, is a prime anthropological example of this effect. Most anthropologists agree that the Chaco Canyon dwellings served as a hub for a food redistribution system among peripheral settlements. These peripheral settlements—mostly maize and bean growing villages—would cede surplus food to Chaco. Drought periodically ravaged either the region North or South of Chaco, but rarely both simultaneously. The central site would collect and store surplus, and, when necessary, distribute this to peripheral settlements experiencing crop failures as a result of drought. The result of this system was that the populations in peripheral settlements were able to grow beyond what their small, runoff-irrigated fields would reliably sustain. The periodic droughts no longer checked population due to membership in the redistributive system. The peripheral settlements paid a steep price for this security—the majority of the surplus wasn’t redistributed, but rather supported an aristocratic priest class in Chaco Canyon—but human fear and desire for security made this trade-off possible.

Still today, our fear of uncertainty and desire for stability and security create an imperative for growth. This is equally true of Indian peasants having seven children to ensure their retirement care as it is of rich Western European nations offering incentives for couples to have children in order to maintain their Ponzi-scheme retirements systems. Fear also extends to feelings of family or racial identity, as people all over the world fear being out-bred by rival or neighboring families, tribes, or ethnic groups. This phenomenon is equally present in tribal societies of Africa, where rival ethnic groups understand the need to compete on the level of population, as it is in America, where there is an undercurrent of fear among white Americans that population growth rates are higher among Hispanics Americans.

The Structure of Human Society Selects for Growth

The psychological impetus toward growth results in what I consider the greatest growth-creating mechanism in human history: the peer-polity system. This phenomenon is scale free and remains as true today as it did when hunter-gather tribes first transitioned to agricultural “big-man” groups. Anthropologically, when big-men groups are often considered the first step toward hierarchal organization. When one farmer was able to grow more than his neighbors, he would have surplus to distribute, and these gifts created social obligations. Farmers would compete to grow the greatest surplus, because this surplus equated to social standing, wives, and power. Human leisure time, quite abundant in most ethnological accountings of remnant hunter-gatherer societies, was lost in favor of laboring to produce greater surplus. The result of larger surpluses was that there was more food to support a greater population, and the labors of this greater population would, in turn, produce more surplus. The fact that surplus production equates to power, across all scales, is the single greatest driver of growth in hierarchy.

In a peer-polity system, where many separate groups interact, it was not possible to opt-out of the competition to create more surplus. Any group that did not create surplus—and therefore grow—would be out-competed by groups that did. Surplus equated to population, ability to occupy and use land, and military might. Larger, stronger groups would seize the land, population, and resources of groups that failed in the unending competition for surplus. Within the peer-polity system, there is a form of natural selection in favor of those groups that produce surplus and grow most effectively. This process selects for growth—more specifically, it selects for the institutionalization of growth. The result is the growth imperative.

The Development of Modern Economics & Finance Requires Growth

This civilizational selection for growth manifests in many ways, but most recently it resulted in the rise of the modern financial system. As political entities became more conscious of this growth imperative, and their competition with other entities, they began to consciously build institutions to enhance their ability to grow. The earliest, and least intentional example is that of economic specialization and centralization. Since before the articulation of these principles by Adam Smith, it was understood that specialization was more efficient—when measured in terms of growth—than artesian craftsmanship, and that centralized production that leveraged economy of place better facilitated growth than did distributed production. It was not enough merely to specialize “a little,” because the yardstick was not growth per se, but growth in comparison to the growth of competitors. It was necessary to specialize and centralize ever more than competing polities in order to survive. As with previous systems of growth, the agricultural and industrial revolutions were self-reinforcing as nations competed in terms of the size of the infantry armies they could field, the amount of steel for battleships and cannon they could produce, etc. It wasn’t possible to reverse course—while it may have been possible for the land area of England, for example, to support its population via either centralized or decentralized agriculture, only centralized agriculture freed a large enough portion of the population to manufacture export goods, military materiel, and to serve in the armed forces.

Similarly, the expansion of credit accelerated the rate of growth—it was no longer necessary to save first buy later when first home loans, then car loans, then consumer credit cards became ever more prevalent, all accelerating at ever-faster rates thanks to the wizardry of complex credit derivatives. This was again a self-supporting cycle: while it is theoretically possible to revert from a buy-now-pay-later system to a save-then-buy system, the transition period would require a significant period of vastly reduced spending—something that would crush today’s highly leveraged economies. Not only is it necessary to maintain our current credit structure, but it is necessary to continually expand our ability to consume now and pay later—just as in the peer polity conflicts between stone-age tribes, credit providers race to provide more consumption for less buck in an effort to compete for market share and to create shareholder return. Corporate entities, while existing at least as early as Renaissance Venice, are yet another example of structural bias toward growth: corporate finance is based on attracting investment by promising greater return for shareholder risk than competing corporations, resulting in a structural drive toward the singular goal of growth. And modern systems of quarterly reporting and 24-hour news cycles only exacerbate the already short-term risk horizons of such enterprises.

Why This is Important

This has been a whirlwind tour of the structural bias in hierarchy toward growth, but it has also, by necessity, been a superficial analysis. Books, entire libraries, could be filled with the analysis of this topic. But despite the scope of this topic, it is remarkable that such a simple concept underlies the necessity of growth: within hierarchy, surplus production equates to power, requiring competing entities across all scales to produce ever more surplus—to grow—in order to compete, survive, and prosper. This has, quite literally, Earth shaking ramifications.

We live on a finite planet, and it seems likely that we are nearing the limits of the Earth’s ability to support ongoing growth. Even if this limit is still decades or centuries away, there is serious moral hazard in the continuation of growth on a finite planet as it serves merely to push that problem on to our children or grandchildren. Growth cannot continue infinitely on a finite planet. This must seem obvious to many people, but I emphasize the point because we tend to overlook or ignore its significance: the basis of our civilization is fundamentally unsustainable. Our civilization seems to have a knack for pushing the envelope, for finding stop-gap measures to push growth beyond a sustainable level. This is also problematic because the further we are able to inflate this bubble beyond a level that is sustainable indefinitely, the farther we must ultimately fall to return to a sustainable world. This is Civilization’s sunk cost: there is serious doubt that our planet can sustain 6+ billion people over the long term, but by drawing a line in the sand, that “a solution that results in the death of millions or billions to return to a sustainable level” is fundamentally impermissible, we merely increase the number that must ultimately die off. Furthermore, while it is theoretically possible to reduce population, as well as other measures of impact on our planet, in a gradual and non-dramatic way (e.g. no die off), the window of opportunity to choose that route is closing. We don’t know how fast—but that uncertainty makes this a far more difficult risk management problem (and challenge to political will) than knowing that we have precisely 10, 100, or 1000 years.

This is our ultimate challenge: solve the problem of growth or face the consequences. Growth isn’t a problem that can be solved through a new technology–all that does is postpone the inevitable reckoning with the limits of a finite world. Fusion, biofuels, super-efficient solar panels, genetic engineering, nano-tech–these cannot, by definition, solve the problem. Growth is not merely a population problem, and no perfect birth control scheme can fix it, because peer polities will only succeed in reducing population (without being eliminated by those that outbreed them) if they can continue to compete by growing overall power to consumer, produce, and control. All these “solutions” can do is delay and exacerbate the Problem of Growth. Growth isn’t a possible problem–it’s a guaranteed crisis, we just don’t know the exact time-frame.

Is there a solution to the Problem of Growth? Can global governance lead to an agreement to abate or otherwise manage growth effectively? It’s theoretically possible, but I see it about as likely as solving war by getting everyone to agree to not fight. Plus, as the constitutional validity and effective power of the Nation-State declines, even if Nation-States manage to all agree to abate growth, they will fail because they are engaged in a very real peer-polity competition with non-state groups that will only use this competitive weakness as a means to establish a more dominant position–and continue growth. Others would argue that collapse is a solution (a topic I have explored in the past), but I now define that more as a resolution. Collapse does nothing to address the causes of Growth, and only results in a set-back for the growth-system. Exhaustion of energy reserves or environmental capacity could hobble the ability of civilization to grow for long periods of time–perhaps even on a geological time scale–but we have no way of knowing for sure that a post-crash civilization will not be just as ragingly growth-oriented as today’s civilization, replete with the same or greater negative effects on the environment and the human spirit. Similarly, collapse that leads to extinction is a resolution, not a solution, when viewed from a human perspective.

A solution, at least as I define it, must allow humans to control the negative effects of growth on our environment and our ability to fulfill our ontogeny. The remaining essays in this series will attempt to identify the root cause of the problem of growth, and to propose concrete and implementable solutions that satisfy that definition.

II. Hierarchy is the Result of Dependency

The first section in this essay identified the reason why hierarchal human structures must grow: surplus production equals power, and entities across all scales must compete for this power—must grow—or they will be pushed aside by those who do. But why can’t human settlements simply exist as stable, sustainable entities? Why can’t a single family or a community simply decide to opt out of this system? The answer: because they are dependent on others to meet their basic needs, and must participate in the broader, hierarchal system in order to fulfill these needs. Dependency, then, is the lifeblood of hierarchy and growth.

Dependency Requires Participation on the Market’s Terms

Take, for example, a modern American suburbanite. Her list of dependencies is virtually unending: food, fuel for heat, fuel for transport, electricity, clothing, medical care, just to name a few. She has no meaningful level of self-sufficiency—without participation in hierarchy she would not survive. This relationship is hierarchal because she is subservient to the broader economy—she may have negotiating power with regard to what job she performs at what compensation for what firm, but she does not have negotiating power on the fundamental issue of participating in the market economy on its terms. She must participate to gain access to her fundamental needs—she is dependent (consider also Robert Anton Wilson’s notion of money in civilization as “bio-surival tickets”).

Compare this to the fundamentally similar situation of family in Lahore, Pakistan, or a farmer in rural Colombia. While their superficial existence and set of material possessions may be strikingly different, they share this common dependency. The Colombian farmer is dependent on a seed company and on revenue from his harvest to fuel his tractor, heat his home, and buy the 90% of his family’s diet that he does not grow. The family in Lahore is dependent on the sales from their clothing store to purchase food—they cannot grow it themselves as they live in an apartment in a dense urban environment. They are dependent on participation in hierarchy—they cannot participate on their own terms and select for a stable and leisurely life. The market, as a result of competition between entities at all levels, functions to minimize input costs—if corn can be grown more cheaply in America and shipped to Colombia than it can be grown in Colombia, by a sufficient margin, then that will eventually happen. This requires the Colombian farmer to compete to make his corn as cheap as possible—i.e. to work as long and as hard to maximize his harvest. While if he were participating on his own terms, he may only wish to work 20 hours per week, he may have to work 50, 60, or more hours at hard labor to make enough money off competitively priced corn to be able meet the basic needs of his family in return. He is in competition with his neighbors and competing entities around the world to minimize the input cost of his own efforts—a poor proposition, and one that is forced upon him because he participates on the market’s terms, all a result of his dependency on the market to meet his basic needs. The situation of the family of shopkeepers in Pakistan or the Suburban knowledge-worker in America is fundamentally the same, even if it may vary on the surface.

The Blurring of Needs and Wants

Why not just drop out? It isn’t that tough to survive as a hermit, gather acorns, grow potatoes on a small plot of forest, or some other means of removing oneself from this dependency on the market. To begin with, “dropping out” and becoming self-sufficient is not quite as easy as it sounds, and just as importantly, it would become nearly impossible if any significant portion of the population chose that route. But more fundamentally, humans don’t want to drop out of participation in the market because they desire the enhanced consumption that is available—or at least exists in some far-off-promised land called “America” (fantasy even in the mind of most “Americans”)—only through such participation. It may be possible to eat worms and acorns and sleep in the bushes, but this would be even more unacceptable than schlepping to work 40+ hours a week. Most people cannot envision, let alone implement, a system that maintains an acceptable “standard of living” without participation in the system, and all but the very lucky or brave few can’t figure out how to participate in that system without being dependent on it.

There is certainly a blurring of “needs” and “wants” in this dependency. Humans don’t “need” very much to remain alive, but a certain amount of discretionary consumption tends to increase the effectiveness of the human machine. From the perspective of the market, this is desirable, but is also an input cost that must be minimized. This is the fundamental problem of participating in the market, the economy, the “system” on its terms: the individual becomes nothing more than an input cost to be minimized in the competition between entities at a higher organizational level. John Robb recently explored this exact issue, but from the perspective of the local community–the implications are quite similar.

In an era of globalization, increased communications connectivity, and (despite the rising costs of energy) an ever increasing global trade network, this marginalization is accelerating at breakneck speed. Is your job something that can be done online from India? How about in person by an illegal immigrant? Because there are people with doctorates willing to work for ¼ what you make if you’re in a knowledge field, and people with high tolerance for mind-numbing, back-breaking labor willing to work hard for $5/hour or less right next door (or for $2/day overseas). If this doesn’t apply to you, you’re one of the lucky few (and, if I might add, you should be working to get yourself to into just such a position). Maybe they don’t know how to outsource your function yet, but trust me, someone is working on it. Participation in the market on its terms means that the market is trying to find a way to make your function cheaper.

This dependency on participation in the hierarchal system fuels the growth of hierarchy. Even if there is a severe depression or collapse, hierarchy will survive the demand destruction because it is necessary to produce and redistribute necessities to people who don’t or can’t produce them themselves. It may be smaller or less complex, but as long as people depend on participation in an outside system—whether that is a local strong man or an international commodities exchange—to gain access to basic necessities, the organization of that system will be hierarchal. And, as a hierarchy, that system will compete with other hierarchies to gain surplus, to grow, and to minimize the cost of human input.

Dependency on a Security Provider

One of the most significant areas in which people are dependent on hierarchal systems is to provide security. This seems to be especially true in times of volatility and change. While it may be possible to set up a fairly self-sufficient farm or commune and provide for one’s basic needs, this sufficiency must still be defended. If everyone doesn’t have access to the necessities that you produce for yourself, then there is potential for conflict. This could range from people willing to use violence to access to your food or water supply to governments or local strong-men expecting your participation in their tax scheme or ideological struggle. Ultimately, dependence on hierarchy is dependence on the blanket of security it provides, no matter how coercive or disagreeable it may be, and even if this security takes the form of “participation” in exchange for protection from the security provider itself.

Why this is Important

Virtually everyone is dependent on participation in hierarchal systems to meet their basic needs, of one type or another. This dependency forces participation, and drives the perpetual growth—and therefore the ultimate unsustainability—of hierarchy. If growth is the problem, then it is necessary to identify the root cause of that problem so that we may treat the problem itself, and not merely a set of symptoms. In our analysis, we have seen in Part 1 that hierarchies must grow, and now in this installment that human dependency is what sustains these hierarchies. Dependency, then, is the root cause of the problem of growth.

III. Building an Alternative to Hierarchy: Rhizome

So far in this essay, I have argued that competition between hierarchal entities selects for those entities that most efficiently grow and intensify, resulting in a requirement for perpetual growth, and that ongoing human dependency on participation in this system is the lifeblood of this process. At the most basic level, then, an alternative to hierarchy and a solution to the problem of growth must address this issue of dependency. My proposed alternative—what I call “rhizome”—begins at exactly this point.

Achieving Minimal Self-Sufficiency

The first principle of rhizome is that individual nodes—whether that is family units or communities of varying sizes—must be minimally self-sufficient. “Minimally self-sufficient” means the ability to consistently and reliably provide for anything so important that you would be willing to subject yourself to the terms of the hierarchal system in order to get it: food, shelter, heat, medical care, entertainment, etc. It doesn’t mean zero trade, asceticism, or “isolationism,” but rather the ability to engage in trade and interaction with the broader system when, and only when, it is advantageous to do so. The corollary here is that a minimally self-sufficient system should also produce some surplus that can be exchanged—but only to the extent that is found to be advantageous. A minimally self sufficient family may produce enough of its own food to get by if need be, its own heat and shelter, and enough of some surplus—let’s say olive oil—to exchange for additional, quality-of-life-enhancing consumables as it finds advantageous. This principle of minimal self-sufficiency empowers the individual family or community, while allowing the continuation of trade, value-added exchange, and full interaction with the outside world.

It should be immediately apparent that “dependency” is the result of one’s definition of “need.” Total self-sufficiency in the eyes of a Zimbabwean peasant, even outright luxury, may fall far short of what the average American perceives as “needing” to survive. As a result, an “objectively” self-sufficient American may sell himself into hierarchy to acquire what is perceived as a “need.” To this end, what I have called “elegant simplicity” is a critical component of the creation of “minimal self-sufficiency.” This is the notion that through conscious design we can meet and exceed our “objective” needs (I define these as largely experiential, not material, and set by our genetic ontogeny, not the global consumer-marketing system) at a level of material consumption that can realistically be provided for on a self-sufficient basis. I’ve written about this topic on several previous occasions (1 2 3 4 5).

Leveraging “Small-Worlds” Networks

How should rhizome nodes interact? Most modern information processing is handled by large, hierarchal systems that, while capable of digesting and processing huge amounts of information, incur great inefficiencies in the process. The basic theoretical model for rhizome communication is the fair or festival. This model can be repeated locally and frequently—in the form of dinner parties, barbecues, and reading groups—and can also affect the establishment and continuation of critical weak, dynamic connections in the form of seasonal fairs, holiday festivals, etc. This is known as the “small-worlds” theory of network. It tells us that, while many very close connections may be powerful, the key to flat-topography (i.e. non-hierarchal) communications is a broad and diverse network of distant but weak connections. For example, if you know all of your neighbors well, you will be relatively isolated in the context of information awareness. However, if you also have weak contact with a student in India, a farmer across the country, and your cousin in London, you will have access to the very different set of information immediately available to those people. These weak connections greatly expands information awareness, and leverages a much more powerful information processing network—while none of your neighbors may have experienced a specific event or solved a particular problem before, there is a much greater chance that someone in your diverse and distant “weak network” has.

In high-tech terms, the blogosphere is exactly such a network. While many blogs may focus primarily on cat pictures, there is tremendous potential to use this network as a distributed and non-hierarchal problem solving, information collection, and processing system. In a low-tech, or vastly lower energy world, the periodic fair or festival performs the same function.

