06 May 2014

PEAK ENERGY

Economic Decline, Food Security, and Cultural Stress


We are not going to run out of fossil fuels. .. Not ever.... 
Unfortunately: ... that’s not the problem.

We continue to consume fossil fuels without regard for the consequences.  We assume our inherited good fortune of coal, oil and natural gas will go on forever. But are there limits to growth?

Yes.  And we shall encounter these limits in the 21st century. Our energy challenges will become painfully evident before 2050.

There isn’t enough fossil energy left on this planet
to ensure the economic prosperity of 9.4 billion people.

And that is the problem.

Our intensive consumption of energy is not sustainable.  Continuing population growth simply increases the number of humans who will ultimately suffer. By any measure, we humans are living far beyond our means.  It’s inevitable. Our energy intensive infrastructure will collapse. The associated economic decline will cause political chaos. For those of us who live in an industrialized nation, the associated lifestyle change will be traumatic.

This report is about the economic and cultural impact of fossil fuel depletion, with particular attention on the United States and – by inference – all first world (OECD) nations. The depletion of our resources is not a phenomenon that will happen sometime in the distant future.  It is happening now.  It has already altered the objectives and alliances of international diplomacy, empowered the political aspirations of producer nations, restructured how world markets work, and changed the economics of fossil fuel exploration, production, transportation and consumption.

It is also increasing the price of gasoline, diesel, propane, jet, and heating oil fuels, along with electricity, fertilizer, soil amendments, and thousands of other products.

With 20 graphs and a no nonsense text - all based on a realistic analysis of published information - this report outlines the interaction of world energy consumption with global economic challenges, population growth, fuel price trends, and fossil fuel consumption from 2012 through 2050. If this analysis is correct, peak energy will occur in 2037. 

In order to help the reader understand the facts, I have included two popular essays with this report:   ‘How Much Oil Do We Have Left? Really?’   and  ‘Twelve Criteria for Evaluating Our Energy Options’

Read these texts and use them as a reference.


Ron


####

Predictions: Standing On a Pile of Sand
Cultural Economists generally dislike making forecasts that predict an event will occur at a specific point in time. There are just too many variables, and the circumstances that drive them can be quite fluid. For example, when the case for peak oil was developed, there was never any doubt peak oil would occur. But the timing would be affected by cultural, technological and economic factors which were impossible to know. In the following essay, we know Peak Energy is certain, but no matter how detailed the analysis, we can only estimate when it will occur. Both my thesis on peak oil and Peak Energy are backed by a detailed analysis of multiple cultural and economic factors, as well as a large, huge, big, enormous, and excruciatingly complex spread sheet. But one can only make an educated guess at some of the variables. Cultural Economists must learn to speak in terms of possibilities and probabilities. Absolutes are perilous.

Think of it this way. If we build a pile of sand, one grain at a time, it will grow in size with a reasonably sharp peak. But it is still a pile of sand, and a pile of sand is inherently unstable. As it grows, it becomes increasingly unstable. We know our pile of sand will collapse at some point, but we don’t know how or when. Will the weight of the next grain cause a minor avalanche? Will it trigger a series of minor avalanches? Or will our entire pile collapse outward? We can make thoughtful estimates and calculate mathematical probabilities. We know a growing pile of sand will collapse. Avalanches are highly probable. But the when and how will remain a possibility until the event actually happens.

In the following dissertation on Peak Energy, over four months of research, a mountain of data, a large spread sheet with multiple columns and rows of calculations, occasional angst with the frustrating characteristics of Microsoft software, and numerous graphs to visualize a set of high probability conclusions eventually led to a projected Peak Energy date of 2037. One could, however, make a case for an earlier date because some of the effects of Peak Energy are already in place. It is also possible to predict Peak Energy will occur after 2050.

The conclusion –as we say – is all in the assumptions.


Ron

#####
The purpose of this study is to examine long term world trends in the availability and consumption of energy, as well as the relationship of these trends to economic growth, and the resulting political risks through 2050. It is not meant to be a comprehensive document. Instead, it highlights several key issues our political systems will be forced to address in the 21st century. The reader should pay attention to the assumptions as well as the associated commentary for each of the graphs presented in the following text.

My purpose is not to forecast a specific date for Peak Energy. I am, however, trying to raise our awareness of a challenge to humanity, which really does exist, is certain to shape the future of human civilization, and is highly likely to occur in this century.

And that is scary.
In any discussion of energy, one must be aware there are two primary categories of energy consumption:

·       When we talk about mobile applications, we are referencing the use of fuels to power the engines of transportation including cars, trucks, busses, construction vehicles, farm tractors, planes, ships, boats, and trains. Although there are a number of electric rail and bus systems, the large majority of these applications depend on the use of an internal combustion engine. Fuel for the engine must be carried within the vehicle. Consequently the fuel must be easy to handle and compact relative to its energy content. Thus far, products derived from oil provide the best combination of convenience and energy. Our transportation system depends on huge quantities of gasoline, diesel, jet, and bunker fuels. While coal and nuclear fuels are practical energy resources for large ships, and there is a growing use of alternative fuels, oil is by far the dominant energy resource for most mobile applications.

·       By contrast, in stationary applications fuels are primarily used as a source of heat to cook food, warm buildings, process agricultural products, convert ore into metals, generate electricity, and so on. Consumption occurs in a chamber or machinery that does not move. Coal, natural gas, and nuclear fuels currently provide most of the energy for these applications. Energy can also be derived from the weight of moving water (hydropower), the sun (solar power), air currents (wind power), and the combustion of biomass. Oil is also an energy resource for stationary applications in the form of kerosene, propane, and heating oil.

In the following text, we compare all forms of energy by equating each one to the energy content of oil. Thus the phrase, tonnes of oil equivalent or TOE which may be defined as a unit of energy that equals the amount of energy released by burning one ton of crude oil. This gives us a way to compare energy consumption by type of fuel or resource. (Note 1)

Oil, coal and natural gas dominated world energy consumption in 2012. Total market share was just over 86 percent of all energy consumption.

Oil is the primary energy resource for vehicle, ship, plane, and train transportation because the products made from oil are easy to transport, and pack enough energy in a small space to provide a practical source of energy for mobile applications. Products for internal combustion engines include gasoline, diesel, jet, and bunker fuels. Oil provides the raw material for stationary heating and cooking applications in the form of kerosene, propane, and heating oil. Oil is also the raw material resource for thousands of manufactured products as well as agricultural soil and crop amendments. Oil provided just over 33 percent of the energy we humans consumed in 2012.

Coal is primarily used as a fuel in stationary applications as a source of heat for the generation of electricity, the manufacture of cement, and the processing of ores into metals such as steel, copper and gold. Although coal can be converted into a liquid fuel, such use has not proven to be economically competitive in most consumer applications. In many nations, coal is burned to provide heat for buildings, hot water and cooking. Coal accounted for almost 30 percent of the energy we consumed in 2012.

Natural gas is primarily used as a fuel in stationary applications as a source of heat for the generation of electricity, the heating of buildings, and the cooking of food. Although compressed natural gas is being used as a transportation fuel, this mobile application currently consumes only a small percentage of our world natural gas resources. Natural gas is also used as the feedstock for the manufacture of soil and crop amendments (primarily fertilizer, herbicides and insecticides). Natural gas supplied almost 24 percent of the energy we consumed in 2012.

The energy of moving water and nuclear fuels is primarily used in stationary applications to generate electricity. Together, these two resources accounted for just over 11 percent of world energy consumption in 2012.

Biomass in the form of fuels for stationary applications (as a source of heat), and mobile applications (as a liquid fuel), along with geothermal energy, wind power, and solar power combined to provide the world with less than 2 percent of our energy consumption in 2012. The following chart shows energy consumption by fuel as a percentage of total world fuel consumption.


Let’s fast forward to 2050 in order to see if we can make a reasonable projection of future world energy consumption. Although it would appear coal will decline from 30 percent of world energy in 2012, to 25 percent in 2050, continued use of this energy resource – particularly in the western pacific region – suggests little change in annual consumption: 3730 million tonnes of oil equivalent energy (TOE) in 2012 versus 3817 tonnes of oil equivalent energy (TOE) in 2050. Natural gas, as a percentage of world energy consumption, is little changed, but annual consumption is projected to increase from 2987 TOE in 2012 to 3812 TOE in 2050. Because of factors we will discuss later, oil consumption has declined from 4131 TOE in 2012 to 3247 TOE in 2050. Oil, which provided 33 percent of the world’s energy in 2012, is projected to furnish just over 21 percent of world energy in 2050. The highest growth energy sectors are nuclear energy (560 TOE in 2012 to 1134 TOE in 2050), hydro electric energy (831 to 1398 TOE), and other energy resources (237 to 1791 TOE). The “Other” category includes biomass, solar, wind, and geothermal energy resources.   Please note: consumption of fuel ethanol and biodiesel is included in the oil consumption tables.


The following graph shows the changing patterns of energy consumption by type: 2012 versus 2050. Total energy consumption has increased from 12,476 TOE in 2012 to 15,198 TOE in 2050.


 As we shall see in the following text, however, these numbers mask the high probability that substantial changes will have occurred in the consumption of available energy resources between 2012 and 2050, significantly transforming the world economy, driving social change, and restructuring our political systems.

Part Two: World Energy Consumption

Advocates of Peak Energy are right. There is a finite supply of accessible oil, coal and natural gas. But they (we) have a problem. Timing: at what point do the economics of production become prohibitively expensive? And at what point in time will higher fossil fuel prices force a reduction in consumption?   No one knows.  It is true the costs of production are going up. Oil exploration and production costs, for example, doubled in some areas between 2005 and 2012. We used to get oil out of the ground for $2.00 a barrel (or less). But contemporary production costs for conventional oil fields are on the order of $7 - $40 per barrel, and non-conventional oil production costs are more like $34 – $70 per barrel (or more). To these costs we must add transportation, refining, and distribution costs (and profit margins) before we fill our tank with fuel or fire up a thermal power station.

It is important to understand the definition of “accessible” reserves: "Accessible reserves are those reserves of oil, coal or natural gas that can actually be found, produced, transported, refined, and distributed without disruption at a price the consumer can afford to pay." Our fossil fuel resources are useful only if they can be produced and consumed, without disruption, at a price the consumer can afford to pay. Whenever you see the term “accessible” in this report, please remember this definition.

Most knowledgeable analysts believe we humans were given an oil endowment of between 5 and 7 trillion barrels of oil. Let’s assume we started with 6.5 Trillion barrels of this black gold. It took from 1859 (when the first well was drilled in Pennsylvania) to 2004 for us to consume the first trillion barrels. That’s 146 years. We humans will consume the second trillion barrels in only 26 years: 2005 to 2030. Even with conservation and energy substitution, it is probable we will consume another 700 billion barrels in the 20 year period from 2031 and 2050. That leaves us with 3.8 trillion barrels of oil.  Sounds good: right? That’s a 100 year supply.

Not so fast. Oil production costs are going up because it is becoming increasingly more difficult to find, produce, transport and refine. Of our 3.8 trillion oil endowment that is left on this planet, it would appear at least 1.7 trillion barrels will be too expensive to use for private vehicle motor fuels, or the manufacture of crop amendments. That means our treasure of accessible oil will likely disappear in 60 years, or less. (Appendix 1)

There is a certain irony here. Earlier predictions of peak oil were usually based on an estimate of how much oil is in the ground, the success of exploration, the ease of production, and the rate of consumption. But in real world economics, it appears peak oil will happen when the products made from oil become too expensive for mass consumption applications (primarily motor fuels, building heat, and soil amendments). Declining demand will force a curtailment of production. If we still have private vehicles in 2074, it is likely most of them will not be powered by gasoline or diesel fuels.

We face the same depletion problem with coal. According to BP, 28.5 percent of the world’s remaining proven coal reserves are in North America, 35.4 percent are in Europe and Eurasia, and 30.9 percent can be found in the Asia Pacific region. Only 47 percent of the world’s remaining deposits contain high quality bituminous or anthracite coal. Another 30 percent is less desirable subbituminous coal, and the remaining 23 percent is low value lignite. In older coal mining areas, like the United States, we are quickly consuming the cheap to produce high quality coal. What’s left will soon be more expensive to produce and of lesser quality. We have assumed most of the world’s cheap, high grade, coal will be gone by 2035. Our accessible reserves of coal would last 90 years if there were no increase in annual consumption. But the world’s appetite for coal, particularly in China and the nations of the western pacific is insatiable. That means peak coal may occur before 2048. What’s left will be increasingly more expensive to mine and of a declining quality (low value coal has a lower BTU value per ton and is fouled with bad stuff like sulfur and ash).