Building Rhizome Institutions

The final aspect of the theory of rhizome is the need to create rhizome-creating and rhizome-strengthening institutions. One of these is the ability of rhizome to defend itself. Developments in fourth generation warfare suggest that, now more than ever, it is realistic for a small group or network to effectively challenge the military forces of hierarchy. However, it is not my intent here to delve into the a plan for rhizome military defense—I have explored that topic elsewhere, and strongly recommend John Robb’s blog and book “Brave New War” for more on this topic.
One institution that I do wish to explore here is the notion of anthropological self-awareness. It is important that the every participant node in rhizome has an understanding of the theoretical foundation of rhizome, and of the general workings of anthropological systems in general. Without this knowledge, it is very likely that participants will fail to realize the pitfalls of dependency, resulting in a quick slide back to hierarchy. I like to analogize anthropological self-awareness to the characters in the movie “Scream,” who were aware of the cliché rules that govern horror movies while actually being in a horror movie. When individual participants understand the rationale behind concepts like minimal self-sufficiency and “small-worlds” network theory, they are far more likely to succeed in consistently turning theory into practice.

Additionally, it is important to recognize the cultural programming that hierarchal systems provide, and to consciously reject and replace parts of this with a myth, taboo, and morality that supports rhizome and discourages hierarchy. Rules are inherently hierarchal—they must be enforced by a superior power, and are not appropriate for governing rhizome. However, normative standards—social norms, taboos, and values—are effective means of coordinating rhizome without resorting to hierarchy. For example, within the context of anthropological self-awareness, it would be considered “wrong” or “taboo” to have slaves, to be a lord of the manor, or to “own” more property than you can reasonably put to sustainable use. This wouldn’t be encoded in a set of laws and enforced by a ruling police power, but rather exist as the normative standard, compliance with which is the prerequisite for full participation in the network.

Finally, institutions should be devolutionary rather than accrete hierarchy. One example of this is the Jubilee system—rather than allow debt or excess property beyond what an individual can use, accumulate, and pass on to following generations–a system that inevitably leads to class divisions and a de facto aristocracy–some ancient cultures would periodically absolve all debt and start fresh, or redistribute land in a one-family-one-farm manner. These specific examples may not apply well to varying circumstances, but the general principles applies: cultural institutions should reinforce decentralization, independence, and rhizome, rather than centralization, dependency, and hierarchy.

Is This Setting the Bar Too High for All?

I’ll be the first to admit that this is a tall order. While the current system—massive, interconnected, and nested hierarchies and exchange systems—is anything but simple, its success is not dependent on every participant comprehending how the system works. While rhizome doesn’t require completely omniscient knowledge by all participants, the danger of hierarchy lurks in excessive specialization in the knowledge and rationale supporting rhizome—dependency on a select few to comprehend and operate the system is just that: dependency. Is it realistic to expect people to, en masse, understand, adopt, and consistently implement these principles? Yes.

I have no delusions that this is some perfect system that can be spread by airdropped pamphlet and then, one night, a switch is flipped and “rhizome” is the order of the day. Rather, I see this as the conceptual framework for the gradual, incremental, and distributed integration of these ideas into the customized plans of individuals and communities preparing for the future. I have suggested in the past that rhizome should operate on what Antonio Negri has called the “diagonal”– that is, in parallel but out of phase with the existing, hierarchal system. There may also be lessons to be incorporated from Hakim Bey’s notions of the Temporary Autonomous Zone and the Permanent Autonomous Zone—that flying under the radar of hierarchy may be a necessary expedient. Ultimately, this will likely never be a system that is fully adopted by society as a whole—I tend to envision this as analogous, in some ways, to the network of monasteries that retained classical knowledge through the dark in Western Europe after the fall of the Roman Empire. In a low-energy future, it may be enough to have a small rhizome network operating in parallel to, but separated from, the remnants of modern civilization. Whether we experience a fast crash, a slow collapse, the rise of a neo-feudal/neo-fascist system, or something else, an extant rhizome network may act as a check on the ability of that system to exploit and marginalize the individual. If rhizome is too successful, too threatening to that system it may be imperiled, but if it is a “competitor” in the sense that it sets a floor and for how much hierarchal systems can abuse humanity, if it provides a viable alternative model, that may be enough to check hierarchy and achieve sustainability and human fulfillment. And, if this is all no more than wishful thinking, it may provide a refuge while Rome burns.

IV. Implementing Rhizome at the Personal Level

Rhizome begins at the personal level, with a conscious attempt to understand anthropological processes, to build minimal self-sufficiency, and to engage in “small-worlds” networks. This installment will outline my ideas for implementing this theory at the personal level in an incremental and practicable way. This is by no means intended to be an exhaustive list of ideas, but rather a starting point for discussion:

Water

In the 21st Century, I think it will become clear that water is our most critical resource. We’ll move past our reliance on oil and fossil fuels—more by the necessity of resorting to dramatically lower consumption of localized energy—but we can’t move beyond our need for water. There is no substitute, so efficiency of use and efficacy of collection are our only options. In parts of the world, water is not a pressing concern. However, due to the fundamental and non-substitutable need for water everywhere, creating a consistent and resilient water supply should be a top priority everywhere. Climate change, or even just periodic extreme drought such as has recently hit the Atlanta area, may suddenly endanger water supplies that today may be considered a “sure thing.” How does the individual do this? I think that four elements are crucial: efficient use, resilient collection systems, purification, and sufficient storage.

Efficient use is the best way to maximize any available water supply, and the means to achieve this are varied: composting (no-flush) toilets, low-flow shower heads, mulching in the garden, etc. Greywater systems (also spelled “graywater,” various spellings seem popular, so search on both) that reuse domestic water use in the garden are another critical way to improve efficiency.

Resilient collection systems are also critical. Rainwater harvesting is the best way to meet individual minimal self-sufficiency—dependence on a shared aquifer, on a municipal supply system, or on a riparian source makes your water supply dependent on the actions of others. Rainwater falling on your property is not (at least arguably not) dependent on others, and it can provide enough water to meet minimal needs of a house and garden in even the most parched regions with sufficient planning and storage. There are many excellent resources on rainwater harvesting, but I think Brad Lancaster’s series is the best—-buy it, read it, and implement his ideas.

While dirty water may be fine for gardens, water purification may be necessary for drinking. Even if an existing water supply doesn’t require purification, the knowledge and ability to purify enough water for personal use with a solar still or via some other method enhances resiliency in the face of unforeseen events.

Storage is also critical. Rain, fortunately, does not fall continuously—it comes in very erratic and unpredictable doses. Conventional wisdom would have said that long-term storage wasn’t necessary in the Atlanta area because rain falls so regularly all year round that storage of only a few months supply would suffice. Recent events proved this wrong. Other areas depend on short, annual monsoon seasons for the vast majority of their rain (such as Arizona). Here, storage of at least one year’s water supply is a threshold for self-sufficiency, and more is desirable. Significant droughts and erratic rainfall mean the more storage the better—if you don’t have enough storage to deal with a drought that halves rainfall for two straight years, then you are forced back to dependency in such an event at exactly the worst time, when everyone else is also facing scarcity. Where to store water? The options here are also varied—cisterns are an obvious source for drinking water, as are ponds where it is a realistic option, but storage in the ground via swales and mulch is a key part of ensuring the water supply to a garden.

Food

If you have enough water and land, it should be possible to grow enough food to provide for minimal self-sufficiency. While many people consider this both unrealistic and extreme, I think it is neither. Even staunchly “establishment” thinkers such as the former chief of Global Strategy for Morgan Stanley advise exactly this path in light of the uncertainty facing humanity. There are several excellent approaches to creating individual food self-sufficiency: Permaculture (see Bill Mollison’s “Permaculture: A Designer’s Manual”), Masanobu Fukuoka’s “Natural Way of Farming” (see book of the same name), Hart’s “Food Forests,” and John Jeavons’ “Biointensive Method” (see “How to Grow More Vegetables”). Some combination and modification of these ideas will work in your circumstances. It is possible to grow enough calories to meet an individual’s requirements in only a few thousand square feet of raised beds—a possibility on even smaller suburban lots, and I have written about the ability to provide a culinarily satisfying diet on as little as 1/3 acre per person.

An additional consideration here is the need to make food supplies resilient in the face of unknown events. I have written about exactly this topic in “Creating Resiliency in Horticulture”, which basically advises to hedge failure of one type of food production with others that are unlikely to fail simultaneously—e.g. balance vegetable gardens with tree-crop production, mix animal production with the availability of reserve rangeland, or include a reserve of land for gathering wild foods. In Crete, after World War II, while massive starvation was wreaking Greece, the locals reverted to harvesting nutritious greens from surrounding forests to survive. The right mix to achieve food resiliency will vary everywhere—the key is to consciously consider and address the issue for your situation.

Shelter, Heating, & Cooling

Shelter should be designed to reduce or eliminate outside energy inputs for heating and cooling. This is possible even in the most extreme climates. Shelter should also be designed to eliminate reliance on building or maintenance materials that can’t be provided in a local and sustainable fashion. I realize that this is a challenge—but our architectural choices speak just as loudly about our real lifestyle as our food choices. Often, studying the architectural choices of pre-industrial people living in your region, or in a climatically similar region, provides great insight into locally appropriate architectural approaches. Passive solar heating and cooling is possible, with the right design, in virtually any climate—something that I have written about elsewhere.

Defense

I’m not going to advocate that individuals set up their own private, defensible bunker stocked with long rifles, claymore mines, and cases of ammunition. If that’s your thing, great. I do think that owning one or more guns may be a good idea for several reasons—defense being only one (hunting, good store of value, etc.). Let’s face facts: if you get to the point that you need to use, or threaten to use a lethal weapon to defend yourself, you’re A) already in serious trouble, and B) have probably made some avoidable mistakes along the way. The single best form of defense that is available to the individual is to ensure that your community is largely self-sufficient, and is composed of individuals who are largely self-sufficient. The entirety of part five of this series will address exactly that topic. Hopefully, America will never get to the point where lethal force must be used to protect your garden, but let’s face it, large parts of the world are already there. In either case, the single best defense is a community composed of connected but individually self-reliant individuals—this is rhizome. If your neighbors don’t need to raid your garden or “borrow” your possessions, then any outside threat to the community is a galvanizing force.

For now, aside from building a resilient community, there are a few things that individuals can do to defend their resiliency. First, don’t stand out. Hakim Bey’s notion of the permanent autonomous zone depends largely on staying “off the map.” How this manifests in individual circumstances will vary wildly. Second, ensure that your base of self-sufficiency is broad and minimally portable. At the risk of seeming like some wild-eyed “Mad Max” doom-monger, brigands can much more easily cart off wealth in the form of sheep or bags of cracked corn than they can in the form of almond trees, bee hives, or a well-stocked pond. Just think through how you achieve your self-sufficiency, and how vulnerable the entire system is to a single shock, a single thief, etc. You don’t have to believe that there will ever be roaming bands of brigands to consider this strategy—it applies equally well to floods, fire, drought, pestilence, climate change, hyperinflation, etc. My article “Creating Resiliency in Horticulture” also addresses this point.

Medicine, Entertainment, & Education

You don’t need to know how to remove your own appendix or perform open heart surgery. You don’t need to become a Tony-award caliber actor to perform for your neighbors. You don’t need to get a doctorate in every conceivable field for the education of your children. But if you understand basic first aid, if you can hold a conversation or tell a story, if you have a small but broad library of non-fiction and reference books, you’re a step ahead. Can you cook a good meal and entertain your friends? Look, human quality of life depends on more than just the ability to meet basic caloric and temperature requirements. The idea of rhizome is not to create a bunch of people scraping by with the bare necessities. Having enough food is great—you could probably buy enough beans right now to last you the next 10 years, but I don’t want to live that way. Most Americans depend on our economy to provide us a notion of quality of life—eating out, watching movies, buying cheap consumables. Minimal self-sufficiency means that we need the ability to provide these quality of life elements on our own. This probably sounds ridiculous to people in the third world who already do this—or to the lucky few in the “West” who have regular family meals, who enjoy quality home cooking, who can carry on enlightening and entertaining conversations for hours, who can just relax and enjoy the simplicity of sitting in the garden. It may sound silly to some, but for others this will be the single, most challenging dependency to eliminate. Again—dependency is the key. I’m not saying that you can never watch E! or go out to Applebee’s. What I am saying is that if you are so dependent on this method of achieving “quality of life” that you will enter the hierarchal system on its terms to access it, you have not achieved minimal self-sufficiency.

Production for Exchange

Finally, beyond minimal self sufficiency, the individual node should have the capability to produce some surplus for exchange because this allows access to additional quality-of-life creating products and services beyond what a single node can realistically provide entirely for itself. This is the point where minimal self-sufficiency doesn’t require isolationism. It is neither possible nor desirable for an individual or family node to provide absolutely everything desired for an optimal quality of life. While minimal self-sufficiency is essential, it is not essential to produce independently every food product, every tool, every type of entertainment, every service that you will want. Once minimal self-sufficiency is achieved, the ability to exchange a surplus product on a discretionary basis allows the individual node to access the myriad of wants—but not needs—that improve quality of life. This surplus product may be a food item—maybe you have 30 chickens and exchange the extra dozen or two eggs that you don’t consumer on a daily basis. Maybe you make wine, olive oil, baked bread, or canned vegetables. Maybe you provide a service—medicine, childcare & education, massage, who knows? The possibilities are endless, but the concept is important.

Practical Considerations in Implementing Rhizome at the Personal Level

Rhizome isn’t an all or nothing proposition—it is possible, and probably both necessary and desirable, to take incremental, consistent steps toward rhizome. Learn how to do more with less. Work to consciously integrate the principles of rhizome into every aspect of your daily life—think about your choices in consumption, then make medium and long-term plans to take bigger steps towards the full realization of rhizome.

And, perhaps most of all, rhizome does not demand, or even endorse, a “bunker mentality.” The single greatest step that an individual can take toward rhizome is to become an active participant in the creation of rhizome in the immediate, local community.

V. Implementing Rhizome at the Community Level

This final essay in this five-part series, The Problem of Growth, looks at implementing rhizome at a community level. Rhizome does not reject community structures in favor of a “bunker mentality,” but rather requires community structures that embrace and facilitate the principles of rhizome at both the personal and community level. Ultimately a rhizome community is composed of rhizome individual or family nodes—participants who do not depend on the community for their basic survival, nor participants who expect to benefit from the community without contribution. Rather, both the individual and the community choose to participate with each other as equals in a non-zero-sum fashion.

The results-based focus of the community is essentially the same as the individual, because the community consists of individuals who recognize the ability of the community to help them build resiliency and self-sufficiency in the provision of their basic needs, as well as the ability to access a broader network beyond the community.

Water

The first thing that communities can do is to get out of the way of individuals’ attempts to create water self-sufficiency: remove zoning and ordinance hurdles that prevent people from practicing rainwater collection and storage, or that mandate people keep their front lawns watered. Communities can also address their storm water policies—many communities simply direct storm water into the ocean (see Los Angeles, for example), rather than effectively storing it in percolation ponds, or otherwise retaining it for community use. Communities can also facilitate the collection and sharing of water-collection and efficiency best practices, as well as help people to refine ideas from outside the community in a locally-appropriate manner. The possibilities are endless—as with virtually everything else here, the key is that the community recognize the issue and make a conscious effort to address it.

Food

Again, communities should start by getting out of the way of individuals’ attempts to become food self-sufficient. This means eliminating zoning or ordinances that require lawns instead of vegetable gardens, that prevent the owning of small livestock such as chickens in suburban developments, and even (!) that mandate the planting of non-fruit bearing trees (on the theory that they’re messy if you forget to harvest them). But communities can also have a very proactive role in facilitating food self-sufficiency. Community gardens are a great place to start, especially where people live in high density housing that makes individual gardening impracticable. This has been done to great effect in urban areas in Venezuela, for instance. Communities can also foster knowledge and facilitate the sharing of best practices via lecture series, master gardener courses, local gardening extensions, community college courses, or community seek banks for locally appropriate species. Finally, communities should consider encouraging farmers markets to promote local surplus produce, to promote at least regional food self-sufficiency, and to kindle a public appreciation for the quality and value of fresh, seasonal, locally grown foods.

Shelter, Heating, & Cooling

I see the actual implementation of self-sufficient shelters as primarily an individual concern, though communities should certainly consider making communal structure, schools, etc. that conform to these standards. Most significantly, however, communities can work to get government out of the way of people who wish to do so individually. Get rid of zoning requirements that forbid solar installations, graywater, rainwater catchment, or small livestock, or that mandate set-backs and minimum numbers of parking spaces. Pass laws or ordinances that eliminate Home Owners’ Association rules prohibiting vegetable gardens, that mandate lawns, that prevent solar installations, etc. Many Colorado Home Owners’ Associations (HOAs) used to ban the installation of solar panels, but Colorado recently passed a statute that prevents HOAs from banning solar—seems like a good idea to me. The Colorado law certainly isn’t perfect, but it is an example of a very real step that a few people can take to work with their local or state government to help make your community more self-sufficient. If your HOA prevents you from installing solar hot water (or other solar), why not try to get the HOA to change its rules–there may be many other neighbors who want the same thing, and the more self-sufficient your immediate neighbors, the stronger your community, even if that community is “suburbia.” If your HOA won’t change, follow Colorado’s example.

Defense

As with individual defense, I don’t advocate that a community take a bunker mentality and make preparations for a Hizb’Allah style defense of South Lebanon. I think that could work, and I’ve written about it here, but I think it is the second to worst outcome and something to be avoided if possible. In modern America, it seems obvious to me that it is fully possible for a rhizome community to operate within the umbrella of any current state government, as well as the federal government. However, there are other nations—take Colombia for example—where this is probably not possible. It seems like a very real possibility that the permissive environment America currently enjoys could look much more like Colombia at some point in the future. For that reason, this is an issue that must be taken up on a case-by-case basis by local communities. While I certainly wouldn’t advocate an armed militia patrolling the perimeter of the self-sufficiency conscious town of Willits, California (though some American communities effectively do this already), this kind of “extreme” action may well be a basic requirement for a small village in Colombia that is attempting to institute localized self-sufficiency and rhizome structure.