The introduction of fracking technology has caused a lot of excitement because we suddenly have a worldwide bonanza of potential natural gas that can be extracted from tight geological formations. But the largess is illusionary. It would appear we humans are sitting on 187 trillion cubic meters (TCM) of proven natural gas reserves (located primarily in Russia 18%, Iran 18%, and Qatar 13%). Let’s assume fracking and subsequent technologies increase our world reserves by 50 percent (as many expect). That would give us a total of 281 TCM to consume (no sure thing). World consumption was on the order of 3.3 TCM in 2012. If we ignore increased consumption, that would give us an 85 year supply of natural gas (before the pilot light goes out forever). But consumption is increasing – fast. Natural gas is replacing coal for the production of electricity and is being promoted as a vehicle fuel. Consumption, which increased by 27 percent over the last 10 years, is projected to increase even faster over the next 10 years. The United States Energy Information Administration (EIA) is one of the government agencies that projects natural gas production will increase through 2030: up 50 percent over 2013 production. Then it will decline. I am slightly more optimistic. It would appear peak natural gas will occur in 2038 if we humans consume an average of 4.7 trillion cubic meters per year from now until then (it would appear peak natural gas will occur when 42 percent of our total legacy has been consumed: 281/4.7 =60 years of consumption times 42% = 25 years from 2013 to 2038).

Supporters of renewable energy are overly optimistic. It is assumed solar and wind energy can increase without constraint into the forever future. We wish it were true. But both technologies have the same constraints: energy storage and portability. This limits their use to stationary applications and battery powered mobile applications. In addition, proponents typically grossly underestimate the size and complexity of world energy markets. Never-the-less, it is possible to take an optimistic view of both solar and wind as energy resources through 2050. Renewables (including solar, wind, geothermal, and commercial biomass) accounted for 1.9 percent of energy consumption in 2012, and are projected to provide 11.8 percent of all the energy we consume in 2050. If we solve the storage and portability problems, the percentage in 2050 could be significantly higher. By the way, if non-commercial biomass is included in our estimates, it would account for roughly 14 percent of world energy in 2012 – mostly for heat and cooking.

It is possible to be more bullish on nuclear and hydro power. We humans will be forced by the accelerating cost and declining availability of fossil fuels to increase our use of nuclear and hydro energy resources for stationary applications – mostly to generate electricity. New technologies have emerged that make the use of compact nuclear energy installations increasingly safer and cost effective as a source of electrical power. Increased reliance on hydro power does not mean we need to construct more huge dams. Smaller installations, including those powered by water from coffer dams and alternative ways to capture the energy of moving water, will add to our energy resources.

In the following graph, the consumption of our planet’s energy resources has been plotted from 2012 through 2050. Note the scale is based on million tons of oil equivalents (MTOE) for each energy resource. The consumption of oil increases from 4222 MTOE in 2012 to a peak consumption of 4676 MTOE in 2024, and then gradually declines to 3247 MTOE in 2050. Coal climbs from 3808 MTOE in 2012 to a peak of 4974 MTOE in 2035, and then declines to 3817 MTOE in 2050. Consumption of natural gas increases from 3071 MTOE in 2012 to a peak of 4735 MTOE in 2038, and then slides to 3813 MTOE in 2050. It would appear there may also be a peak in the consumption of nuclear fuels: 572 MTOE in 2012 to a high of 1166 MTOE in 2045, trailing downward to 1134 MTOE in 2050. The consumption of hydroelectric power does not peak. Consumption increases steadily from 842 MTOE in 2012 to 1398 MTOE in 2050. Our dependence on renewable energy resources also continues to increase throughout the forecast period, from 276 MTOE in 2012 to 1791 MTOE in 2050. 


In the next graph we can see the combined effect of these energy consumption patterns. To put this data in perspective, we have graphed it from 1900 through 2050. Data from 1900 to 2012 (the blue line) is from actual recorded information. Projections from 2012 to 2050 are extrapolations modified by the assumptions given in the prior paragraphs. If our assumptions are correct, world energy consumption peaks at 18,120 MTOE in 2037.


One can question the above assumptions, but currently available data supports a stark conclusion. Sometime in this century, probably before 2050, consumption of our planet’s fossil energy resources will peak, and then begin an unstoppable decline. We cannot escape the constraints. Energy consumption depends on energy production. We must always be aware of the political and cultural constraints placed on energy resource production and consumption; the characteristics of the resources available; the sustainability of each resource base (including the quality as well as the quantity of each resource); the cost of exploration, production, and transportation; the cost of processing or manufacturing end use products; and the cost and challenges of retail distribution.

Taken together, these are the elements that define the accessibility factor. It’s the right way to evaluate our energy options. (Appendix 2)


Part Three: Peak Energy

Population and Energy

The United Nations Department of Economic and Social Affairs, United Nation's Population Division (UNP), now believes the number of people on our planet may exceed 9.4 billion people by the end of 2050. That compares with ~7.0 billion people at the end of 2012. Most of the population growth will come within the less developed nations whose population is projected to rise from 5.9 billion in 2012 to 7.9 billion in 2050. Because they already have such large populations, however, annual absolute additions are a crucial dilemma for China (~ 14 million people a year to its current population of 1.35 billion), and India (~ 18 million people a year to its current population of approximately 1 billion).  In contrast, the population of the more developed regions is expected to remain largely unchanged at 1.2 billion and would decline were it not for the projected net migration of people from the less developed nations to the more prosperous nations which belong to the Organization for Economic Co-operation and Development (OECD).

Birth rates are coming down. Fertility has fallen below the replacement rate (less than 2.1 children per woman) for many traditional families in Europe, Russia, Japan and higher income nations. In intermediate fertility nations (such as India, Brazil, the Philippines, Syria, Israel, Malaysia, Indonesia, and Egypt) women are having an average of ~3 children during their lifetime. On the other hand, in North Africa and some predominately Muslim nations, birthrates still exceed 5 children per female.

Demographers credit increased family prosperity, access to family planning information, changing social values, and improved female education for the decline in fertility within some cultures. It takes about 20 to 25 years of exposure to television and other media, along with educational reforms, to encourage a change of attitude about birthing. It has been taking another generation or two for a population decline to become evident.

Declining birth rates, along with improved health care and nutrition, are gradually shifting the average age of first world populations upward. In developing countries the aging of national populations has meant a higher percentage of the population is of employment age. Higher rates of economic growth are possible (but not assured). Some Asian and South American nations fall into this category. On the other hand, within some of the more developed nations, low fertility rates and an aging population has brought about a decrease in the percentage of adults who are employable. Japan is an example. In Africa and the Middle East, high birth rates and higher mortality rates have ensured young people will continue make up a larger proportion of the population.

Most nations aspire to attaining first world economic structures. If there were no energy problem ahead, we could expect personal income to grow faster than the national population. Immigrants who move from developing nations to first world economies increase the demand for energy. On a global basis, this migration from low energy developing world lifestyles to OECD high energy consumption lifestyles guarantees a continuing upward pressure on fossil fuel energy consumption. In general, the more advanced an economy and the higher personal income, the greater the demand for energy. According to the Optimum Population Trust, “some international agencies and many national governments still share a comprehensive vision of global sustainable development and poverty alleviation that centers on unlimited consumption-based economic expansion.”

That incredibly naive vision of unlimited economic growth will never happen. Public policy must come to terms with a terrible reality:

There isn’t enough fossil energy
left on this planet
to ensure the economic prosperity
 of 9.4 billion people.

Since every human consumes energy, a gap is created between the projected natural demand for fossil fuels and the availability of economically affordable fossil fuel production. This gap between Natural Demand and Available Energy could be called a “deficiency of well-being”.  The larger the gap, the greater we humans will have to adjust our lifestyles to deal with an increasingly energy deficient Cultural Ecosystem.

One can debate the exact date this gap will start to appear. But it will happen. If you are under the age of 20, it is likely to happen in your lifetime.

 

Population, Fuel Consumption and GDP

It has been reported in the Wall Street Journal that Exxon Mobil, Chevron, and Shell spent more than $120 billion in 2013 to boost their oil and natural gas output. But all three companies have two agonizing problems: exploration costs have sharply escalated and returns have thus far been terrible. Exxon Mobil’s capital expenditures increased by 51 percent between 2009 and 2013, but production is up only 6 percent. Shell’s capital expenditures were up 39 percent during this period, but the company’s production has only increased a discouraging 1 percent. Chevron has done even worse, expenditures were up 89 percent while production actually decreased by 3 percent.

Exploration is a real challenge for the independent gas and oil producers. Chevron’s Gargon project, for example, is located 40 miles off the coast of Australia in deep water. Costs will probably exceed $60 billion before production begins in 2017 (maybe). Exxon Mobil and Shell are sharing 50 percent of the cost, and the treasure trove of natural gas they are after sounds huge: 40 trillion cubic feet of gas. But let’s put that into perspective. That would have been enough natural gas to satisfy world consumption for only 123 days in 2012, and production will take place over many years.

Such is the oil and gas business. Big numbers, huge risks, and escalating costs are a fact of life.  Most of the prolific fields are controlled by national governments. Nations like Saudi Arabia, China, Russia, Iran and Qatar. The independent oil and natural gas companies have been forced to make deals all over our planet. Look everywhere for hydrocarbons. Even under the ocean. Doesn’t that sound a little bit scary? Of course these projects will eventually pay off. But doesn’t it appear exploration and production has the feel of desperation about it? Why do we need to drill so far out in the ocean? Is it because easy to find and produce liquid and gas hydrocarbons are history? For the independent oil companies, that appears to be the case.

National governments will continue to maximize their oil, coal and natural gas income by time tested methods: continually increase royalties, taxes, and fees. Production will inevitably decline because of the usual reasons: poor resource management, inadequate investment, graft, corruption, political turmoil, environmental concerns, and resource depletion. National governments treat their resource sales as national treasure and a source of government income. Consumers need to remember, these energy resources will be produced on a schedule determined by national government policy (or by political circumstances), rather than consumer demand. National governments have repeatedly demonstrated they are looking for ways to increase the price of available production. Let’s not be naive. We will pay more for gasoline, diesel, propane, jet, heating oil, and natural gas fuels, as well as higher prices for soil and plant amendments (which make the green revolution possible) (Note 2)

So where do we go from here?

Well for one thing, despite declining birth rates in many nations, we humans keep producing babies. The following graph plots world population growth (extrapolated from UN data) and projected energy consumption from 1900 to 2050. Per capita energy consumption increases faster than population growth. But there is a snag. What happens if world fuel consumption (from all energy resources) peaks in 2037 as our scenario proposes?


Notice the rather tight correlation between population growth and energy consumption. It is an inescapable fact. People use energy. The more people there are, the more energy is consumed, and emerging nations want their share of the good life. That means consumption per capita is going up, and it will continue to do so until there is no more available energy at a price people can afford to pay. Will it peak (as shown by our scenario) in 2037? Entirely possible, and probably for reasons having little to do with fossil fuels in the ground. Peak Energy will happen because of price motivated conservation.

Then what?  The better life dreams of several hundred million souls turn to crap.

Energy optimists assume there are no constraints on energy consumption. In the following graph we have projected the UN’s world population growth and the International Monetary Fund’s implied projection of world Gross Domestic Product (GDP) from 2012 through 2050. Notice it has been assumed that GDP per capita will continue to increase unabated through 2050. Everyone is materially better off. But is this realistic?

Absolutely not: by 2050, all 9.4 billion of us will feel the devastating effects of declining energy resources.



As shown in the following graph, by 2050 we humans will face a serious energy shortfall. In order to continue our planet’s projected economic growth, we will need 24,547 million tons of oil equivalent energy. What we will have is only 15,198 million tons of oil equivalent energy. That’s 38 percent less than we would need to sustain the IMF’s implied projected GDP growth.


The Best Case scenario for world GDP assumes no energy constraints to GDP growth. The Compound Annual Growth Rate (CAGR) from 2012 through 2050 is a healthy 3.5%. But a more realistic economic scenario must account for the declining availability of affordable energy resources. Assuming the constraints to world energy consumption described in our scenario are correct, then we should expect to see somewhat slower GDP growth from 2012 through 2037, and a declining GDP from 2038 through 2050. As shown in the following graph, the CAGR of world GDP averages only 2 percent from 2012 through 2050.

In our scenario we have also taken a very optimistic view of projected increases in energy efficiency and conservation. Call it a matter of faith. Assuming these are estimates correct, overall world energy consumption only grows by a CAGR of .5 percent from 2012 through 2050. Most of the conservation and efficiency practices occur after 2024 when the reality of peak oil forces consumers to adopt new life styles, accompanied by a radical change in the production and distribution of goods and services.