Medicine, Entertainment, & Education

Communities have a myriad of ways to provide for their own entertainment, without resorting to some canned cable-TV product. Also, communities can address the specialized knowledge problems—education and medicine, as well as gardening, and the theory of rhizome, by ensuring that these topics are covered in local school curriculums at all levels (public and private), by making these kinds of learning resources available via a community college, the local library, a lecture series, etc.

Exchange, Information Processing, and Interaction Beyond the Local Community

The possibilities here are numerous, and I’ll just name a few possibilities for consideration: Community currency, community paper or blog, community development micro-loans, sponsoring seasonal fairs or festivals, etc. This is an area ripe for innovation and the sharing of best-practices…for additional ideas, see “Going Local” by Michael Schuman.

Practical Considerations in Implementing Rhizome at the Community Level

Just as with implementing rhizome at the individual level, rhizome is not an all-or-nothing proposition for communities. Any step that makes it easier for individuals to move toward rhizome is beneficial. Every community’s situation is different, and the number of ways to combine just the few suggestions provided here is nearly limitless. Customize, come up with new solutions, adapt or reject these ideas as you see fit, and share what works (best practices) and what doesn’t with the world in an open-source manner—but more than anything else, think about how to bring your community closer to rhizome, and then act.

Addressing Free-Riders

Finally, every community must address the problem of free riders. Some people will want to benefit from the community without contributing anything at all. In most cases, normative pressures will suffice, and this is especially true of rhizome, where there isn’t a grand redistributive scheme that facilitates some people to leach indefinitely off the collected surplus. Still, the problem will arise, and there will always be a need and a place for charity, within rhizome and elsewhere. The most important factor in determining who is worthy of charity and who is a free-rider is the conscious articulation of the requirements for membership: the community gains strength by helping up its least self-sufficient members, but it should do so by helping them to fish, rather than repeatedly just giving them fish to eat. Rhizome communities need not be heartless—in fact, they shouldn’t be heartless, not just on moral grounds, but on selfish grounds of building a more resilient community—but they should exert normative pressures to demand participation roughly commensurate with capability.

VI. Conclusion

I hope that this five-part series addressing the Problem of Growth has been useful. One of the cornerstones of my personal philosophy is that growth is the greatest challenge facing humanity, and that shifting from a hierarchal to a rhizome form of social organization is our best chance to “solve” that problem. I also think that rhizome is valuable as it is a scale-free solution: I think that it can help to solve our international and national problems, but even if that fails it can certainly improve our individual situations. Ultimately, removing ourselves, one at a time, from being part of the cause of humanities problem cannot be a bad thing. As Ghandi said, “be the change that you wish to see in this world.” That seems particularly applicable to a scale-free solution!
I think that this discussion is particularly relevant within the context of Peak Oil and Peak Energy.

Infinite growth requires, eventually, infinite energy. Assume that we develop a perfect fusion generator, or that we cover the entire surface of the Earth with 100% efficient solar collectors. None of this actually solves the problem of growth—it just shifts the burden of dealing with that problem onto our grandchildren, or perhaps even 100 generations from now. It’s easy to take the self-centered perspective that such burden-shifting is acceptable, but I find it fundamentally morally unacceptable. This (rather long) essay begins with that moral assumption—if you don’t share it, then you will likely have found a preferable solution, or perhaps denied that growth even represents a problem to begin with. That’s fine by me—I am trying to present one possible solution without claiming that it is the only possible solution. I hope you have found it useful.

The original five parts of this essay can be found here.

Update on the Simmons-Tierney Bet
Monday, 17 Mar, 2008 – 9:00 | No Comment



Greeen (left scale) monthly spot price of West Texas Intermediate crude oil, expressed in $2005 (CPI deflated) per barrel. Plum (right scale), number of barrels of WTI crude purchasable by forty average hours of private industry wages, pre-tax. Source: EIA for crude prices, BLS for CPI index, and BLS via Alfred for average hourly wages. Dashed lines are extrapolations of exponential fit from Jan 2002 on for illustration of trends only. These are not predictions, and the basis for assuming future trends will be similar to past ones is weak.

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On August 23rd, 2005, shortly after the publication of Twilight in the Desert, New York Times columnist John Tierney announced a bet with author Matt Simmons on the future price of oil:

I don’t share Matthew Simmons’s angst, but I admire his style. He is that rare doomsayer who puts his money where his doom is.

After reading his prediction, quoted Sunday in the cover story of The New York Times Magazine, that oil prices will soar into the triple digits, I called to ask if he’d back his prophecy with cash. Without a second’s hesitation, he agreed to bet me $5,000.

His only concern seemed to be that he was fleecing me. Mr. Simmons, the head of a Houston investment bank specializing in the energy industry, patiently explained to me why Saudi Arabia’s oil production would falter much sooner than expected. That’s the thesis of his new book, “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.”

I didn’t try to argue with him about Saudi Arabia, because I know next to nothing about oil production there or anywhere else. I’m just following the advice of a mentor and friend, the economist Julian Simon: if you find anyone willing to bet that natural resource prices are going up, take him for all you can.

After reprising the history of the famous bet between Paul Ehrlich and Julian Simon, the actual terms of this new Simmons-Tierney bet were detailed further down the column:

I proposed to him a bet using what Julian considered the best measure of a resource’s value: how it compares with the average worker’s wage. I offered to bet that the price of oil would not rise faster than the average wage, meaning that future workers would be able to afford oil more easily than they could today.

Mr. Simmons said he favored a simpler wager, based on his expectation that the price of oil, now about $65 per barrel, would more than triple during the next five years. He said he’d bet that the price in 2010, when adjusted for inflation so it’s stated in 2005 dollars, would be at least $200 per barrel.

Remembering a tip from Julian, I suggested that we use the average price for the whole year of 2010 instead of the price on any particular date – that way, neither of us would be vulnerable to a sudden short-term swing as the market reacted to some unexpected news. Mr. Simmons agreed, and we sealed the deal by e-mail.

We are now close to the half way point on this bet, so how is it looking?

To assess this, I constructed two measures – one is the measure on which the bet will actually be decided – oil prices in 2005 dollars. Tierney’s column doesn’t define exactly which oil price, or how to deflate it, but simple choices are to use West Texas Intermediate (WTI) oil prices (from the EIA) and correct for inflation with the BLS’s CPI-U index.

In addition to this, I also looked at a metric to measure what Tierney was originally trying to propose – how much oil can be bought with a given unit of wages, which he said should increase over time (people should become worth more and more, relative to oil). My implementation of that was to take average hourly wages in private industry, multiply by forty, and then see how many barrels of oil that would buy (ie how many barrels of oil does a week’s worth of gross pay buy).

Furthermore, I noted in June 2006 that the run up in oil prices since the beginning of 2002 was exponential in form, and this is still roughly true. So I fit an exponential to both metrics and projected it out for a few years. The average doubling time in price is a shade over three years at present for nominal prices, and about 3 1/2 years for real prices. Obviously, an exponential increase in oil prices cannot continue forever (too many doublings and people would be spending all their income on oil), and I have no real idea when it will stop. Thus these extrapolations are just to be taken as what happens if current trends continue, not an unconditional assertion that they will continue.

With those caveats out of the way, here’s the data:



Greeen (left scale) monthly spot price of West Texas Intermediate crude oil, expressed in $2005 (CPI deflated) per barrel. Plum (right scale), number of barrels of WTI crude purchasable by forty average hours of private industry wages, pre-tax. Source: EIA for crude prices, BLS for CPI index, and BLS via Alfred for average hourly wages. Dashed lines are extrapolations of exponential fit from Jan 2002 on for illustration of trends only. These are not predictions, and the basis for assuming future trends will be similar to past ones is weak.

So the most important observation is that, right now, Simmons is on track to lose the bet. The current trajectory of oil prices do not take us to $200 (in 2005 dollars) until sometime in 2012, assuming the trend continues. So things will need to hurry up and deteriorate faster in order for Simmons to win.

However, it seems to me important to look a little deeper. In a sense both men look wrong in light of the data of the last few years. Simmons looks too pessimistic – at least so far, oil prices are not increasing as fast as he presumably expected them to. On the other hand, if we look not at the final terms of the bet, but rather at what Tierney initially proposed, then Tierney looks much too optimistic. The oil value of a week’s work has not gone up, but instead has continued to fall rather sharply (real wages having been roughly flat, while oil is increasing rapidly). And while Simmons is quantitatively wrong, Tierney’s original proposal would seem to be qualitatively wrong – things are moving in the opposite direction from what he predicted.

Of course, there are still two years, nine months, and a couple of weeks to go before the end of 2010 when the bet will be settled for sure. Who knows what will happen in the intervening time. But the trends right now point to Simmons losing the bet by being right on the big picture, but overstating his case somewhat.

Added in Press

After I had written the piece to this point, on Saturday, I sent it to Matt Simmons and John Tierney to see if they had any comment. Only Simmons responded:

Good piece. This is also first time I re-read John’s column in a long
time. Here are a few observations I would add. At the time when Tierney
called, I obviously had no certain idea where crude prices would be in
2010, but thought the likelihood they would rise a great deal was very
high. To make the story simple, I picked $200.

If you take your same chart and ignore the slow rise until mid 2005, and
then take the times it shot up, or start trend line in 2007, the
trajectory gets you there in fine shape.

We obviously talking about far more than a fun $5,000 bet. If oil has
peaked, and the world stays in denial, there could be such social chaos
that it might be hard to even define what the price of crude even is.

More important is the question “Is $110 oil now priced right?” Answer is
also easy. No since this is still only $.17 a cup!

Simmons in essence is arguing that there’s still hope for him to win along the kind of trajectory I’ve marked in orange here:



Greeen (left scale) monthly spot price of West Texas Intermediate crude oil, expressed in $2005 (CPI deflated) per barrel. Plum (right scale), number of barrels of WTI crude purchasable by forty average hours of private industry wages, pre-tax. Source: EIA for crude prices, BLS for CPI index, and BLS via Alfred for average hourly wages. Dashed lines are extrapolations of exponential fit from Jan 2002 on for illustration of trends only. These are not predictions, and the basis for assuming future trends will be similar to past ones is weak.

It’s true the recent run-up is very rapid. I also think it has a somewhat different cause. During much of the 2002-2007 timeframe, we were approaching or in a plateau of global production. On the plateau, increases that would have occurred in demand (due to economic growth) had to be countered by increases in price. Since the price increases were about 25% annually, that suggests that the elasticity ratio (income elasticity/price elasticity) for oil had to be in the range of 5-7, so that 4%-5% global economic growth and flat oil supply could turn into 25% annual oil price increases.

Now, however, we are in a somewhat different world. It looks like there is at least a small bump in supply at the end of 2007, and the prospect of more in 2008 – maybe as much as a couple of million barrels/day, though it’s hard to be sure, still less precise. Given similar to recent trend GDP growth, this wouldn’t require as large a growth in oil price. And given a global recession, it might be expected to lead to much lower price growth, maybe even price falls.

However, what is happening instead is, as the credit bubble deflates rapidly, we have sharp falls in the dollar and negative real interest rates, sparking a rush to commodities. How long this trend will continue is probably anyone’s guess. The best hope for Simmons was perhaps raised by Paul Kasriel in a very important analysis last week, concerning the possibility of the failure of the currency pegs of the Saudi riyal and Chinese yuan

But, in our opinion, what could turn a walk on the dollar into a sprint would be a decision by
the Chinese and/or Saudi central banks to eliminate the pegs of their currencies to the
greenback. Now, what would motivate these central banks to sever the peg? The desire to rein
in their domestic inflation. In an environment in which the dollar is under downward pressure,
the by-product of pegging one’s currency is higher inflation in the economy whose central
bank is pegging.

The inflation mechanics are as follows. The pegging central bank has to buy U.S. dollars in
the foreign exchange market in order to prevent the dollar from falling against its currency.
The dollar-buying central bank purchases dollar with its own currency. The dollar-buying
central bank gets its own currency the same way all central banks get their own currency – it
figuratively “prints” it. The dollar-purchasing central bank therefore floods its economy with
its own base money, resulting in inflation – inflation in the prices of goods/services and
inflation in the prices of assets.



Recent trends in Saudi Arabian and Chinese consumer inflation. Source: Northern Trust

And certainly, the extraordinary events of this weekend, with the emergency acquisition of Bear Stearns by JP Morgan, with guarantees provided by the Federal Reserve, will have put further pressure on the dollar. Personally, I was already assuming that a number of large US financial institutions were going to end up insolvent as a result of the end of the credit bubble. Thus I found the news very pleasing, because it suggested a Federal Reserve able to take very decisive and rapid action to do what was necessary to maintain the functioning of the financial system (I believe a significant amount of nationalization of insolvent institutions is going to be required before we are through). However, judging by stock market prices – Bear was worth $50/share as recently as Thursday and sold for $2/share by Sunday – the market as a whole did not share that perception and has been surprised to the very negative by what just happened. This will further weaken the dollar, and put greater pressure on foreign central banks to pull their pegs.

And if the Saudi and Chinese pegs come undone, then maybe oil could get expensive enough in dollars for Simmons to win his bet after all.

David Paterson: First Openly Peak Oil Aware Governor
Saturday, 15 Mar, 2008 – 8:46 | No Comment

Eliot Spitzer’s historic fall from grace was a blow to many progressives who believed that he would reform New York’s dysfunctional state government, but his replacement may be equally transformative, but from a Peak Oil perspective.

David Paterson will be the nation’s first legally blind Governor and only the fourth African American governor (New York’s first)since Reconstruction ended. As I wrote back in 2006, Lieutenant Governor David Paterson is not only peak oil aware, but willing to make public speeches about it and fairly eloquent on explaining peak oil to ordinary folks.
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He also has a 20+ year history with the state legislature, holding the minority leader post for the Democrats in the State Senate. News coverage has brought to light the high level of respect he gets from both Republicans and Democrats, many noting his soft touch and collegiality as very different from Spitzer’s “I’m an effing Steamroller” approach to getting his way.

It’s not clear yet what his adminstration’s priorities will, but he has a good record on environmental and alternative energy issues. But if tackling oil dependence is high on his agenda, it is possible that he will be able to find the right bargain to strike with legislature and assemble a working majority on key issues.

I can’t find a current version of the speeches he gave during campaign that used to be on the campaign website, but here’s what I captured at the time from a campaign speech that summarized his views:

Eliot Spitzer, my friend, and I, outside of our goals, have a little polite competition. We try to find the most obtuse quotations to work into government policy, and I still haven’t been able to match Eliot’s presumption, which I think is very, very applicable to energy policy, in the words of Yogi Berra: If you don’t know where you’re going, you’ll wind up someplace else.

Tell me if this verse sounds familiar: “And then one day, while he was shooting for some food, up from the ground there came a bubbling crude.” Those light-hearted lyrics from the CBS 60s comedy series, “The Beverly Hillbillies,” in my opinion poignantly portray the mass availability of oil and gas in American society, in the society at that time.

But the situation comedy that allowed a poor mountaineer to become a Hollywood millionaire may have obfuscated the work of a Shell Oil geologist who was offering a different interpretation at the same time.

In 1956, Dr. King Hubert offered a prediction that United States’ oil production would, in effect, plateau somewhere between 1970 and 1971. This was the culmination of research where the first drilling for oil in this country came in 1859. By 1870, we had a network of oil pipes, starting the first network of delivering of oil as a fuel alternative at that particular time, and the curve went up steadily and steadily until, alarmingly, October of 1970 when we were producing 9.5 million barrels of oil per day. That’s the highest we ever achieved.

Currently, we’re producing about 5.1 million barrels of oil per day. We will go under half of the oil production of 1970, 37 years later, sometime in the middle of next year. Now this is staggering because, in addition to that, the United States Department of Energy – and I don’t know how they got this past Phillip Kooning, Bobby – offered a paper describing the mitigation of oil peak downside, meaning that, after the production of oil slips below half of the peak production, at that point the energy return on energy investment becomes negative.

In other words, it takes as much energy to bring the oil out of the ground as it would to realize energy benefits from the oil that’s actually drilled. So the reality is that in the flourishing 50s, we were getting 30 barrels of oil out of the ground for every barrel invested, and we are now somewhere between five and 10 barrels of oil for every barrel we invest.

So the question is: when is the oil going to run out? The answer is: nobody knows.
There were alarmists in the 70s after the fuel shortage crisis that said that we’d run out of oil in the 80s. There are bloggers on the Internet who say we’re going to run out of oil in the next 10 years. No one really knows. Discoveries in the Yucatan Peninsula, the Gulf of Mexico, and in Credo, Alaska, have certainly extended that period of time.

But then the drilling that took place in the Caspian Sea in 1998 that was supposed to yield 400 billion barrels of oil is now being estimated at 40 billion barrels of oil. So it goes back and forth, how long the oil supplies are going to last.

But what’s more important than that would best be represented by this example: The human body has 21 quarts of blood contained in it. We don’t die at the moment we offer our last drop of blood. What’s more important is when our first drop of blood is spilled, and that’s what Shakespeare taught us in the “Merchant of Venice.” The problem is that if a person loses 20 to 25% of his own blood, it severely impairs the systems of the body, and death will not be long.
This is the problem we are going to have if there is any cutoff of our oil supplies in the immediate future.

Remember the 1970s oil shortage only involved a 5% lessened amount of oil than we actually have now, than we actually had at that particular time. What we’ve got to start concentrating on, as a society, are alternatives to what has been the lifeblood of our economy.

The Spitzer administration’s policy on energy can be summed up in four words: conserve today, renew tomorrow.
We have got to stop throwing good energy after bad. We will use conservation for immediate results, and we’ll hope that we can find alternative sources of energy for long-term and future positive results. These are not new ideas. They’re not dramatic. They don’t even cost that much, but they are effective.

And the most effective and immediate way to establish some kind of impact on our environment is through conservation. Conservation doesn’t mean privatization. It doesn’t mean austerity. It just means doing more with less, not just doing with less.