 As we have mentioned earlier in this discussion, one may scoff at the proposed date of “Peak Energy”, but the eventuality is inescapable. Declining per capita energy consumption will have a corresponding effect on personal income, the value of money, and the creation of national wealth.

Good News

There is good news in all this dreadful discussion. Peak Energy means we will gradually consume less oil, coal and natural gas. Pollution from carbon dioxide, methane, and other gases will be reduced. According to the logic used by the U.N.’s Intergovernmental Panel on Climate Change (IPCC), the perils of global warming will decrease because we will be burning less fossil fuel. The following graph charts global temperature anomalies through 2050 based on our assumption of Peak Energy. Notice the decline of temperature forcing, particularly after 2037. NASA GISS Surface Temperature (GISTEMP) Analysis has been used from 1880 through 2012. Forward temperature projections follow UN projections, modified for the effect of Peak Energy. Man-made global warming will decrease.


There is more (conceivably) good news. We will improve solar energy collection technology, making it more efficient and less expensive as a source of energy. We can do more with hydro power (which does not necessarily mean huge dams and reservoirs). We can and will do more with hydrogen both as a storage mechanism and as a source of immediate energy. We can and will do more with hydrocarbon chemistry and the manufacture of totally new liquid fuels. We can do more with small scale nuclear and thorium plants as a source of local power. One can hope we will solve the energy storage challenge for both solar and wind power. And last, but hopefully not least, maybe someone will make nuclear fission work.


Part Four: Economic Growth and Decline

Even with continuing improvements in energy efficiency and conservation, the Gross Domestic Product (GDP) of any nation is tied to its consumption of energy. There is also a correlation between World GDP, which is the sum of all individual national GDPs, and world energy consumption. If the growth rate of fossil fuel production gradually declines from 2012 through 2037, and total energy production declines from 2038 through 2050, then we must adjust world GDP for the reality of decreasing energy resources. This shift has been drawn in the following graph. It shows how the declining availability of accessible energy must eventually pull down international economic activity. Energy consumption peaks at 18,120 MTOE in 2037. World GDP peaks at 169 trillion dollars in 2040. By 2050, world energy consumption declines 16 percent to 15,198 MTOE, and world GDP drops by 9 percent to 154 trillion. It should be obvious that assuming a 16 percent decline in energy consumption only causes a 9 percent drop in GDP is very optimistic.


The decline of available accessible energy creates a huge gap between the implied International Monetary Fund (IMF) GDP projection ($263 trillion dollars) and a real world GDP ($154 trillion dollars) that has been adjusted for energy deficiency. That’s 41 percent less economic activity than our world needs to sustain the projected incomes of the people on our planet.


In the following graph we compare per capita income with per capita energy consumption. All money calculations are in 2012 dollars. Despite increased energy efficiency and conservation, the decline of available accessible energy causes a deterioration of per capita income. After increasing from $10,286 in 2012 to $19,129 in 2037, it then declines to $16,469 in 2050. Energy consumption per capita increases from 1.777 tons in 2012 to a peak of 2.075 tons in 2037, and then declines to 1.621 tons in 2050.

Translation: human economic security will decline after 2037.


We must remember “Accessible reserves are those reserves of oil, coal or natural gas that can actually be found, produced, transported, refined, and distributed without disruption at a price the consumer can afford to pay”. Energy must be available and accessible to the consumer. But energy prices are going up. The following graph shows the coal, oil and natural gas price indexes from 1990 through 2012. Notice the price for Brent oil continues to increase even as the price for natural gas declines.


If we create a composite index of coal, oil and natural gas, it is easier to see the overall trend of energy prices. Even with the recent decline of natural gas prices (in some nations), the index continues to rise. Consumer energy price increases have actually accelerated since 2002. Higher prices reduce energy consumption. Higher energy prices also reduce economic growth.


And so, what can we conclude? Declines in the availability and accessibility of our planet’s fossil fuel energy resources make unlimited economic growth highly unlikely. A more realistic economic scenario must include limits to energy production and consumption that will lead to a declining GDP and per capita income. There are only three unknown issues: how will these events unfold, when will they occur, and how will they affect national cultures?


Part Five: Consequences

Inevitable

It is, of course, impossible to predict how our unstoppable march to Peak Energy will play out. Nor can we forecast the absolute date of Peak Energy consumption. There are just too many variables. In order to make an accurate prediction of events, we would have be absolutely certain we understand the scope and direction of energy technology; the peak dates for oil, natural gas, and coal resource depletion; the date (or dates) when the mass of consumers will no longer be able to afford escalating energy prices;  how the cultural and political events unfolding in Eastern Europe, the Middle East, Africa and elsewhere will play out; how economic growth will affect energy demand for every year that lies ahead;  the impact of oil, natural gas and coal resource accessibility on the production of food and goods; the political reaction to resource depletion and food shortage chaos; and so on.

Sorry. That is beyond our intellectual capability.

We do know the outcome is inevitable. Probably before 2050, but certainly in this century, world economic growth will hit a wall. What follows is decline. There will not be enough energy to support a continuation of economic growth or further increases in food production. Few nations will even have the energy resources to sustain past levels of economic activity. Regional famine is certain.

 

Oil, Natural Gas and Coal Production

New technologies promise to improve fossil fuel resource production all over our planet. Given that fracking, horizontal drilling, seismic analysis, and other technologies have improved the availability of natural gas and oil, and assuming no substantial impediments to the use of these exploration and production methods, the production of these energy resources should be adequate over the next few years. Most analysts who follow these markets believe non-OPEC oil and natural gas production will provide a comfortable cushion to support the growth of consumer demand. Eventually, however, any continuing growth in world fossil fuel consumption will have to depend on nations like Russia, Iran, Iraq and Saudi Arabia.
 

Oil

Oil discoveries in tight formations have dramatically improved American and Canadian oil resource expectations. Near term production forecasts are significantly higher. We also fervently hope undiscovered land and shallow water oil resources exist in Africa, Mexico, and South America. But the majority of oil production must come from drilling holes in the ground to find large oil bearing geological structures. Current exploration reality outside the continental land mass of North America appears to be focused on deep sea water and polar resources. This is not cheap oil. We can expect higher prices for oil and everything we make from this fossil fuel resource.

 

Natural Gas

Pipeline transport challenges tend to restrict natural gas distribution to regional markets. Looking ahead, Liquefied Natural Gas (LNG) terminal construction will make it easier to transport natural gas to markets on an international basis. We have assumed a plentiful supply of natural gas until at least 2038. Industry observers believe new tight formation discoveries could extend the useful economic life of natural gas into the late 21st century. We hope they are right. Because no LNG facilities are required to transport natural gas within regional markets, U. S. and Canadian internal natural gas prices should be lower than in most other OECD nations. We can project ever higher prices for natural gas on a global basis, however, because it is, and will continue to be, used as a substitute for both oil and coal as a raw material and energy resource.

 

Coal

With the exception of the Far East, coal production will continue to be constrained by environmental concerns that limit consumption. Never-the-less; production will continue to increase, most notably in China, S.E. Asia, Australia, and Russia. We can expect consumer prices to go up in tandem with ever higher exploration and production costs. After Peak Energy, the decline of oil production, along with competitive consumption demands for natural gas, will force a greater reliance on coal for heat and cooking. Coal is likely to be a major source of heat energy throughout this century.

 

Energy Will Be Expensive

Discussions of oil, natural gas and coal usually focus on their use as energy resources. We tend to forget, these commodities also furnish the raw materials for thousands of manufactured products. That means they not only supply the energy to extract, process, transport, refine, manufacture and distribute the products we take for granted, they also provide raw materials for buildings, plastics, textiles, cosmetics, drugs, vehicles, roads, and so on.

The industrial revolution,
which enabled the mass production
of low cost goods,
was interdependent with the availability
of cheap energy and cheap raw materials.

But oil, natural gas and coal will be more expensive. Energy and raw material costs will spiral ever higher. There will be a corresponding increase in everything we buy. Although food and fuel prices are the most immediately sensitive to changes in the cost of these commodities, increases in the cost of processing, manufacturing and transportation of manufactured goods is inevitable. And this begs a question.

If mass production is interdependent
with cheap fuels and cheap raw materials,
then what happens
when these resources are no longer cheap?

Although excess oil and natural gas production capacity currently restrains fuel price increases, fossil fuel cost structures work against any long term price reduction. In classical economic theory, it is assumed producers will reduce consumer prices when supply exceeds demand because producers are forced to compete for market share. When these lower prices are in place, consumers will buy more oil, coal, and natural gas. This iterative process continues until equilibrium is reached between demand and supply.

Rubbish.  Classical economic theory works if we are calculating how supply and demand affects the price of door knobs, but the primary energy resources upon which we humans have built our civilization are framed by far more complex issues.

First of all, coal, oil and natural gas are finite resources. Depletion is certain. Each incremental gain in production moves us closer to depletion. The closer we get to depletion, the higher the costs of exploration and production. These costs, as we have already witnessed, put an ever increasing base under consumer prices. If producers cannot sell their product for more than the cost of production, they will simply stop production.

In the second place, we must also recognize that in addition to rising production and exploration costs, fossil fuel exporting countries are moving ever closer to controlling the availability of these commodities. National competition for available coal and oil reserves is one of the reasons China has become increasingly interested in extending its political control over areas within the South China Sea. Russia has already demonstrated it will use its natural gas reserves as a political weapon. Iraq’s oil production ambitions have been delayed by internal political conflict. Although fracking and seismic technology have created a natural gas bonanza in the United States, this has not had much effect on international natural gas prices. Venezuela, which has a poor record of fossil fuel resource development, actually moved to nationalize the assets of the companies that were improving resource production. Iran’s natural gas and oil resource development plans are subject to the religious objectives of that nation’s rulers. Sectarian and religious violence in Nigeria continues to impede oil production operations.

In the final analysis, therefore, corporate behavior, government action, cultural stability, economics, legal agreements, geography, weather, transportation, environmental concerns, military diplomacy and the always potent combination of religion and politics are as important as geology in developing resource production forecasts, and none of these factors are likely to decrease the price of coal, oil and natural gas. The closer humanity gets to fossil fuel resource depletion, the greater the petulant behavior of producer nations. Indeed, between now and 2050, it is highly likely the primary producer nations will assume virtual control over fossil fuel resource availability and price – and therefore the health of the entire world economy. Greed will drive the price of energy - up.

 

Food Security

We are victims of our agricultural success. The “Green Revolution” introduced modern methods of irrigation; improved varieties of genetically modified crops; the use of pesticides and herbicides; and the application of synthetic fertilizers to farmers in developing nations. In India, for example, rice yields increased from about 2 tons per hectare in the 1960s, to 6 tons per hectare in the 1990s, and the price per ton dropped from over $500 to under $200 a ton. This pattern of having more to eat has been repeated for all the basic food crops in most of the nations on our planet. Cereal production (rice, maize, and wheat) more than doubled in developing nations between the years 1961–1985.

But putting more food on the table has led to having more babies and fewer people dying from starvation. The result: there are more mouths to feed and further increases in food production are no sure thing.

So, what is the limit? The UN estimates up to half our planet’s population is either directly, or indirectly, dependent on the continuing use of inorganic fertilizers. In addition, every farm of any size, as well as every food processor, distributor, and retailer depends on the products we make from oil to furnish the energy and materials needed for the continuation of their business. At what point does the world price of natural gas, which accounts for 90 percent of the cost of producing ammonia, and the increasing price for a barrel of oil, make the production, transportation, and distribution of crop and soil amendments financially prohibitive?

In other words, how long will food be accessible? The UN estimates over 30 million people die each year as a direct or indirect result of hunger and poor nutrition. David Pimentel and Mario Giampietro in their study Food, Land, Population and the U.S. Economy wrote they believe an agricultural crisis will only begin to impact the United States after 2020, and will not become critical until 2050. But if oil, natural gas and coal production peak as discussed in our scenario, a world agricultural crisis could happen much sooner. Increased famine is inevitable. Constant hunger leads to weakened immune systems and a subsequent increase in disease.

Existing food price volatility suggests the global food production and distribution system may be unsustainable. For example, sharply higher fuel and fertilizer prices in 2008 forced farmers to use less soil and plant amendments. Crop production suffered. This led to food shortages and a sudden increase in food prices. Then nations like Russia and India – which normally sell their surplus production - imposed trade and tariff restrictions on exports, thus exacerbating global food shortages and pushing up prices even further. Riots followed.