We’re asking New York businesses to raise profits by reducing their utility costs, not by reducing their businesses. We’re asking the families in New York to lower their utility bills, not to lower their expectation of a lifestyle. Conservation is good business sense, because if it saves energy; it saves money. Because energy is the new currency.

We want to make sure that the community action agencies, the not-for-profits and the weatherization organizations, get the proper funding that they will need. So we will use conservation in the short-term. We will implement it to get immediate results, but we want to pursue renewable energy sources as a long-term solution to New York’s energy uses.

This is the long-term solution that can liberate America from its dependency on foreign oil importation. And we certainly think that this is an avenue that we can go on now because it will decrease greenhouse gas effects, create high-skilled, high-paying jobs around the state. It can stimulate in-state investment and generate huge tax revenues.

There is an ancillary benefit to bringing renewable energy, and it is that every dollar invested in renewable energy can create 40% more jobs than the conventional sources and more widely-used sources of gas and oil.

And this typifies Eliot Spitzer’s view of dealing with crisis: he believes that crisis creates opportunity, and opportunity is enhanced by more jobs and economic development for this state.

Paterson is expected to lay out his priorities as governor later this week and then be formally sworn into office on Monday, March 17th at noon.

Peak Oil Overview – March 2008 (Pdf and Powerpoint available)
Thursday, 13 Mar, 2008 – 9:57 | No Comment

Preliminary data regarding oil production through December 2007 is now available from the US Energy Information Administration, so it is a good time to put together an updated summary of where we are now with respect to peak oil. The major themes of this presentation are

• The US oil story
• The world oil story
• Five myths

I have put this summary together in the format of a PowerPoint presentation plus notes. In this format, it is a multi-purpose document. You can

1. Read the post yourself, with or without my comments.

2. Use the presentation (PDF) as a handout, to give to one or two of your friends. My comments are intended to give you some more background, so you can better explain the presentation and answer questions.

3. Use the presentation for a group, using the PowerPoint format.
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The PDF version of this presentation is available here. The PowerPoint version is available here.

Peak Oil Overview – March ’08

Gail Tverberg
TheOilDrum.com

Outline

• The US oil story
• The world oil story
• Five myths
2

The US Oil Story

3

The US Oil Story


4

Comments: US oil production has been declining since 1970, in spite of technology advances and new drilling in the Gulf of Mexico. The recent dip and uptick reflects lower production in 2005 due to hurricane damage, followed by a bounce back in 2006 and 2007, as the damage was repaired.

US Peak in 1970

• US had been world’s largest producer

• Peak came as a surprise to most
—Had been predicted by Hubbert in 1958

• Precipitated a rush to find oil elsewhere
—Ramp up Saudi and Mexico production
—New production in Alaska and North Sea

5

Comments: We were fortunate in 1970 to find other places in the world where oil was available, but had not yet been developed. There are still a few such sites available (for example, some US sites that have been placed off-limits for development), but they are much smaller in relationship to what was available in 1970.

M. King Hubbert had predicted in 1956 that the US production of oil would peak in 1970, but few believed him.

On page 22 of the same report, he predicts that world oil production will peak “about 2000″. His prediction was made in 1956. As such, it did not reflect significant changes in the 1970s, including the significant recession of the 1973-1975 period, the switch to nuclear and natural gas instead of petroleum for electricity generation, and mileage improvements for cars. If these had been reflected, the predicted peak would have been several years later.

Saudi increases were quickest

• Saudi oil company was run by Americans
—Able to ramp up quickly

• OPEC embargo in 1973, however
—Oil shortages
—Huge oil price run-ups
—Lead to major recession 1973 – 75

6

Comments:
According to Wikipedia, Arabian American Oil Company (Aramco) was jointly owned by four US oil companies in 1970. In 1973, the Saudi Arabian government acquired 25% of the company. The percentage ownership was increased to 60% in 1974, and 100% in 1980.

OPEC began operation in 1965, but did not have pricing leverage until the United States could no longer produce the vast majority of its own oil, because of its decline in production. In Octover 1973, OPEC initiated an oil embargo against countries that supported Israel in the Yom Kippur War, particularly targeting the United States and Netherlands. The embargo lasted only a few months, until March 1974.

During this time, there was a sharp rise in oil prices, and a sharp drop in the stock market. In the United States, gasoline was rationed with people able to buy on odd or even days, depending on the last digit in their license plate number. According to Wikipedia, oil consumption in the United States dropped by 6.1% during this period.

The 1973-75 recession was the most severe recession since World War II. Merrill Lynch says it believes the current recession will be similar to that recession.

Other oil online by late 1970s

7

Comments: Even when an oil company wants to start new production quickly, it is difficult to do so. The ramp up in Alaska oil production had to wait until the Trans-Alaskan Pipeline System was completed in 1977.

It was known that oil was available in the North Sea prior to the oil embargo. It was not until the price run-up related to the embargo that it was economically feasible to drill there, however.

Production in all three of the areas shown is now declining. Alaskan production reached its peak in 1988; the North Sea peaked in 1999; and Mexico peaked in 2004. The shapes of the production curves vary for the different locations, depending on where the oil was located, and how it was produced.

Now the US is a major importer of oil
and a tiny user of alternatives


8

Comments: This figure is from Page 166 of the 2008 Economic Report of the President. The data shown are 2006 figures. Percentages for alternatives would be slightly higher for 2007.

The graphs are not as clear as I would like. The larger circle on the left represents consumption. It totals 100 quadrillion Btus. The smaller circle represents production. It totals 71 quadrillion Btus. Renewables are in the section pulled out. In total, renewables amount to 10% of production or 7% of consumption. The vast majority of renewables are hydroelectric and “other biomass” (wood used to heat homes and fuel some electric generating plants).

Reading Slide 8

• About two thirds of oil is imported

• Biofuels make up about 1.0% of energy production – a little less of use

• Wind comprises 0.4% of energy production

• Solar comprises 0.1% of energy production

9

Comments: We use a huge amount of oil and other fossil fuels. Even with big ramp up in alternatives, they are still tiny. If a cutback is made in fossil fuels, either because of shortages or because of a desire to reduce carbon dioxide, it seems clear that at least part of the response will have to be reduce total energy usage.

The World Oil Story

10

World Oil: Discoveries follow same pattern as US production


11

Comments: The discovery information is based on backdated information – what we now think old discoveries were worth. Some of the big oil fields in the Middle East were discovered about 1960. We are still discovering new fields, but they tend to be smaller and more difficult to extract. The discovery information includes only liquid oil, not oil in the form of tar or other solids.

The combination of discoveries which peaked many years ago, and oil extraction which tends to peak in individual areas, leads one to believe the eventually world oil production will peak. There will still be oil in the ground, but it will be difficult to extract. Eventually, we simply won’t be able to keep extracting as much as we would like:

• As oil fields get older, the percentage of water extracted with the oil tends to increase. In some cases the water percentage exceeds 99%. Once an oil field’s water production exceeds the installed water handling capability, production will need to be reduced. When the cost of additional water handling capability exceeds the cost of oil extracted, it stops making economic sense to extract the oil.

• Some of the oil will be mixed with toxic chemicals like poisonous hydrogen sulfide gas. Special techniques will be required to safely extract this oil. This process will be expensive and time consuming. A giant oil field discovered in Kazakhstan in 2000 has this problem and isn’t expected to come on line until at least 2011.

• Some of the oil is found extremely deep beneath the sea. Special techniques need to be developed to deal with the high pressures and the temperature differentials encountered when drilling in these locations. Developing these new techniques takes time and is expensive. At some point, we will reach our limit on deep sea drilling.

• Some of the oil is very viscous, akin to tar. It can only be extracted by digging. Production requires inputs of fresh water and natural gas. Once limits on either of these are reached, production must stop. In some cases nuclear may be substituted for the natural gas, but this takes time, money, and agreement of the local population.

World oil production has stalled


12

Comments: Oil production on an “all liquids” basis was flat for the years 2005, 2006, and 2007. On an energy available basis, production actually declined. There are several reasons for this:

• The “All Liquids” summary includes lower energy products like ethanol and natural gas liquids. These have been growing, while crude oil production has tended to slightly decline since 2005.

• The oil produced requires more and more energy in extraction, because it is mixed with more and more water, and is found in deeper and deeper locations. More energy is required for extraction, leaving less for end users.

• If we look at oil available for imports, this has been declining since 2005. Part of the reason is the greater amount of oil used in extraction; part of the reason is that the standard of living in oil exporting nations is rising, so these nations are using more of the oil themselves, leaving less to export.

And prices are spiking


13

Comment: The fact that oil prices have been spiking since 2005 should come as no surprise. I show an estimated partial 2008 price on this graph, too, since we know the price spike has continued into 2008.

Given the shrinking supply and rising demand, the rise in prices was close to inevitable. Some of the poorer countries are being priced out of the market, and the use of coal is rising, particularly in China.

The higher prices have stimulated work on fields that were known, but not fully developed. Recent data compiled on oil megaprojects indicates that oil companies are now making a concerted effort to develop sites that may be available but have not yet been developed. Many of these projects are expected to begin production in 2008 and 2009.

OPEC, particularly Saudi Arabia, has had
reduced oil production recently


14

Comment: The oil production of Saudi Arabia and OPEC has been sufficiently variable over time that it is difficult to make predictions, simply based on trends. OPEC’s production, and in particular Saudi Arabia’s production, is down in both 2006 and 2007. It is hard to know exactly what this means.

According to the US Energy Information Administration, Saudi Arabia’s highest oil production was in 1980, when it produced 9.9 million barrels a day. Its recent peak was in 2005, when it produced 9.6 million barrels a day. In 2006, Saudi production dropped to an average of 9.2 million barrels a day. In 2007, production from February to August was only 8.6 million barrels a day.

When OPEC agreed to raise quotas near the end of 2007, Saudi Arabia did in fact raise its production. Its highest single month of production in 2007 was 9.1 million barrels a day, in December 2007. This represented a 500,000 barrel a day increase over its earlier low production of 8.6 million barrels a day, but still left production below both the 2006 average of 9.2 million barrels a day and the 2005 average of 9.6 million barrels a day.

One question too is whether this increase will continue, or if it is just temporary. It is sometimes possible to squeeze out a little extra production for a while, but then production drops back to a more normal level. Saudi Arabia originally planned to have an upgraded field (Khursaniyah) on line by late 2007, which was expected to produce an extra 500,000 barrels a day of oil. It may have thought it could make a spurt of extra production until this field came on line. Now the Khursaniyah field upgrade has been delayed until late 2008. Will Saudi Arabia be able to continue the increase, without the assistance of the Khursaniyah field?

Another question is why OPEC refused to raise its quota further on March 5, 2008. Is Saudi Arabia now really at the peak of what it can produce? It claims to have more production available in reserve. We know that Saudi Arabia has some poor quality oil off-line because the oil requires special processing which is not yet available in any refinery. Is this the only Saudi production off-line? Are other OPEC countries also unable to produce more?

OPEC’s true reserves are unknown

• Published reserves are unaudited

• Last Saudi reserve while US involved was 110 Gb in 1979 (perhaps 168 at “expected”)
—Production to date 81 Gb, implying 29 to 87 Gb remaining; Saudi claims 264 Gb remaining

• Kuwait published 96.5 Gb – Audit 24Gb

• GW Bush says regarding asking Saudi Arabia for more oil
—“It is hard to ask them to do something they may not be able to do.”

15

Comment: If one analyzes the reserves for OPEC countries, one very quickly comes to the conclusion that the published numbers are unreasonably high.

This is the story: In the early 1980s, OPEC oil countries were all vying for high quotas. To get those high quotas, they believed that publishing high reserves would be helpful. One by one, OPEC oil countries raised their reserve estimates, in an attempt to make it look like they had more oil, so deserved higher quotas. To further this illusion, they kept the reserve numbers at the new high level, even when oil had been pumped out, and no new oil had been found.

The practice has continued for years. OPEC leaders found that by overstating their reserves, they gained new respect, both within their own countries and abroad. They also found that the practice was very easy to do, since no one is auditing the reserve numbers they provide.

A graph of OPEC oil reserves over time is as follows:


(Not in Presentation)

There are many other ways this problem can be seen. For example, OPEC’s oil production is unreasonably low in relationship to its reserves, unless the countries are inept at production or are misstating their reserve amounts. I discuss this issue further in my post The Disconnect Between Oil Reserves and Production. “Ace” has calculated some much lower reserve estimates, based on industry estimated recovery percentages.

Another insight can be gained by looking at Saudi oil reserves, when Americans were involved in setting reserves. According to Matt Simmons’ “Twilight in the Desert”, Saudi oil reserves were 110 Gigabarrels (Gb or billion barrels in US terminology) in 1979, back when Americans were still partial owners of Aramco. If we subtract the 81 Gb pumped out since then, this suggests remaining reserves of 29 Gb.

If is possible (even likely) that the 1979 American estimate was low. If, instead, we use the Saudi published estimate of 168 Gb in 1980, and subtract from it production of 81 Gb to date, we get an estimate of 87 Gb. This is less than a third of the 264.3 Gb that Saudi Arabia is currently reporting as reserves!

Kuwait is another country where we have an alternate estimate of the proven reserves available. An analysis by the Kuwait Oil Company as of December 31, 2001, showed proven reserves for the country of 24 Gb. Their published reserves were 96.5 as of December 31, 2001, moving up to 101.5 as of December 31, 2006!

President George W. Bush seems to be aware of Saudi Arabia’s production/reserve problems. In an interview on ABC’s Nightline, when asked why he didn’t pressure the king for more oil, George Bush said

If they don’t have a lot of additional oil to put on the market, it is hard to ask somebody to do something they may not be able to do.

Somehow, US textbooks and newspapers have not figured out the problem with OPEC reserves. They continue to quote huge “proven reserves” for most of the OPEC countries. The word proven adds credibility to the numbers, suggesting that somehow, the reserves have been proven to some authority, when nothing could be further from the truth.

The United States Geological Service (USGS) has added further to the confusion. It has taken the absurd reserves published by OPEC, and made calculations based on US development patterns suggesting that OPEC reserves may, in fact, be low. USGS publishes its even higher estimates, confusing the situation further.

Fortunately, FSU production has increased recently


16

Comment: The Former Soviet Union saw a sharp decline in oil production in the late 1980s and early 1990s. With the adoption of modern extraction methods, they have been able to increase production again. There have even been some more recent discoveries brought on line.

Production going forward is uncertain

• OPEC refuses to increase quotas

• Numerous reports say Russian production is likely to begin decreasing soon

• Little hope for US, North Sea, Mexico

• Canadian oil sands contribution is very small

• Recent discoveries have been small, relative to what is needed

• New production techniques can lead to sudden drop-offs
—Followed by small dribble for years from EOR

17

Comments:We have problems almost everywhere we look. OPEC doesn’t look like it is willing/able to increase production; Russia, which is the biggest part of the Former Soviet Union, looks like it is about to begin to decline; and there are a huge number of countries already post-peak, like the United States, Mexico, and the countries that make up North Sea production.

Even Canada, apart from the oil sands, is post peak. Canada depends on imports–heavily from Saudi Arabia–for its oil. While Canada has been exporting oil from the oil sands to the US, there are really two issues involved:

(1) The amount of oil from the oil sands is not likely to ramp up quickly.

(2) Canada is likely to need the oil itself, as its other production declines. This is especially the case if Saudi oil which it imports continues to decline. Under NAFTA, Canada is obligated to export a proportional share of its oil to the US, but this may be subject to renegotiation in the next few years.

There are really a couple of issues with newer technologies that are being used. One is that fancier and fancier extraction tools (such as horizontal wells and maximum reservoir contact wells) have been developed. These are able to suck out a greater percentage of the available oil, before production suddenly “hits a wall” when the layer of oil has been extracted, and the remaining oil is mixed with a huge amount of water and under little pressure. If this should happen on an enormous field like Ghawar in Saudi Arabia, we could very quickly see production drop by 2 million barrels a day, or more.

In recent years, quite a few “enhanced oil recovery” methods have been developed. Much of the impact of these methods is already reflected in the production data graphed. In some cases, like Mexico, it has permitted production to continue longer before the inevitable drop in oil production came. In others, it helps wells to continue to produce at a very low level after the vast majority of production is completed. It is doubtful that oil production will ever stop – a dribble that is nearly all water will continue indefinitely.

Projections of Future Production Vary Widely


18

Comment: The highest estimate in slide 18 is from the US Energy Information Administration. It is based solely on demand, under the assumption that OPEC can always provide additional oil if needed.

The next highest forecast is from the newsletter of the Association for the Study Peak Oil and Gas-Ireland, prepared by Colin Campbell. A link to it can be found here. It assumes that production will rise from its current level of 85 million barrels a day to a peak of 88 million barrels a day in 2010. After that, production will decline.

The next highest forecast is that of “Ace” of The Oil Drum staff. A link to his forecast can be found here. In this forecast, Ace considers the various Megaprojects, and when they are expected to go on line. He also considers expected decline rates on existing fields. He believes that we are on a plateau now that may last a few years. After that production will decline.

The remaining estimate is by Matt Simmons. In this interview, he mentions that he expects crude oil (not “total liquids”) to drop to 65 million barrels a day by 2013. I have attempted to translate this comment into an equivalent projection, on a total liquids basis. It ends up being just a bit below Ace’s projection.

World “All Liquids” Forecasts

• “All Liquids” – Includes biofuels and “coal to liquid” fuels

• US EIA forecast – Based solely on demand

• ASPO Newsletter – Assoc. for the Study of Peak Oil and Gas Ireland, March ‘08

• “Ace”- Tony Eriksen, on The Oil Drum

• Simmons – Matt Simmons, recent interview on evworld.com

19

EIA expects biofuels, CTL,
and oil sands to remain small


20

Comment: The US Energy Information Administration’s current projections suggest that it does not expect any of these fuels to grow to be significant between now and 2030.

Five Myths

21

Myth #1: OPEC could produce more if it used current techniques

• International oil companies use same service companies US companies do

• Most are using up-to-date techniques

• Expenditures often are high

• Problem is very old fields

• Overstated reserves raise expectations

22

Comment: It is easy to see how this myth might arise, if people believe published reserves.

Myth #2: Drilling in Arctic National Wildlife Refuge will save us

23

Comment: This slide is from a presentation of Dr. Sam Shelton of Georgia Tech. The oil from ANWR is expected to provide only a small upward “bump” to US production.

Quite a few of the other much-hyped solutions are expected to provide equivalently little benefit. We will likely need to reduce consumption to better match supply.

Myth #3: A small downturn can easily be made up with energy efficiency

• The quickest impacts are financial
—Recession or depression
—Serious recession in 1973 – 75

• Use of biofuels raises food prices
—Further increases recession risk

• Don’t need peak for recession
—Only need supply/demand shortfall
—Likely what we are experiencing now

24

Comment: The connection between oil supply and the economy is not well understood by most. A shortage of oil very quickly leads to an increase in prices, and a cutback in the demand for other goods and services. The combination of these events tends to cause a recession. Cutting back on usage tends not to be sufficient to prevent the problem, because there are so many other users around the world, including in China and the developing world. They are likely to cause an increasing demand for oil, even if we try to cut back.

Myth #4: Canadian oil sands will save us

• Hard to see this with current technology
—Technology known since 1920s
—Production slow and expensive

• Requires huge amount of natural gas
—In limited supply

• Most optimistic forecasts equal 5% of current world oil by 2030
—Even this exceeds available natural gas
25

Comment: There has been commercial development of the Canadian Oil Sands since 1967. Huge amounts have been spent, and there has been great damage to the environment. Even with this, production has remained small–only a little over 1% of world supply. Natural gas limitations suggest that we will never be able to greatly ramp up production.

Myth #5: Biofuels will save us

• Corn-based ethanol has many problems
—Raises food prices, not scalable, CO2 issues, depletes water supply

• Cellulosic ethanol theoretically is better
—Still does not scale to more than 20% of need
—Competes with biomass for electric, home heat

• Biofuel from algae might work
—Not perfected yet
26

Comment: Every study that has been done recently with respect to corn ethanol seems to come out with worse indications. Corn ethanol has virtually no benefits over petroleum. It uses huge amounts of fossil fuels as inputs, so it has most of the drawbacks of fossil fuels. It also has its own drawbacks, including raising prices, damage to the environment, high water usage, and possible CO2 and other global warming gas increases because of land use changes and nitrogen fertilizer use.

At this point, there aren’t good alternatives to gasoline commercially available, however. Since there is great political appeal to growing our own fuel, corn ethanol is supported by most politicians, even if any reasonable analysis would say its benefit is very limited.

Longer term cellulosic ethanol may be a better solution, but at this time it is not commercially available. Even if we use wood and switchgrass as inputs, cellulosic ethanol will be difficult to scale up to provide more than a small share of the needed fuel.

Biofuel from algae looks to some like it might work. At this point, we do not have a commercial way of doing this and the cost would be extremely high.

Food to 2050
Monday, 10 Mar, 2008 – 7:40 | No Comment



Average United States yields per unit area for various crops, 1900-2007. Yields are expressed as a multiplier of the 1900-1935 average. Source: National Agricultural Statistics Service.

[break]

This post continues an exercise I began a month or so ago of trying to figure out how civilization could be moved to a mostly sustainable footing by 2050, while still being recognizable as civilization, and in particular allowing some continued level of economic growth between now and then, especially in the developing countries. Let me remind you of the parameters of the exercise:

  • Population: The global population is able to grow and go through its demographic transition with death rates continuing to go down. No die-offs.
  • Economy: The world economy is able to grow on average over the period – modestly in developed countries, faster in developing countries.
  • Carbon emissions: The global energy infrastructure will be mainly replaced with non-carbon-emitting energy sources by the end of the period, and residual emissions will be rapidly diminishing.
  • Fossil fuels: I assume that peak oil is here about now but that declines will be governed by the Hubbert model (and thus will be gradual). I assume natural gas and coal are globally plentiful enough that climate policy is required to prevent their full use.
  • Technology: I do not assume any massive breakthroughs – no technological miracles that solve problems in ways completely unknown or untested today. However, where technological sectors have long established rates of progress in key metrics, I extrapolate the metric to continue improving at the historic rate (eg the economics of solar power, or the yields/acre of agriculture are assumed to keep improving on the historical trajectory).
  • Impact on wild ecosystems. Developed countries are assumed to maintain the protections they currently have in place (for national parks, wildernesses etc). Developing countries are assumed to exploit their unused land up to the point of best current practices for developed countries. Whatever impact on ecosystems arises from climate change due to past carbon emissions and the tail of emissions to 2050 is viewed as unavoidable.
  • Conservatism Other than the above, I use the overarching principle of trying to assume as little change in the way the world works as possible – I assume it remains a more-or-less free market world, in which national governments regulate their own countries to temper the worst excesses of the free market and periodically enter into treaties on the more pressing global problems. I assume it remains full of highly imperfect humans mostly struggling to improve their own circumstances. I assume people are willing to come together and take collective action for the common good, but only when the need for that action has become so overwhelming and immediate as to be irrefutable.

In Powering Civilization to 2050 I argued it was potentially feasible to transition to power civilization with a mix of solar, wind, and nuclear energy, with the transition well on the way to completion by 2050. (Luis de Sousa made a broadly similar argument in Olduvai Revisited 2008). This would require a period of belt tightening and conservation in the next couple of decades, but once the transition had overcome the critical threshold (as solar energy in particular became cheap), I suggested energy in general would get cheap again. I adopted the UN medium population projection which has population at about 9 billion by 2050, with growth slowing sharply. Making plausible assumptions for economic growth between now and 2050 if energy was available, we got to a world GDP of about $350 trillion in 2050 (in 2006 purchasing power parity dollars), versus about $70 trillion in 2007

If the average global citizen was significantly wealthier in 2050, they would undoubtedly want to drive more. The switch to primarily electrical energy sources for civilization would preclude doing this with all liquid fuels. In Four Billion Cars in 2050? I argued that, given that the average citizen will be living in a dense third world city by 2050, we can assume rates of ownership typical of the most car-free corners of western Europe at the moment (Holland), which gives rise to a few billion cars in 2050. I further argued that it seems feasible that this many plugin-hybrids could be built – there appears to be enough lithium for the batteries – and run on less than 10mbd of liquid fuels.

In this piece I want to look at another area that many people think is likely to be a critical bottleneck to civilization continuing – the area of food, agriculture, and soil. I am of course not an expert in these areas, but happily there is a lot of excellent scholarship and scenario building that I can lean on. My task is reduced to reporting of the existing science, with some modest adjustments to reflect where my assumptions differ from those of published scenarios (most especially the assumption of a near-term peak in oil supply, and a full-speed effort to convert society to carbon-free energy sources.)

Let’s begin with two very helpful UN Food and Agriculture Organization reports: World agriculture: towards 2015/2030, and the sequel World Agriculture: Towards 2030/2050. What these reports do is basically look at projections for population and economic growth and then estimate how much food people would want in the future, and what quantity of agricultural commodities would be required to fulfill that demand. The first report focusses a lot more on the supply-side factors of how this could be done, while the second report extends the analysis out further in time but confines itself much more to demand side considerations.

The input assumptions about population and world GDP are slightly different than mine, but close enough that I am just going to adopt their food scenario wholesale, rather than trying to construct my own from first principles. The differences would be small – much smaller than the other uncertainties in the problem. Let me first summarize their scenario, and then we will start to explore the potential bottlenecks that might prevent achievement of this much food production. (However, I strongly encourage readers that care about where their food is going to be coming from in the future to take the time and read the FAO reports themselves.)

Let’s start with a look at what the FAO scenario has for average nutrition. This next graph shows both history and projections to 2050 for daily dietary energy (in Kilocalories/day/person) in various regions of the world, as well as the global average.



Per capita food availability 1970-2050 for various regions, together with world average. Values for 2000 and before are data (left of the vertical red line), 2010 onwards are projections (right of vertical red line). Source: Table 2.1 of UN Food and Agriculture Organization, World Agriculture: Towards 2030/2050.

As you can see, the history is that most regions of the world have been getting more and more food. The exceptions are some of the formerly communist countries which suffered a partial collapse of their societies as they attempted to transition to a different economic system. The FAO projects that as the developing countries continues to grow faster than the developed world, they will be able to afford more food, and thus they will continue to approach, but not completely achieve, developed world levels of (over)feeding.

I could quibble with a few things here – I might guess that wealthier developing countries will get closer to current developed country averages by 2050, and I wonder about the sharp trend break between the past and the projections in the developed world. Still, these are minor issues – I think this has to be in the right ballpark for any scenario that assumes continued improvement of economic conditions in the developing world, and no major societal collapses (which is what we are trying to figure out how to avoid).

If we take the FAO’s scenario breakout of food groups (which they give by weight on a per-capita basis) and multiply by population, we get the following for total food demand:



Total food requirement 1970-2050 by major food types. Values for 2000 and before are data (left of the vertical red line), 2010 onwards are projections (right of vertical red line). Source: Table 2.7 of UN Food and Agriculture Organization, World Agriculture: Towards 2030/2050 and UN Medium Population Scenario for population figures. Note that I did not include “Other food”, which is only given in calorific terms in the table, and constitutes less than 10% of calories. Fruits and green vegetables would be included under that category.

As you can see, by 2050, the world would need to be producing about 50% more food than it is today (by weight – somewhat more in terms of energy in crops, since the meat component grows more than 50%). This contrasts with roughly doubling the planetary food production over the last 40 years. However, it’s still an awful lot of extra food to produce – the required absolute increase in food production is similar in size to what has been achieved in the last forty years.

Let’s now consider a variety of potential bottlenecks to achieving this kind of increase in food production. One major area of concern (water) I will reserve for its own future piece, but I address the other big potential constraints that I am aware of.

Land Use and Crop Yields

The doubling of global food production since the 1960s has not come about because of expanding cropland. The world has about 14.8 billion hectares of land area, and the uses of it over the last few decades are as follows:



Major classes of global land use 1961-2003. Source: FAO.

As you can see, the areas of cropland and pasture have increased slightly, at the expense of forests and other land, but the shifts are small percentage-wise. Instead, increased food production for the planet’s extra billions of humans has largely come from big increases in agricultural yields.

I’m going to start with some yield data for the US, where we have long time series on yields for a number of crops. After that, we’ll discuss the global situation. I have taken National Agricultural Statistics Service data on average US yields and reexpressed them on a common basis as a multiplier of the 1900-1935 average (or for those crops were the series doesn’t start till after 1900, from whenever it does start until 1935).



Average United States yields per unit area for selected crops, 1900-2007. Yields are expressed as a multiplier of the 1900-1935 average. Source: National Agricultural Statistics Service.

All the series show a roughly similar pattern. They were all fairly flat (with noise) until sometime in the late 1930s or 1940s. Then they all took off and began growing roughly linearly (again with noise). Modern yields are anywhere from 2.3 to 6.5 times greater than yields in the early twentieth century. Although some series have had periods of lagging for a decade or two (eg peanuts after 1983, dried beans – garbanzos and the like – after 1990), on the whole most of the series look like they are still increasing – there is no obvious pattern of yields flattening off yet. I encourage you to stare at this remarkable data for a long time. It’s really worth thinking about the implications of it. Here are a few conclusions I draw.

Firstly, mechanization (and fossil-fuel powered machinery) are not the main cause of modern yields. Steam tractors were in widespread use in the late 1800s and early 1900s:



Steam Tractor in action in Ontario, 1916. Source: Ontario Govt Photo Archive.

The first gasoline powered tractor to be mass produced was introduced by Ford in 1917. Yet the yield take-off doesn’t begin until 1940, and is almost certainly due to the agricultural innovations that comprise the green revolution. As The Future of Crop Yields and Cropped Area explains it:

The Green Revolution strategy emerged from a surprising confluence of different lines of agricultural
research (Evans, 1998) – the development of cheap nitrogenous fertilizers, of dwarf varieties of major
cereals, and of effective weed control. Nitrogenous fertilizers increase crop production substantially, but
make plants top-heavy, causing them to fall over. The development of dwarf varieties solves this problem,
but at the cost of making plants highly susceptible to weeds, which grow higher than the dwarf plants,
depriving them of light. The development of effective herbicides removed this problem. Further Green
Revolution development focused on crop breeding to increase the harvest index – the ratio of the mass of
grain to total above-ground biomass.

Secondly, anyone who wants to suggest that the world can be fed other than through industrial agriculture has some explaining to do about this data. Every crop shows yields prior to the green revolution that were flat and a small fraction of modern yields. If we returned to yields like that, either a lot of us would be starving, or we’d be terracing and irrigating most of the currently forested hillsides on the planet for food. While shopping for locally grown produce at your nearest organic farmer’s market, stop and give a moment of thanks for the massive productivity of the industrial enterprise that brings you, or at least your fellow citizens, almost all of your calorie input.

Which raises a third important point. Food = Area Cropped x Average Yield. If average yields had not increased like this, humanity’s impact on natural ecosystems would be much greater. It’s true that industrial agriculture has a lot of impacts (nitrogen runoff and the like). However, the alternative would probably have been worse, since it would have required us to intensively exploit enormous areas of fragile, and currently less intensively exploited, land.

Fourthly, the period of greatest global warming, since 1950, coincides with the explosion of yields. I do not suggest that global warming caused increased yields. But at any rate, it would be hard to argue that industrial agriculture yields cannot grow rapidly in the face of the kind of warming we have seen to date: they just did

Well, is the global situation the same, or is this US data unrepresentative? I don’t have access to as much data, but roughly, yes, it’s the same:



Average global cereal yields, 1961-2000. T. Dyson: World Food Trends: A Neo-Malthusian Prospect?, compiled from FAO data.

As you can see, global cereal yields are on the same roughly linear upward trajectory since 1961. Cereals are by far the most important food crop since not only do people eat a lot of them directly, but they also account for much of the input to the meat and dairy food groups that people eat, and thus are the base for the bulk of human calorie intake.

So obviously the critical question is whether or not yields can continue to increase in this manner? If we can just project out the linear increase than clearly a linearly increasing amount of food from a roughly constant amount of land is feasible, and humanity will be able to feed itself without having too much further impact on other ecosystems. On the other hand, if yields fail to increase, then we will be faced with unpleasant tradeoffs like trying to farm fairly unsuitable regions (think tropical rainforests, or the hilly parts of the western US), or not have enough food. So are we near some kind of theoretical yield limit?

Some people seem to think so. Lester Brown, who has been issuing alarming prognostications about food for several decades now, writes in Chapter 4 of his book Outgrowing the Earth

Although the investment level in agricultural research,
public and private, has not changed materially in recent
years, the backlog of unused agricultural technology to
raise land productivity is shrinking. In every farming
community where yields have been rising rapidly, there
comes a time when the rise slows and eventually levels
off. For wheat growers in the United States and rice growers
in Japan, for example, most of the available yield-raising technologies are already in use. Farmers in these
countries are looking over the shoulders of agricultural
researchers in their quest for new technologies to raise
yields further. Unfortunately, they are not finding much.

From 1950 to 1990 the world’s grain farmers raised the
productivity oftheir land by an unprecedented 2.1 percent
a year, slightly faster than the 1.9 annual growth of world
population during the same period. But from 1990 to 2000
this dropped to 1.2 percent per year, scarcely half as fast.

The argument in the second paragraph doesn’t hold water to me. Population has been increasing pretty much linearly in recent decades, and agricultural yields have also been increasing pretty much linearly – I don’t see any break from that pattern in the 1990-2000 decade. Of course, a linear rise will look like a dropping exponential growth rate, but Brown is careful to only point out the slowing in the yield growth rate. What he doesn’t tell you is that world population growth had also dropped to only 1.4% during 1990-2000. In general, food prices until very recently were in a multi-decade secular decline, indicating that food production was not under serious supply-side constraint until the last few years:



Ratio of crude food/feed producer price index to all US consumer prices, Jan 1969-Dec 2007. Source: St Louis Fed.

And the argument in the first Brown paragraph I quoted doesn’t seem to be how the agricultural scientists themselves are feeling. For example, Science reported last week:

A decade ago, sequencing the maize genome was just too daunting. With 2.5 billion DNA bases, it rivaled the human genome in size and contained many repetitive regions that confounded the assembly of a final sequence. But last week, not one but three corn genomes, in various stages of completion, were introduced to the maize genetics community. In addition, researchers announced the availability of specially bred strains that will greatly speed tracking down genes involved in traits such as flowering time and disease resistance. These resources are ushering in a new era in maize genetics and should lead to tougher breeds, better yields, and biofuel alternatives. “We’re sitting on very exciting times,” says Geoff Graham, a plant breeder at Pioneer Hi-Bred International Inc.

The geneticists are well on the way to having complete genome sequences for thousands of corn varietals from all over the world. If I was a corn geneticist, I’d be pretty excited too.

A more grounded attempt to estimate the issue seems to be the FAO’s discussion in World agriculture: towards 2015/2030:

The slower growth in production projected for the next 30 years means that yields will not need to grow as rapidly as in the past. Growth in wheat yields is projected to slow to 1.1 percent a year in the next 30 years, while rice yields are expected to rise by only 0.9 percent per year.

Nevertheless, increased yields will be required – so is the projected increase feasible? One way of judging is to look at the difference in performance between groups of countries. Some developing countries have attained very high crop yields. In 1997-99, for example, the top performing 10 percent had average wheat yields more than six times higher that those of the worst performing 10 percent and twice as high as the average in the largest producers, China, India and Turkey. For rice the gaps were roughly similar.

National yield differences like these are due to two main sets of causes:

Some of the differences are due to differing conditions of soil, climate and slope. In Mexico, for example, much of the country is arid or semi-arid and less than a fifth of the land cultivated to maize is suitable for improved hybrid varieties. As a result, the country’s maize yield of 2.4 tonnes per ha is not much more than a quarter of the United States average. Yield gaps of this kind, caused by agro-ecological differences, cannot be narrowed.

Other parts of the yield gap, however, are the result of differences in crop management practices, such as the amount of fertilizer used. These gaps can be narrowed, if it is economic for farmers to do so.