In the following graph, we document the WTI world oil price index, the international natural gas price index, and the United Nation’s Food and Agriculture Organization (FAO) food price index. The world price of food, as measured by the FAO index, has increased by 90 percent in the 25 year period from 1990 through 2014, and the price of oil has increased by 274 percent. The corresponding natural gas index is almost identical to the oil price index. The close relationship of natural gas and oil prices suggests any disruption of oil production (highly likely) will increase the price of both energy resources. Consequently, we should anticipate a spike in natural gas prices irrespective of whether or not there are plentiful supplies of natural gas. The conversion of vehicles to natural gas, the substitution of natural gas for oil in manufacturing, and the substitution of natural gas for coal fired electricity production will sustain this correlation. The European Commission estimates that about one-half of European natural gas supply is indexed to oil. Moreover, about 80% of Russian natural gas supplies to OECD Europe are linked to the price of oil.

Notice that oil, natural gas, and food price increases have accelerated since ~2005. Food riots occurred when all three indexes jumped in 2008 and again in 2011. The timing of the Arab Spring in 2008 was coincident with a global rice shortage and an increase in staple food prices. Riots occurred across the Middle East, North Africa, Peru, Pakistan, and South Asia.


Irrespective of what triggers a famine, government action (or lack of inaction), can influence how severe the famine will be, and how long it will last. We should note that people will normally put up with a lot of crap from their government. Lies, deception, elitism, crony economic gain, and police state harassment may not be challenged. But within many social structures, human tolerance for oppression, corruption, indecision, and failure will drop to near zero when people are constantly hungry.

The United Nation’s Food and Agriculture Organization (FAO) has estimated almost 870 million people on our planet suffered from chronic undernourishment in 2012. Of these, 852 million live in developing nations. One of the biggest threats to global stability is the potential for a food crisis.

Yes: there are limits to food security.  Yes: Peak Energy will decrease food security.

 

Transportation

Higher prices have already become a fact of business for companies that move people and freight from place to place. Jet fuel, which was approximately 13 percent of airline operating costs in 2002, increased to 34 percent of airline costs in 2013. Trucks moved about 74 percent of American freight in 2013. Motor fuel now accounts for ~ 38 percent of long haul carrier operating costs. Freight truck companies are evaluating (and buying) natural gas powered units as an alternative to diesel powered trucks. For Class 1 railroads, fuel represents a major component of operating costs, increasing from 7 – 11 percent in 2002 to 23 – 26 percent in 2013. Ship owners are complaining bunker fuel is four times more expensive than it was 10 years ago, and now accounts for 70 percent of freight ship operating costs.

The following graph illustrates these escalating costs by comparing what businesses paid for engine fuels in 2003 versus how much they had to pay for these fuels ten years later in 2013. The jet fuel index is up 256 percent, the cost of diesel is up 227 percent and the cost of gasoline is up 221 percent. The consolidated engine fuel price index increased by an average of more than 10 percent per year from 2003 to 2013. By 2013, it was up by 234 percent.

Is anyone naive enough to believe engine fuel prices will not go any higher?


Consumer reaction to higher diesel and gasoline prices is predictable. Buy vehicles that get better gas mileage and drive less. We can expect higher gasoline and diesel prices will also reduce personal vehicle sales. The tipping point for a forced reduction of fuel consumption has been documented, along with a probable reduction of vehicle ownership. (Note 3)

The current trend within developing nations is to sharply increase private vehicle ownership. Millions of new vehicles will compete for space on streets already choked with humanity. But where will it end? The closer we get to Peak Energy, the more likely consumers will be forced to move from private to public transportation. Governments are not prepared for the resulting demand this will create for bus, light rail and Class 1 rail service. And here are two questions:

·       What happens to national economic and social structures if people are forced to rely on public transportation in order to go shopping and find employment?
·       How will ever higher freight costs impact economic activity, consumer prices, and product availability?

 

Culture Shock

Stress

Thus far, we humans in developed nations have been able to accelerate our energy resources faster than our population growth. Well-being (which may also be thought of as human health, freedom from hunger, physical comfort, economic prosperity and social happiness) has continued to improve. Less affluent nations are determined to follow this same course.  And thus far (if we ignore regional conflict and destitution), our collective well-being has improved faster than our numbers.

But we should refrain from being overly optimistic. We humans refuse to introduce effective population policies. For instinctive reasons, population control is an emotional issue. Opposition is supported by cultural attitudes, including the belief that unlimited reproduction is ordained by God (or Allah). Logical arguments based on available food, water and resource deterioration are brushed aside. The impending disastrous effects of overpopulation are thus a given. A developing energy crisis merely serves to accelerate their arrival.

Higher fuel costs are driving higher rates of inflation for current expense items such as food and fuels. Price conscious consumers are being encouraged to purchase locally produced goods and services. Increasing fuel costs will eventually restrict our choice of foods to those that are easily transported and processed in bulk. Fresh fruits and vegetables will be prohibitively expensive for most of the year because they are not “in season”. The daily diets of low and middle income families will be hurt the most. Expensive energy may also hinder or incapacitate municipal services such as public transit, emergency services, and sanitation. We humans who live in energy intensive OECD nations will soon discover even the cost and availability of public transit service suffers the same fate as private personal transportation. Increasingly expensive personal transportation, coupled with the insanity of dysfunctional public services, works against long distance commuting.

Since Gross National Product – the sum of economic activity – is interdependent with the availability of cheap energy, national economies are certain to decline as we approach Peak Energy. It is difficult to imagine how we will escape a continuing slide into depression. We who live in the OECD nations are not used to the mind numbing experience of chronic unemployment, poverty, and hunger. Our income will decline, but everything we buy will be more expensive.

This can only lead to a deterioration of human well-being. Economic stress tends to make us less tolerant. We adopt parochial attitudes, us versus them social structures, and fear based political allegiances. Religious practices provide the excuse for social and political action. We become more competitive. The trauma of Peak Energy promises to deepen the psychological distress. The thin veneer of civilized behavior is easily ruptured. Conflict is a catharsis for pent up frustration. These patterns of human behavior are well established. Just pick up a newspaper. Read about our history.

 We have an archeological record of several cultures that grew until they exhausted their resources… and then perished (See: “Collapse”, by Jared Diamond). Furthermore, cultures evolving toward self-destruction tend to adopt rigid systems of cultural behavior, become increasingly corrupt, and espouse a tolerance for incredibly cruel bloodshed.