To find out what progress in yields is feasible, it is necessary to distinguish between the gaps that can be narrowed and those that cannot. A detailed FAO/IIASA study based on agro-ecological zones has taken stock of the amount of land in each country that is suitable, in varying degrees, for different crops. Using these data it is possible to work out a national maximum obtainable yield for each crop.

This maximum assumes that high levels of inputs and the best suited crop varieties are used for each area, and that each crop is grown on a range of land quality that reflects the national mix. It is a realistic figure because it is based on technologies already known and does not assume any major breakthroughs in plant breeding. If anything, it is likely to under-estimate maximum obtainable yields, because in practice crops will tend to be grown on the land best suited for them.

The maximum obtainable yield can then be compared with actual national average yield to give some idea of the yield gap that can be bridged. The study showed that even a technologically progressive country such as France is not yet close to reaching its maximum obtainable yield. France could obtain an average wheat yield of 8.7 tonnes per ha, rising to 11.6 tonnes per ha on her best wheat land, yet her actual average yield today is only 7.2 tonnes per ha.

For example:


Gap between actual national yields and estimated yield with best currently known varietals and inputs. Source: FAO report, World agriculture: towards 2015/2030

And so,

Similar yield gaps exist for most countries studied in this way. Only a few countries are actually achieving their maximum obtainable yield. When real prices rise, there is every reason to believe that farmers will work to bridge yield gaps. In the past, farmers with good access to technologies, inputs and markets have responded very quickly to higher prices. Argentina, for example, increased her wheat production by no less than 68 percent in just one year (1996), following price rises, although this was done mainly be extending the area under wheat. Where land is scarcer, farmers respond by switching to higher-yielding varieties and increasing their use of other inputs to achieve higher yields.

It seems clear that, even if no more new technologies become available, there is still scope for increasing crop yields in line with requirements. Indeed, if just 11 of the countries that produce wheat, accounting for less than two-fifths of world production, were to bridge only half the gap between their maximum obtainable and their actual yields, then the world’s wheat output would increase by almost a quarter.

Another way to try to get at the issue is to look at how current yields compare to the theoretical potential of photosynthesis. This is generally expressed as net primary productivity (NPP) – the amount of carbon that plants can fix, exclusive of that used to power their own respiration. The net primary productivity is the photosynthetic product that is available to be eaten by people and other animals, rot into the soil, etc. Here is a map of the fraction of net primary productivity appropriated by humans published by Haberl et al last year in the Proceedings of the National Academy of Sciences, which I take to be a decent representative of the state-of-the-art in this kind of calculation:


Global distribution of fraction of potential net primary productivity appropriated by humans. Source: Haberl et al: Quantifying and mapping the human appropriation of net primary production in earth’s terrestrial ecosystems

You might look at the red – 60%-80% appropriation of NPP in many of the world’s key crop growing areas, and think there wasn’t enough head room for another 50%+ increase in yield in those areas. However, it’s important to understand exactly how the accounting in these calculations is done. Let’s consider a piece of the US midwest that used to be tall-grass prairie and is now under corn. What Haberl et al would do is first use a vegetation model (specifically, this one) to establish that it would be a prairie there absent human intervention, and figure out how much carbon the prairie would have fixed as NPP. That quantity they call NPP0 (for that particular area – they compute NPP0 for every cell in a global grid). So this is an estimate of the theoretical carbon fixation in the absence of any human influence. In particular, this is with the rainfall that falls naturally – carbon fixation in actual use could potentially exceed this if the crop was irrigated.

Then they would run the model again, but constrained to have cornfields rather than prairies. The carbon fixed by the model in that scenario would be NPPact. Thus a model estimate of the actual carbon fixation in the actual human use of the area.

Next, they would figure out NPPh which would be basically the carbon in the harvested corn based on national agricultural statistics (and in agricultural residues if those were harvested and statistically tracked also, but not likely in the case of corn). So NPPh is the part that we humans really use (either by eating or feeding to our animals).

Given the actual NPPact, and the NPPh they would then compute the difference, NPPt – basically the carbon in the corn stover which gets returned to the ground, eaten by mice, or whatever happens to it.

So then the human appropriation of net primary productivity (HANPP) is defined as 1 – NPPt/NPP0. That is to say, if you look at the carbon that the prairie would have fixed, and then the carbon in the corn-stover, the difference is what is considered to be human appropriated. And that’s the thing in the map that’s 60-100% in the midwest (and other heavily utilized major cropland areas). However, this is not the same as the theoretical yield. In particular, a lot of the appropriated carbon comes about due to the difference between NPP0 and NPPact – the corn field doesn’t fix as much carbon as the prairie, probably mainly because it starts the season out as bare soil and has to grow an annual crop from seed, instead of being a set of perennial grasses that can sprout from last year’s roots and cover the available area in chlorophyll much faster.

Let’s look at their Table 2 to make this clearer. This table shows the global breakdown of HANPP by food class. If we look at the “Cropping” category, we can see the different figures.


Summary of human appropriation of net primary productivity. NPP0 is modeled carbon fixation in wild condition. NPPact is carbon fixation in actual human usage. NPPh is carbon harvested or unfixed by harvest. NPPt is residual carbon flowing into ecosystem. Source: Haberl et al: Quantifying and mapping the human appropriation of net primary production in earth’s terrestrial ecosystems

As you can see, the average m2 of cropfield (worldwide) would fix 0.6kg of carbon if it wasn’t actually a field, but instead was covered in whatever the climactic climax vegatation is in that location. As a square meter of a field instead, it fixed 0.4kg of carbon, and of that humans got, on average 0.3kg as food and straw etc, leaving 0.1kg to go to the ground. So the HANPP is considered to be 5/6 (1 – 0.1/0.6). (The authors insist on three significant figures (83.5%), but I’m skeptical that the calculations are really that accurate). However, hopefully it should be clear by now that that doesn’t mean there’s a theoretical limit of only increasing yield by a further 1/5. Instead, there are multiple targets for the agronomists and geneticists to go after. The gap between the 0.4kg of NPPact and the 0.6kg NPP0 could be addressed with plants that had a longer growing season, covered the ground earlier, etc. To the extent some cropland is water-limited, irrigation could potentially increase the total NPP feasible. To the extent the 0.3kg of NPPh is showing up as straw rather than food, then potentially that could be increased further.

A few decades down the road, one imagines heat-loving genetic mutant corn plants that pop up in the spring from perennial roots, promptly cover the ground with leaves that flatten themselves to the soil, and then start spitting out corn kernels, which can be harvested several times a year. It might not look much like a corn plant, but made into Doritos, people would probably still eat it (well, Americans would, anyway).

In short, another factor two of global cropland yields seems not to be ruled out on theoretical grounds. However, much more than that would appear to require the geneticists to come up with better photosynthesis (black plants basically – on which there has been no progress, as far as I understand).

Finally, it’s worth mentioning that the FAO thinks there is considerable potential to use more land for agriculture:

There is still potential agricultural land that is as yet unused. At present some 1.5 billion ha of land is used for arable and permanent crops, around 11 percent of the world’s surface area. A new assessment by FAO and the International Institute for Applied Systems Analysis (IIASA) of soils, terrains and climates compared with the needs of and for major crops suggests that a further 2.8 billion ha are to some degree suitable for rainfed production. This is almost twice as much as is currently farmed.

Here’s the breakdown for where the alleged potential cropland is:


Regional breakdown of land considered available for cropping, compared to land in present use for that purpose. Source: FAO report World agriculture: towards 2015/2030

However, “much of the land reserve may have characteristics that make agriculture difficult, such as low soil fertility, high soil toxicity, high incidence of human and animal diseases, poor infrastructure, and hilly or otherwise difficult terrain.” Caveat emptor!

If you look carefully at this figure – with the available land mainly in South America and Sub-saharan Africa, and the HANPP map above, you’ll realize that much of what the FAO is talking about is cutting down the remaining tropical rainforests and using them for agriculture. I don’t think that’s a very good idea for a host of different reasons – better that we eat mutant corn, I think. The great bulk of the best land is almost certainly in production already.

Soil Loss

It appears to me that until recently, there has been a good deal of scientific confusion on the seriousness of soil erosion, estimates of the rate of erosion vary by more than an order of magnitude, and the overall data situation make global oil reserves look like a model of precision. As such, I don’t think it’s possible to make a clear evaluation of how near term the threat is globally. My best impression is that it’s regionally quite severe, especially on fragile and marginal lands (dry, steep, or thin-soiled), but is probably not a near-term (next few decades) threat on the core agricultural regions from which most food comes (which tend to be flatter places with deep soils that don’t erode quickly). It is certainly a major concern on the century timescale. However, there are many cultural practices that can help while still allowing good yields and, if I’m reading the literature correctly, erosion appears to be controllable, even within the context of fairly industrial styles of agriculture. Let me quickly sketch some of the debate.

The last global evaluation appears to have been GLASOD done by Oldeman et al and published in 1990. They produced a map which looks like this:


Global map of soil degradation. Source: GLASOD map, as shown in FAO report World agriculture: towards 2015/2030

This looks really bad – everywhere humans are, the soil is degraded, and much of the world’s core crop land is in the “severely degraded” category. However, that did not yet have much noticeable effect on global yields, which have continued to increase by leaps and bounds since then. Moreover, this map was produced by what amounts to a survey of soil scientists, who used their subjective judgement. The instructions for filling out the questionaire describe how to set up the map cells, and then say:

The next step involves evaluation of the degree, relative extent, recent past rate and causative factors for each type of human-induced soil degradation, as it may occur in the delineated physiographic unit. This evaluation process should be carried out in close cooperation with national and/or international experts with local knowledge of the region. The evaluation process results in a list of of human-induced soil degradation types per physiographic unit, ranking them in order of importance.

So this doesn’t sound like a precise, quantitative sort of estimate. And more quantitative estimates are dogged with problems. A central issue is that most soil eroded from place A (let’s say a steep field on the side of a valley) isn’t necessarily lost to cultivation. Instead, it may end up in place B (let’s say the flood plain of the river in the bottom of the valley) where it may still be of use in cultivation.

The US is the best measured place, in that we at least have a national agency charged with regular quantitative assessments of soil erosion (a legacy of the dustbowl years). The last assessment was the 2003 National Resources Inventory.


NRCS maps of US soil erosion in 2003. Source: US National Resources Conservation Service 2003 National Resources Inventory

These estimates are made by applying models (the Universal Soil Loss Equation and the Wind Erosion Equation) to topographical and climate data. The model inputs are things like the rainfall data, the slope of the field, the erodibility of the particular soil, etc. The overall amounts of erosion are decreasing, and the amount is not imminently scary. The current national average of 4.7 tons/acre/year corresponds to a little more than 1 kg/m2/yr, which in turn is about 1mm/year, or an inch in twenty five years. That’s not good, but doesn’t sound like a likely disaster before 2050, particularly given that the rate of erosion is dropping quite rapidly.

However, these estimates in one way overstate the problem because the USLE and WEE are designed to assess how much soil is removed from its original location, but not where that soil goes. Most of it is unlikely to make it all the way out to the ocean, but instead end up somewhere else where it may be put to use. An extraordinary paper by Trimble in 1999 assessed the details of where soil went in a single valley in Wisconsin by doing detailed samples and cross sections of the alluvial plains. His estimates of the trends and disposition of soil is as follows:


Disposition of soil erosion in Coon Creek watershed, Wisconsin. Source: S. Trimble Decreased Rates of Alluvial Sediment Storage in the Coon Creek Basin, Wisconsin, 1975-93

Clearly, the soil erosion is decreasing, but also, most of it hasn’t gone that far, and, therefore, could potentially be put back at some point in the future if that becomes economically desirable.

Still, in the long term, it seems that eroding an inch every few decades from upland areas is certainly not sustainable, though it’s not an imminent crisis either. In an important meta-analysis last year, D. Montgomery compiled erosion rates for a wide variety of situations and plotted the following cumulative density function for the probability of different erosion rates:


Cumulative distribution function of soil erosion and formation rates from numerous studies around the world. Hollow circles represent rates of soil formation, solid line is geological erosion rates, triangles are soil erosion rates under native vegetation, while diamonds are soil erosion rates under various conservation tillage methods (terracing or no-till agriculture). Solid circles represent plough-based agriculture. Source: D. Montgomery, Soil erosion and agricultural sustainability

The key things to note are these:

  • Rates of soil production and erosion under native vegetation are roughly similar, suggesting soil depths are naturally in equilibrium.
  • Rates of “agricultural” erosion are a couple of orders of magnitude higher, suggesting that ploughing is not a long-term proposition.
  • Rates of “Conservation” erosion are roughly comparable to to natural erosion rates under native vegetation. This covers more sustainable management regimes such as terracing and no-till agriculture.

This suggests that the long-term sustainability of industrial agriculture requires the use of no-till farming systems in which ploughing is not done, crop residues are left on the field, and weeds are managed another way (primarily via herbicides today).

Fertilizer

The three major fertilizer nutrients applied in industrial agriculture are Nitrogen (N), Phosphorus (P), and Potassium (K). None appear to be a critical constraint on agriculture to the 2050 timeframe, though there are significant issues with nitrogen in the short term.

Nitrogen fertilizer is manufactured via the Haber-Bosch process in which nitrogen gas (which forms almost 80% of the atmosphere) is heated with hydrogen over an iron catalyst at high temperatures and pressures to form ammonia (NH3) which is subsequently reacted with other compounds to form urea, ammonium sulphate, and other compounds used as fertilizer. Presently, almost all the hydrogen input to this process is produced by steam reformation of natural gas, and this is the cause of the short term problem since natural gas supplies are problematic, and likely to worsen with both Europe and North America probably at or past peak natural gas. Fertilizer manufacture is exiting these regions and moving to the Middle East, Trinidad, and other places with more natural gas.

However, in the long term, there’s no reason nitrogen fertilizer has to be made from natural gas. In my scenario in which energy production is dominated by renewable/nuclear electricity by 2050, the natural source of hydrogen for Haber-Bosch is by electrolyzing water. Producing nitrogen fertilizer is unproblematic as long as society has ample energy.

The reserves and reserve-base for phosphorus are enormous. According to the USGS, 2006 global production of phosphate rock was 145 million tons, while reserves were 18 billion tons, and the reserve base was 50 billion tons. For the 2050 timeframe, I consider reserve base to be the more appropriate number for the same reasons discussed under lithium. The reserve base for phosphate rock is 350 times larger than 2006 production, so there is no evidence of a problem at present.

Some bloggers are concerned that the Hubbert linearization suggests peak phosphorus has already past. However, Hubbert linearization is not very reliable if there is no independent evidence to suggest peak is at hand, due to the problem of dual peak structures giving rise to misleading linear regions (eg see the UK oil linearization). In this case, with enormous reserves, and stable phosphorus prices (they haven’t varied outside the range of $27-$28/ton from 2002-2006), it seems very unlikely that phosphorus is in trouble. JD has made a similar point (snark warning).

Potassium comes from the mining of potash. The USGS estimates the global reserve base to be 550 times larger than current usage. So potassium is unlikely to limit civilization any time soon.

Fuel use in Farming and Food Transport

I don’t have global statistics, but at least in the US, agriculture is a minor user of oil. In total, it only used 2.2% of oil in 2000. This contrasts with cars and light trucks, which used 40%, heavy trucks which used 12.7%, air travel at 6.7% etc. Since agriculture is such a critical industry, we can ensure it is preferred for oil usage.

Furthermore, all shipping trade only uses 2.5% of US oil use. Most of that is shipping things other than food, but the bulk of food transportation is in there too. Amongst critics of globalism, the image of strawberries being flown from Chile is a popular thing to pick on. However, things like strawberries form a miniscule fraction of our diet. A more representative image of global food trade would be a grain ship like this one:


Grain ship docked in Australia.

Shipping is extremely energy efficient – two orders of magnitude better per ton-mile than air freight. Thus, long-haul shipping of food will be cost effective long after oil has peaked. Ships can also be run on nuclear power, as the US navy has been demonstrating for decades.

In Conclusion

There seems to be reason for cautious optimism that if other global problems can be solved, food production will not be a critical constraint on civilization to 2050. If industrial agricultural yields maintain their historical trajectory, there will be enough food without needing much more land. In case yields fail to continue increasing, more land is potentially available globally, though likely of poor quality. Soil erosion is an important problem, but not a critical emergency, and can seemingly be solved permanently with no-till farming methods. Fertilizer does not appear to be seriously constrained in the long-term, though nitrogen fertilizer needs to be transitioned away from reliance on natural gas. Agriculture only needs a tiny fraction of global liquid fuel use to operate, and this can be maintained for a long time, since food production is a critical infrastructure.

However, if we were to keep growing the conversion of food into biofuels, all bets would be off.

Other sources

In addition to the sources linked directly above, I consulted the following references

Matt Simmons on Fast Money (CNBC)
Sunday, 9 Mar, 2008 – 15:00 | No Comment

Matt Simmons was on Fast Money (on CNBC) Friday afternoon. Here’s the clip.

Matt Simmons on Fast Money (CNBC)
Sunday, 9 Mar, 2008 – 15:00 | No Comment

Matt Simmons was on Fast Money (on CNBC) Friday afternoon. Here’s the clip.

The Next Agriculture?
Friday, 7 Mar, 2008 – 10:00 | No Comment

This is a guest post by John Michael Greer, who blogs at The Archdruid Report. John is the Grand Archdruid of the Ancient Order of Druids in America (AODA) and has been active in the alternative spirituality movement for more than 25 years, and is the author of a dozen books, including “The Druidry Handbook” (Weiser, 2006). He lives in Ashland, Oregon.

Archdruids take breaks from time to time, but the peak oil debate does not, and during my recent vacation a lively discussion sprang up on The Oil Drum about the future of agriculture in a postpetroleum world. The point at issue was whether today’s mechanized agriculture will remain in place, or be replaced by a new rural economy of small farms using human and animal labor, as the world skids down the far side of Hubbert’s peak.

Summarizing a vigorous discussion of a complex topic in a few paragraphs is a risky proposition, so I’ll focus here on the two essays that defined the debate, Stuart Staniford’s The Fallacy of Reversibility and Sharon Astyk’s Is Localization Doomed? Staniford argued that those who expected a nonmechanized, small-farm economy in the wake of peak oil were claiming that the history of agriculture over the last century would simply run in reverse, tracking the decline in fossil fuel availability in the same way it tracked the growth in fossil fuel production.
[break]
If this view was correct, he claimed, rising fuel prices would have already begun to push American agriculture in the direction of smaller, less energy-intensive farms, and this would show in currently available statistics about profitability, labor costs, farm size and the like. He then demonstrated that no such changes could be found in the statistics, and on this basis claimed that what he called the “reversalist” position had no merit.

Astyk, responding to Staniford, made two major points. First, she noted that nobody claimed that the transition from today’s agribusiness to tomorrow’s rural landscape of small farms would simply run history in reverse, and Staniford was therefore kicking a straw man. Second, she suggested that the emergence of a nonmechanized, small-farm economy in the postpetroleum future was not an inevitability, but a policy choice that Staniford’s so-called “reversalists” considered the best option in the face of peak oil.

Like many readers of the debate, I found neither of these positions really satisfactory. By the time I finished reading the comments, though, it was getting late, and I decided to round out the evening by pouring myself a glass of scotch and reading a few pages of a Gary Larson Far Side anthology. Somewhere toward the bottom of the glass I dozed off; I must have been reading one of Larson’s dinosaur cartoons in my last waking moments, because I slipped into a dream in which a conference of dinosaurs pondered the approaching end of the Mesozoic era.

Quite a few dinosaurs had already given speeches about the threat of global cooling. Several of them had mentioned that mammals, with their warm blood and furry coats, might be better off in a post-Mesozoic world. At this point in the debate, however, another dinosaur lumbered up to the podium to speak.

“This talk of mammals taking over the world is nonsense,” it said. “It’s true, of course, that the ancestors of mammals – the therapsids – ruled the earth back before dinosaurs came along, in the Permian period, before the earth’s climate shifted to its long Mesozoic warm spell.” This sparked a good deal of discussion among the audience, and the Tyrannosaurus rex who presided over the meeting had to display its foot-long teeth and growl to quiet things down.

“Nonetheless,” the speaker went on, “this claim that evolution will run in reverse can readily be refuted. If that were true, the global cooling we’ve seen already would have made dinosaurs become smaller and furrier, and that hasn’t happened. In fact” – at this point it nodded toward the Tyrannosaurus rex – “it’s clear that we’re getting larger and scalier all the time. There’s every reason to think that as the climate cools, and selection pressures become more extreme, big scaly dinosaurs will have even greater competitive advantages than they do now.”

At this point the buzz of conversation in the audience could not be restrained, even when the Tyrannosaurus rex killed and ate one of the loudest talkers. A few moments later, though, a bright light flashed through the sky. “Did you see that?” said the Triceratops sitting next to me, pointing toward the sky with the horn on his nose. “I’ve never seen a shooting star that big.” A moment later I was jolted awake by what felt like the shockwave from an asteroid impact, but was actually the Gary Larson anthology sliding from my lap and hitting the floor.

The parallels between Staniford’s argument and that of his saurian equivalent, as it happens, go well beyond the obvious. Both, strictly speaking, are quite correct in their core assertions. As the Mesozoic era drew toward its close, dinosaurs did not retrace the process that led up to the monster reptiles of the Cretaceous. In fact, important branches of the dinosaur clan – the carnosaurs that led to Tyrannosaurus rex, the ceratopsians that ended with Triceratops, and others – got progressively larger as the Cretaceous drew on.

These successful evolutionary lineages continued to follow their established trajectory as long as it remained viable. When it stopped being viable, they didn’t shift into reverse and shrink back down to the size of their Permian ancestors; they died out, and other organisms better suited to the new conditions took over. In the same way, Staniford’s assertion that today’s industrial agriculture will not throw the gearshifts of its combines into reverse, and gradually retrace its tracks into the 19th century, is almost certainly correct.

Staniford is also correct to point out that in a world intent on pouring its food supply into its fuel tanks, rising energy prices mean that industrial farming is becoming more profitable, not less. As a member of the Grange, I’ve had the chance to watch this from an angle that may be rare in the peak oil scene. Where the rest of the media bemoans rising grain prices, the Grange News is full of satisfied comments by family farmers who can finally make ends meet, now that their grain sells for more than it cost to grow.

Yet Staniford’s overall argument fails, for the same reason that his imaginary Mesozoic equivalent missed seeing the future in plain sight — both rely on linear models to predict a nonlinear situation. In his essay, Staniford used the distinction between reversible and irreversible processes as a model for historical change in agriculture. The difference between linear and nonlinear change, however, is at least as relevant.

Watch a frozen lake melt and you have a seasonally timely example of nonlinear change. The transition from ice to liquid water doesn’t happen gradually as temperature rises; it happens at a specific point in the temperature spectrum, 32°F, and only then once the ice has absorbed enough energy to overcome its thermal inertia and provide the heat of fusion. A five-degree warming can be irrelevant to the process, if it’s from 15°F to 20°F, or for that matter from 40°F to 45°F. The same rise between 30°F and 35°F, on the other hand, can cause drastic change.

Nonlinear change happens most often in systems that have negative feedback loops which balance out pressures for change. In the case of the frozen lake, the main sources of negative feedback are the stability of water’s solid state and its capacity as a heat sink. Only when enough heat has entered the situation to overcome these factors does change happen, and when it does, the lake shifts from one relatively stable state to another.

The modern agricultural economy is a classic candidate for nonlinear change. The feedback loops resisting agricultural change in the modern world are at least as potent as the ones that keep a lake from melting at 20°F. The food production and distribution system is oriented toward business as usual, and the psychology of previous investment and the very real costs of retooling to fit a different model both raise obstacles to change. Monopolistic practices and the government subsidies and price supports that make most of today’s “capitalist” agriculture a case study in corporate socialism also give the status quo impressive inertia.

At the same time, if something is unsustainable, it’s a given that sooner or later it won’t be sustained. Today’s industrial agriculture, with its far-flung supply and distribution chains, its dependence on huge inputs of nonrenewable resources, and its severe impact on topsoil, water quality, and environmental health, is a case in point. As transport costs rise, fossil fuel and mineral reserves deplete, and the burden of coping with ecological damage climbs, industrial agriculture will sooner or later reach the point of negative returns – and as Joseph Tainter pointed out in a different context, that’s the point at which collapse becomes the most likely outcome.

Staniford has argued elsewhere that the energy crisis caused by the end of cheap oil will be temporary. He proposes that nuclear power and other technologies will sooner or later make energy cheap and abundant again. If he’s right, it’s possible that new energy sources will come on line soon enough to keep industrial agriculture from hitting the wall. None of the theorists he critiques in his essay agree that the approaching crisis will be temporary, though, and this latter assessment gives their argument compelling force: as energy supplies dwindle and a social fabric predicated on cheap energy comes apart, the pressures on the agricultural status quo will eventually reach a level high enough to force nonlinear change.

This is where the second half of Sharon Astyk’s argument comes in. She points out that many of the writers critiqued in Staniford’s essay see a nonmechanized small-farm agricultural economy not as the inevitable result of economic forces, but as a deliberate policy choice. If our existing agriculture could fold out from under us, they suggest, getting plan B in place is a good idea.

Now this may well be true, but history teaches that when ideology collides with economics, it’s inevitably ideology that comes off worst. The same trap that has blocked most proposals for lifeboat communities so far – how do you make them economically viable in the world we inhabit today? – lies in wait for schemes to relocalize agriculture that don’t take the actual economics of farming in today’s world into account.

Fortunately, there’s reason to think that economic factors will favor the rise of a nonmechanized small-farm economy in the industrial world in the decades to come. The best evidence for this suggestion comes, ironically enough, from Stuart Staniford. In posts about the agricultural side of peak oil – notably Fermenting the Food Supply – Staniford pointed out that the use of grain as a feedstock for ethanol is likely to drive up the price of basic foodstuffs so far that many people will no longer be able to afford to eat.

This is potentially a serious crisis, but it also represents an opportunity. Sharp increases in the price of food mean that food production methods that may not be economical under current conditions could well pass the breakeven point and begin turning a profit. To thrive in the economic climate of the near future, of course, such methods would have to meet certain requirements, but most of these can be anticipated easily enough.

These alternative farming projects would have to use minimal fossil fuel inputs, since fuel costs will likely be very high by past standards for much of the foreseeable future. They would need to focus on local distribution, since those same fuel costs will put long-distance transport out of reach. They would have to focus on intensive production from very small plots, since acreage large enough for industrial farming will likely increase in price. They would also benefit greatly by relying on human labor with hand tools, since the economic consequences of peak oil will likely send unemployment rates soaring while making capital hard to come by.

All of these criteria are met, as it happens, by the small organic farms and truck gardens that many relocalization theorists hold up as models for future agriculture. Already an economic success, especially around West Coast cities, these agricultural alternatives have evolved their own distribution system, relying on farmers markets, co-op groceries, local restauranteurs and community-supported agriculture schemes to carry out an end run around food distribution systems geared toward corporate monopolies.

As more grains and other fermentable bulk commodities get turned into ethanol, and food prices rise in response, such arrangements may well become a significant source of food for a sizeable fraction of Americans – and in the process, of course, the economics of small-scale alternative farms are likely to improve a great deal. The result may well resemble nothing so much as the agricultural system of the former Soviet Union in its last years, featuring vast farms that had become almost irrelevant to the national food supply, while little market gardens in backyards produced most of the food people actually ate.

If Staniford is correct and the postpeak energy crisis turns out to be a passing phase, that bimodal system might endure for quite some time, as it did in the Soviet Union. If more pessimistic assessments of our energy future are closer to the mark, as I suspect they are, the industrial half of the system can be counted on to collapse at some point down the road once energy and resource availability drop to levels insufficient to sustain a continental economy. If this turns out to be the case, the small intensive farms around the urban fringes – mammals amid agribusiness dinosaurs – may well become the nucleus of the next agriculture.

The Disconnect Between Oil Reserves and Production
Thursday, 6 Mar, 2008 – 10:00 | No Comment

This post includes some ideas of Matt Mushalik, plus some of my analysis. Matt is a retired civil engineer and regional planner from Sydney, Australia.

If a person looks at published oil reserves, it is easy to get the idea that there are huge amounts of oil left to be extracted. One would think that there is no way that peak oil should be a concern. Once we look at the situation a more closely, we discover that published oil reserves really aren’t all that helpful in telling us about future production. In fact, the evidence suggests that oil shortages may not be many years away.

1. How much oil reserves are shown in published reports?


Figure 1
[break]
Most reports show reserves similar to those shown above, which were compiled by British Petroleum (BP). The major categories shown on Figure 1 are

• Canadian oil or tar sands. Generally considered a resource, rather than a reserve. (Shown separately by BP.) Oil sands resource was first listed by BP in 1999, even though commercial production began in 1967.

• OPEC 11. Excludes Angola (added to OPEC in 2007), and Ecuador (added recently).

• FSU. Former Soviet Union.

• USA, Europe, etc. Everything else other than Canadian oil sands, OPEC 11, and FSU. Includes Australia, Canada, China, Mexico, and many other counties.

In this analysis, the term “gigabarrels” (abbreviated Gb) is used to mean 1,000 million barrels, or 1 billion barrels in USA terminology.

2. How does the distribution of actual oil production compare with the distribution of published reserves?

It is very different:


Figure 2

Production from the Canadian oil sands is just a thin ribbon, year after year, in spite of the apparently large size of the available resources. OPEC 11 has far less production than might be expected by their “proven reserves.” USA, Europe, etc. has much higher production than might be expected based on the size of their reserves. If one graphs the ratio of production to reserves, one obtains the following:


Figure 3

It is clear from this graph that the ratio of production to reserves varies considerably from group to group. It can also vary over time, as shown by the fact that the ratio for FSU is shifting downward over time.

There seems to be an anomaly in the BP data in 1998, which was the year production for FSU was shown by country for the first time. In 1998, there was a 23Gb increase in FSU reserves, and corresponding decrease in reserves for the USA, Europe, etc. group. Apparently, reserves for one or two countries got shifted between the two groups at that time. This anomaly causes the jump in the 1998 production to reserve ratios in Figure 3.

3. Aren’t published reserves a leading indicator for future production?

One might expect reserves to be a leading indicator, but when one looks at historical data on an aggregate basis, it is difficult to see much evidence that this is in fact the case.

• USA, Europe, etc. Oil reserves are essentially flat from 1980 to 2006, while oil production first rose, then peaked and began to decline. One would never guess the rise and fall in oil production from the reserves.

• USA by itself Both oil production and oil reserves have been falling since prior to 1980. Oil production has tended to fall more quickly than oil reserves, as evidenced by the decline in the production to reserve ratio over time. If reserves were a leading indicator of depletion, one might expect this ratio to rise rather than fall over time.


Figure 4

• OPEC 11 Several OPEC members publish very high reserve numbers, but have never offered production at the level one might expect from the quoted reserves.

• FSU Russia quotes its reserves at “P3″ level, a level that is quite a bit higher than the level mandated by the US Securities and Exchange Commission (SEC). Besides P1 or proved reserves, which are all the SEC permits, it includes amounts that are expected with improvements in technology and economics, and even amounts that may be possible in the future, with future technology. The big drop in the ratio of production to reserves in recent years may indicate a more aggressive view of what may be possible in the future.

• Oil sands The hot water extraction process similar to that used todaywas patented in 1928, and the first large-scale commercial extraction began in 1967. While a huge amount of the resource is present and there has been a great deal of investment ($10.4 billion in 2005), production remains low — currently a little over 1% of world oil supply. According to Statistics Canada, 2007 production is expected to increase by 2.2% over 2006 production.

4. Does everyone use the same rules in determining oil reserves?

No. Companies which follow the US SEC rules are required to set reserves at the P1 level — the amount that is clearly available with current technology and current economic conditions. Availability must be demonstrated by actual production or commercial formation tests. Some countries use P2 reserves — reserves that are at the “expected” level. Others use P3 reserves, incorporating amounts that may be possible with future technology and higher oil prices. I am not aware of aggregate data regarding the difference in these reserve levels, but some company level data suggests that at times they can be very large (for example, here and here).

Now that companies are having increasing difficulty replacing their SEC reserves due to depletion, the SEC is considering modernizing its rules. The changes are expected to increase the amount of reserves companies can record.

Reserve amounts reported by countries to statistical organizations are generally not audited. BP reports whatever countries report to it, without adjustment. When these amounts are published in newspapers and books, they are often referred to as “proven reserves,” even though they use different definitions and are not audited.

Based on US data, the data BP publishes appears to be on a crude + condensate + natural gas liquids basis. Biofuels are excluded, as are processing gains.

5. Is there any evidence that the oil reserves for OPEC are overstated?

There is a great deal of evidence that this is the case.

• Matt Simmons obtained copies of more than 200 scientific papers published by scientists working on Saudi Arabian oil production. Based on his review of these papers, Simmons came to the conclusion that reservoirs in Saudi Arabia were at an advanced stage of depletion, and that the reserves were significantly overstated. His findings were published in the book Twilight in the Desert in 2005.

• Several of the OPEC countries adjusted their reserves upward in the 1980s, without any new oil discoveries, at a time when there was discussion about how production quotas should be allocated. It was believed that having higher reserves would be beneficial when quotas were assigned, so each country in turn raised its reserves. Logically, reserves should be declining in recent years, as oil is pumped out, and virtually no new fields are added, but this is not happening.


Figure 5

• Dr. Sadad I. Al Husseini, former Executive Vice President of Aramco (Saudi Arabia’s national oil company), gave a presentation last October in which he stated that OPEC oil reserves are overstated by more than 300 Gb. If the amount is 300 Gb, it would correspond to about one-third of current reserves. His presentation says more than, so this is a floor, not a best estimate.

• A report by the reserves committee of the Kuwait oil company shows only 24.2 Gb of proven reserves (48.1 Gb if non-proven reserves are included) at the end of 2001, while published reserves as of the same date were 96.5 Gb. This was only 25% of the published level.

• The amount of oil produced by OPEC, relative to the amount of stated reserves, is very low. Some of this may be the result of very heavy oil that cannot be produced very quickly, such as that found in Venezuela (similar to the Canadian oil sands). Some other oil may be bypassed, because of war and sanctions, as in Iraq. Even allowing for this, the reserves would be much more reasonable in relationship to production if they were half of their stated amount, or even less.

• While OPEC claims extra capacity, its actions are not consistent with having much extra capacity. It seems likely that much of the claimed extra capacity relates to oil that is difficult to refine. No buyers are available, because no refineries can handle the particular impurities of the oil.

6. Is there a way of representing the disproportionate nature of the reserves and production graphically?

Matt Mushalik has prepared a graph showing the disproportionate nature of reserves and production. According to his calculations, 45% of oil production comes from only 190 GB of reserves. If these should deplete, there will be very serious implications for world production.


Figure 6

Matt’s groupings are a little different from mine. He shows several of the OPEC countries separately and groups the remaining countries by whether their reserves are increasing over time or decreasing over time. Matt has written about the disconnect between reserves and production in World’s Fragile Oil Flows From Declining Reserve Base.

7. Doesn’t the US Geological Service (USGS) say that huge amounts of oil are yet to be discovered, and that current reserves will prove to be too low, rather than too high?

Yes. The latest USGS study does show 649 Gb of undiscovered oil and 612 Gb of “reserve growth”. The methodology of this analysis is seriously in doubt, according to a report by Jean Laherrere. In this report, USGS does not adequately reflect the fact that the rate of discoveries has been falling.


Figure 7

The USGS also determines expected reserve growth in an inappropriate manner. They determine reserve growth based on historical experience for companies using SEC reserves. They apply this approach world-wide, without considering the type of reserves reported by other countries. In countries where reserves are inflated, this adjustment has the effect of inflating them further. If the ratio of US production to reserves has been declining over time, it is likely this approach will even overstate future US reserve growth.

8. Which of the groups “USA, Europe, etc.”, FSU, and OPEC are past peak production?

• USA, Europe, etc. The grouping USA, Europe, etc. is fairly clearly past peak production. The USA, the North Sea, and Mexico are all past peak, as are Canadian conventional production and Australia. The only other major producer that is not past peak is China, and its production is increasing very little. Angola and Ecuador, which have recently joined OPEC, are shown in this group, but even with their inclusion, production is dropping.


Figure 8

It is logical that this group should peak first, because it includes most of the heavy users of oil, and they generally extracted their own oil first.

EIA data through November 2007 is shown because it gives nearly the full 2007 year, while BP does not yet include 2007. The reason BP data is consistently higher than EIA data is because it includes natural gas liquids, while EIA data includes only crude and condensate. Since EIA does not show a subtotal for FSU, it was necessary to estimate this amount by combining data for the available countries, and adding an estimate for countries not shown separately, based on BP data for this segment.

• Former Soviet Union Oil production for the FSU does not yet appear to have peaked.


Figure 9

Production dropped in the early 1990′s, and is now getting back to the level it was previously. It is not clear that it will ever exceed its previous peak. There are frequent reports that Russian production is expected to level off or decline in the future; the smaller countries are limited in their production capability by infrastructure limitations. Thus, increases in the future are likely to be small, at least in relationship to declines in production of the USA, Europe, etc. group. Thus, this group is not likely by itself to save us from peak oil.

• OPEC 11 It is possible that OPEC-11 is past peak, but this is not yet certain. BP indicates a small up-tick in OPEC 11 production in 2006, but EIA data shows a decrease in both 2006 and 2007 production.


Figure 10

If one looks more closely at OPEC 11 production using Matt Mushalik’s graph of incremental EIA production (showing just recent changes in production), one can see that that while Saudi Arabian oil production is not as low as it was in early 2007, it is nowhere near where it was in mid-2005.


Figure 11

The lower Saudi production raises questions about OPEC 11′s ability to raise its production. This is one to watch–once OPEC 11 is past peak, it is very likely that the world is past peak. We know so little about “real” OPEC reserves that reserve levels cannot be used to eliminate this possibility.

9. Can the Canadian oil sands save us from peak oil?

Can the perpetual sliver ever be anything else? It is difficult to see how Canadian oil sands production will expand very much, very quickly. According to the Master’s thesis of Bengt Söderbergh, natural gas availability is likely to limit oil sands production in the long term. With or without the natural gas limitation, there are many other concerns, including environmental impact, greenhouse gas emissions, and very high continuing investment. Optimistic estimates of production are about four times current production by 2030. This would be about 5% of current world production–still not very much.

It is possible that one of the new production techniques, such as Toe to Heel Air Injection, will prove to be effective. If this happens, oil sands production may increase by even more than that forecast in the current optimistic target. If such an increase does occur, much of the benefit is likely to be after 2020. Such an increase could theoretically help mitigate the downslope after the peak in world oil production. The increase, should it occur, is likely be too late and too small to prevent the peak.

10. Does this type of analysis say anything about depletion rates?

Possibly. Cambridge Energy Research Associates (CERA) published an analysis indicating that if one looks at a mixture of fields that are increasing and decreasing, the overall decline rate is 4.5%.

If CERA looks at the decline rate for a mixture of increasing and decreasing fields, it sounds like CERA is looking at the depletion rate with respect to reserves at a point in time. This is in contrast to a decline rate, which one generally thinks about as occurring after individual field’s peak or plateau.

While CERA made its calculation with individual field data, another approach would be to start with aggregate data relating to the (production / reserves) ratio, such as BP data. A person would then make adjustments to the aggregate data. One adjustment would be to remove reserves relating to fields that are not yet in production from the total reserve amount. Another adjustment might be to put reserves on a P2 (that is expected) basis, if companies report them on a P1 or P3 basis. Another adjustment is a small timing adjustment – the payments during one year should relate to reserves at the end of the previous year, instead of the end of the current year. Ratios before adjustment are shown in Figure 3.

The ratio before adjustment for the USA, Europe, etc. group is 7.1% (Figure 3). It seems likely that even after adjustment, it would be higher than 4.5%.

The ratio before adjustment for the FSU group is 3.5%. Two adjustments are needed:

1 .To reduce the reserves because reserves are on a P3 basis, and thus are higher than the expected or P2 level.

2. To reduce the reserves by the amount relating to fields not yet in production.

Both of these adjustments would tend to reduce the denominator of this ratio, and thus increase the ratio. With these adjustments, it is likely that the FSU ratio would also be over 4.5%.

OPEC reserves, as published, are too unreliable for this approach to work. If a person had a better analysis of reserve figures for OPEC, it could perhaps be applied.

11. What should we do now?

Given the likely shortage of oil in the future, and the likely environmental impacts whether or not there is an oil shortage, it would be best to start taking action now to reduce usage of oil and other fossil fuels.


Figure 12

We are now running out of time to implement urban rail solutions as is being done in the Australian City of Perth. In Perth, rail lines run alongside the freeways. Rail stations have bus terminuses on top the rail stations, and kiss & ride and park & ride facilities nearby. This is ideal for getting to the station in various ways and a quick train-ride to the city.

The Disconnect Between Oil Reserves and Production
Thursday, 6 Mar, 2008 – 10:00 | No Comment

This post includes some ideas of Matt Mushalik, plus some of my analysis. Matt is a retired civil engineer and regional planner from Sydney, Australia.

If a person looks at published oil reserves, it is easy to get the idea that there are huge amounts of oil left to be extracted. One would think that there is no way that peak oil should be a concern. Once we look at the situation a more closely, we discover that published oil reserves really aren’t all that helpful in telling us about future production. In fact, the evidence suggests that oil shortages may not be many years away.

1. How much oil reserves are shown in published reports?


Figure 1

[break]
Most reports show reserves similar to those shown above, which were compiled by British Petroleum (BP). The major categories shown on Figure 1 are

• Canadian oil or tar sands. Generally considered a resource, rather than a reserve. (Shown separately by BP.) Oil sands resource was first listed by BP in 1999, even though commercial production began in 1967.

• OPEC 11. Excludes Angola (added to OPEC in 2007), and Ecuador (added recently).

• FSU. Former Soviet Union.

• USA, Europe, etc. Everything else other than Canadian oil sands, OPEC 11, and FSU. Includes Australia, Canada, China, Mexico, and many other counties.

In this analysis, the term “gigabarrels” (abbreviated Gb) is used to mean 1,000 million barrels, or 1 billion barrels in USA terminology.

2. How does the distribution of actual oil production compare with the distribution of published reserves?

It is very different:


Figure 2

Production from the Canadian oil sands is just a thin ribbon, year after year, in spite of the apparently large size of the available resources. OPEC 11 has far less production than might be expected by their “proven reserves.” USA, Europe, etc. has much higher production than might be expected based on the size of their reserves. If one graphs the ratio of production to reserves, one obtains the following:


Figure 3

It is clear from this graph that the ratio of production to reserves varies considerably from group to group. It can also vary over time, as shown by the fact that the ratio for FSU is shifting downward over time.

There seems to be an anomaly in the BP data in 1998, which was the year production for FSU was shown by country for the first time. In 1998, there was a 23Gb increase in FSU reserves, and corresponding decrease in reserves for the USA, Europe, etc. group. Apparently, reserves for one or two countries got shifted between the two groups at that time. This anomaly causes the jump in the 1998 production to reserve ratios in Figure 3.

3. Aren’t published reserves a leading indicator for future production?

One might expect reserves to be a leading indicator, but when one looks at historical data on an aggregate basis, it is difficult to see much evidence that this is in fact the case.

• USA, Europe, etc. Oil reserves are essentially flat from 1980 to 2006, while oil production first rose, then peaked and began to decline. One would never guess the rise and fall in oil production from the reserves.

• USA by itself Both oil production and oil reserves have been falling since prior to 1980. Oil production has tended to fall more quickly than oil reserves, as evidenced by the decline in the production to reserve ratio over time. If reserves were a leading indicator of depletion, one might expect this ratio to rise rather than fall over time.


Figure 4

• OPEC 11 Several OPEC members publish very high reserve numbers, but have never offered production at the level one might expect from the quoted reserves.

• FSU Russia quotes its reserves at “P3″ level, a level that is quite a bit higher than the level mandated by the US Securities and Exchange Commission (SEC). Besides P1 or proved reserves, which are all the SEC permits, it includes amounts that are expected with improvements in technology and economics, and even amounts that may be possible in the future, with future technology. The big drop in the ratio of production to reserves in recent years may indicate a more aggressive view of what may be possible in the future.

• Oil sands The hot water extraction process similar to that used todaywas patented in 1928, and the first large-scale commercial extraction began in 1967. While a huge amount of the resource is present and there has been a great deal of investment ($10.4 billion in 2005), production remains low — currently a little over 1% of world oil supply. According to Statistics Canada, 2007 production is expected to increase by 2.2% over 2006 production.

4. Does everyone use the same rules in determining oil reserves?

No. Companies which follow the US SEC rules are required to set reserves at the P1 level — the amount that is clearly available with current technology and current economic conditions. Availability must be demonstrated by actual production or commercial formation tests. Some countries use P2 reserves — reserves that are at the “expected” level. Others use P3 reserves, incorporating amounts that may be possible with future technology and higher oil prices. I am not aware of aggregate data regarding the difference in these reserve levels, but some company level data suggests that at times they can be very large (for example, here and here).

Now that companies are having increasing difficulty replacing their SEC reserves due to depletion, the SEC is considering modernizing its rules. The changes are expected to increase the amount of reserves companies can record.

Reserve amounts reported by countries to statistical organizations are generally not audited. BP reports whatever countries report to it, without adjustment. When these amounts are published in newspapers and books, they are often referred to as “proven reserves,” even though they use different definitions and are not audited.

Based on US data, the data BP publishes appears to be on a crude + condensate + natural gas liquids basis. Biofuels are excluded, as are processing gains.

5. Is there any evidence that the oil reserves for OPEC are overstated?

There is a great deal of evidence that this is the case.

• Matt Simmons obtained copies of more than 200 scientific papers published by scientists working on Saudi Arabian oil production. Based on his review of these papers, Simmons came to the conclusion that reservoirs in Saudi Arabia were at an advanced stage of depletion, and that the reserves were significantly overstated. His findings were published in the book Twilight in the Desert in 2005.

• Several of the OPEC countries adjusted their reserves upward in the 1980s, without any new oil discoveries, at a time when there was discussion about how production quotas should be allocated. It was believed that having higher reserves would be beneficial when quotas were assigned, so each country in turn raised its reserves. Logically, reserves should be declining in recent years, as oil is pumped out, and virtually no new fields are added, but this is not happening.


Figure 5

• Dr. Sadad I. Al Husseini, former Executive Vice President of Aramco (Saudi Arabia’s national oil company), gave a presentation last October in which he stated that OPEC oil reserves are overstated by more than 300 Gb. If the amount is 300 Gb, it would correspond to about one-third of current reserves. His presentation says more than, so this is a floor, not a best estimate.

• A report by the reserves committee of the Kuwait oil company shows only 24.2 Gb of proven reserves (48.1 Gb if non-proven reserves are included) at the end of 2001, while published reserves as of the same date were 96.5 Gb. This was only 25% of the published level.

• The amount of oil produced by OPEC, relative to the amount of stated reserves, is very low. Some of this may be the result of very heavy oil that cannot be produced very quickly, such as that found in Venezuela (similar to the Canadian oil sands). Some other oil may be bypassed, because of war and sanctions, as in Iraq. Even allowing for this, the reserves would be much more reasonable in relationship to production if they were half of their stated amount, or even less.

• While OPEC claims extra capacity, its actions are not consistent with having much extra capacity. It seems likely that much of the claimed extra capacity relates to oil that is difficult to refine. No buyers are available, because no refineries can handle the particular impurities of the oil.

6. Is there a way of representing the disproportionate nature of the reserves and production graphically?

Matt Mushalik has prepared a graph showing the disproportionate nature of reserves and production. According to his calculations, 45% of oil production comes from only 190 GB of reserves. If these should deplete, there will be very serious implications for world production.


Figure 6

Matt’s groupings are a little different from mine. He shows several of the OPEC countries separately and groups the remaining countries by whether their reserves are increasing over time or decreasing over time. Matt has written about the disconnect between reserves and production in World’s Fragile Oil Flows From Declining Reserve Base.

7. Doesn’t the US Geological Service (USGS) say that huge amounts of oil are yet to be discovered, and that current reserves will prove to be too low, rather than too high?

Yes. The latest USGS study does show 649 Gb of undiscovered oil and 612 Gb of “reserve growth”. The methodology of this analysis is seriously in doubt, according to a report by Jean Laherrere. In this report, USGS does not adequately reflect the fact that the rate of discoveries has been falling.


Figure 7

The USGS also determines expected reserve growth in an inappropriate manner. They determine reserve growth based on historical experience for companies using SEC reserves. They apply this approach world-wide, without considering the type of reserves reported by other countries. In countries where reserves are inflated, this adjustment has the effect of inflating them further. If the ratio of US production to reserves has been declining over time, it is likely this approach will even overstate future US reserve growth.

8. Which of the groups “USA, Europe, etc.”, FSU, and OPEC are past peak production?

• USA, Europe, etc. The grouping USA, Europe, etc. is fairly clearly past peak production. The USA, the North Sea, and Mexico are all past peak, as are Canadian conventional production and Australia. The only other major producer that is not past peak is China, and its production is increasing very little. Angola and Ecuador, which have recently joined OPEC, are shown in this group, but even with their inclusion, production is dropping.


Figure 8

It is logical that this group should peak first, because it includes most of the heavy users of oil, and they generally extracted their own oil first.

EIA data through November 2007 is shown because it gives nearly the full 2007 year, while BP does not yet include 2007. The reason BP data is consistently higher than EIA data is because it includes natural gas liquids, while EIA data includes only crude and condensate. Since EIA does not show a subtotal for FSU, it was necessary to estimate this amount by combining data for the available countries, and adding an estimate for countries not shown separately, based on BP data for this segment.

• Former Soviet Union Oil production for the FSU does not yet appear to have peaked.


Figure 9

Production dropped in the early 1990′s, and is now getting back to the level it was previously. It is not clear that it will ever exceed its previous peak. There are frequent reports that Russian production is expected to level off or decline in the future; the smaller countries are limited in their production capability by infrastructure limitations. Thus, increases in the future are likely to be small, at least in relationship to declines in production of the USA, Europe, etc. group. Thus, this group is not likely by itself to save us from peak oil.

• OPEC 11 It is possible that OPEC-11 is past peak, but this is not yet certain. BP indicates a small up-tick in OPEC 11 production in 2006, but EIA data shows a decrease in both 2006 and 2007 production.


Figure 10

If one looks more closely at OPEC 11 production using Matt Mushalik’s graph of incremental EIA production (showing just recent changes in production), one can see that that while Saudi Arabian oil production is not as low as it was in early 2007, it is nowhere near where it was in mid-2005.


Figure 11

The lower Saudi production raises questions about OPEC 11′s ability to raise its production. This is one to watch–once OPEC 11 is past peak, it is very likely that the world is past peak. We know so little about “real” OPEC reserves that reserve levels cannot be used to eliminate this possibility.

9. Can the Canadian oil sands save us from peak oil?

Can the perpetual sliver ever be anything else? It is difficult to see how Canadian oil sands production will expand very much, very quickly. According to the Master’s thesis of Bengt Söderbergh, natural gas availability is likely to limit oil sands production in the long term. With or without the natural gas limitation, there are many other concerns, including environmental impact, greenhouse gas emissions, and very high continuing investment. Optimistic estimates of production are about four times current production by 2030. This would be about 5% of current world production–still not very much.

It is possible that one of the new production techniques, such as Toe to Heel Air Injection, will prove to be effective. If this happens, oil sands production may increase by even more than that forecast in the current optimistic target. If such an increase does occur, much of the benefit is likely to be after 2020. Such an increase could theoretically help mitigate the downslope after the peak in world oil production. The increase, should it occur, is likely be too late and too small to prevent the peak.

10. Does this type of analysis say anything about depletion rates?

Possibly. Cambridge Energy Research Associates (CERA) published an analysis indicating that if one looks at a mixture of fields that are increasing and decreasing, the overall decline rate is 4.5%.

If CERA looks at the decline rate for a mixture of increasing and decreasing fields, it sounds like CERA is looking at the depletion rate with respect to reserves at a point in time. This is in contrast to a decline rate, which one generally thinks about as occurring after individual field’s peak or plateau.

While CERA made its calculation with individual field data, another approach would be to start with aggregate data relating to the (production / reserves) ratio, such as BP data. A person would then make adjustments to the aggregate data. One adjustment would be to remove reserves relating to fields that are not yet in production from the total reserve amount. Another adjustment might be to put reserves on a P2 (that is expected) basis, if companies report them on a P1 or P3 basis. Another adjustment is a small timing adjustment – the payments during one year should relate to reserves at the end of the previous year, instead of the end of the current year. Ratios before adjustment are shown in Figure 3.

The ratio before adjustment for the USA, Europe, etc. group is 7.1% (Figure 3). It seems likely that even after adjustment, it would be higher than 4.5%.

The ratio before adjustment for the FSU group is 3.5%. Two adjustments are needed:

1 .To reduce the reserves because reserves are on a P3 basis, and thus are higher than the expected or P2 level.

2. To reduce the reserves by the amount relating to fields not yet in production.

Both of these adjustments would tend to reduce the denominator of this ratio, and thus increase the ratio. With these adjustments, it is likely that the FSU ratio would also be over 4.5%.

OPEC reserves, as published, are too unreliable for this approach to work. If a person had a better analysis of reserve figures for OPEC, it could perhaps be applied.

11. What should we do now?

Given the likely shortage of oil in the future, and the likely environmental impacts whether or not there is an oil shortage, it would be best to start taking action now to reduce usage of oil and other fossil fuels.


Figure 12

We are now running out of time to implement urban rail solutions as is being done in the Australian City of Perth. In Perth, rail lines run alongside the freeways. Rail stations have bus terminuses on top the rail stations, and kiss & ride and park & ride facilities nearby. This is ideal for getting to the station in various ways and a quick train-ride to the city.