 

Political Institutions

Will Democracy provide a workable response to the cultural, economic and environmental strains of the 21st century?
 
Probably not.

It is hard to see how a democracy will be able to survive the social and economic challenges of a Peak Energy crisis. Democracy only works where the governed can be (and are) independent, self-reliant, responsible, moral, and reasonably well educated. Workers must be allowed to create personal wealth, and they must be motivated to take advantage of abundant opportunity. But economic opportunity, which has been the enabling foundation of personal intellectual growth, the evolution of civilized behavior, and the wealth of nations since the 1400s, is in a decline that will accelerate as we approach Peak Energy.

On the other hand, existing democracies are not alone. All national governments are in danger of collapse because they will be unable to dictate the availability of cheap fuels and food. Our political institutions lack the leadership, strategic planning, and intellectual depth required to manage the challenging issues associated with Peak Energy. No matter how sonorous the rhetoric or aggressive the jack boot oppression, the institutions of government will become unstable. There are no politically easy solutions. Declining economic activity will decrease government income and force a sharp reduction in welfare benefits. Low and middle income citizens will not like economic deprivation, the loss of mobility, food restrictions, and evaporating personal comfort. Government reaction to higher fuel and food prices will be a greater use of the socialist tools of governance, all backed by the strict police power of the State.

But even the abusive use of autocratic oppression will fail to maintain order. Hunger drives desperation. In most nations, the governed will realize national central authority has not solved the problems that will come with Peak Energy. What happens next?  Riots and government collapse. New regional political boundaries are likely to be established – often after violent confrontation - based on ethnic, religious, language, and cultural demographics.

 

We are vulnerable to Peak Energy.

Fossil fuels are the lifeblood of OECD national economic activity, and provide the heat, power, and mobility presently enjoyed by OECD populations. In 2012, the OECD member nations could claim only 14.3 percent of world proven oil reserves. But as a group, they consumed 50.2 percent of the world’s oil production. The story for natural gas is similar. OECD nations accounted for 48 percent of world natural gas consumption in 2012, but have only 10.0 percent of the world’s proven reserves.  Most OECD nations are thus heavily dependent on foreign oil and natural gas producers for their very survival. However, these nations are in better shape when it comes to coal. In 2012 they accounted for 28.2 percent of the world’s consumption, and had 44.0 percent of the world’s proven reserves.

Yes: we who live in the OECD nations are voracious consumers of energy. We have developed an energy intensive economy and lifestyle. Our culture assumes energy will always be inexpensive and readily available. Our values, laws, regulations, social customs, ambitions, and social progress have been inexorably linked the ever-increasing consumption of coal, oil and natural gas. Our world economy and the personal lifestyles of millions upon millions of humans rest on the foundation of accessible energy. That assumption underlies our opinions about public transportation, affordable housing, birthing, employment, the availability of cheap food, population density, community zoning, and freeway construction. Material abundance and population growth mirror energy consumption. The freedom of personal mobility is ingrained into our psyche. These things, we believe, are a natural right.

They are not.


We are planning to consume increasing quantities
of energy resources
that may, or may not, be available,
at a price that many of us will not be able to afford.

Does this make any sense?

Think of it this way. We humans have just gone through 175 years of explosive population and economic growth all made possible by the almost unlimited consumption of cheap fossil fuels. That period of expansion is coming to a close. What’s next for us is the opposite of expansion – contraction.

 

I Could Be Wrong

So: are we an endangered species:  we humans? Are we destined to enter an age of despots and tyrants for whom domination and conquest are the ultimate ego trip? Does the decline of Roman into the Dark Ages give us clues as to what lies ahead for humanity?

I could be wrong. I sincerely hope I am wrong. And I concede it is easy to reject, scorn and/or dismiss these ideas as laughable, silly, ignorant, and unbelievable. But there is one nagging question.  Look at the following graph of our human population. It took less than 70 of those 175 years of economic and population growth to decimate our planet’s environment and deplete its readily available cheap resources.


Does anyone believe human population growth, along with all the food and fuel resource consumption that ever larger populations require to survive, is forever sustainable? Is it not possible that Peak Energy will force the tipping point of population growth? Will the decline be as fast (or even faster) than the upside?

You decide.


Ron
The Cultural Economist


References:
Historical statistics and information found in this report were taken from government sources and published data. All statistics and information in this report from 2012 through 2050 were developed by the author.

U S Census Bureau, Population Division, International Data Base Update, August, 2006
U. S. Census data used through 2006, as adjusted by UN projections through 2050.
Food and Agriculture Organization of the United Nations (FAO)
Fossil fuel data 2000 - 2012: Various government sources including:
·       IEA: International Energy Agency, World Energy Outlook, 2013
·       EIA: Energy Information Administration, Statistics and Outlook, 2014
·       United Nations Development Program (UNDP)
·       United Nations Statistics Division (UNSD)
BP Statistical Review of World Energy, June 2013
OECD: Organization for Economic Cooperation and Development
UN: Population Estimates by UN Population Division of the United Nations Department of Economic and Social Affairs of the United Nations Secretariat.

Note 1: The IEA/OECD organization defines one ton of oil equivalent (toe) to be equal to 41.868 GJ or 11.63 MWh of energy.

Note 2: Nations with the largest fuel production in 2012 -
·       Coal:  USA, S. Africa, Australia, China, India, and Indonesia.
·       Natural Gas:  USA, Canada, Russia, Qatar, Iran, and Norway.
·       Oil:  USA, Canada, Mexico, Brazil, Venezuela, Norway, Kazakhstan, Russia, Saudi Arabia, Iran, Iraq, Qatar, United Arab Emirates, Angola, Nigeria, and China.

Note 3: A discussion of how consumers will likely react to higher fuel prices can be found here - http://tceconomist.blogspot.com/2011/07/price-of-oil-how-much-will-it-hurt.html


Appendix 1: How Much Oil Do We Have Left? Really   

Can be found Here

 

Appendix 2: Twelve Criteria for Evaluating Our Energy Options  

Can be found Here


Appendix 3 Legal Information


Disclaimer
There are multiple and sometimes conflicting opinions about the governments, religions, cultures, organizations, companies, markets and products discussed in this report. Specific or inferred references to, and all discussion of, persons, groups, organizations, events or circumstances are subject to a variety of interpretations and should therefore be treated as conjecture. Since there are so many variables that will impact the timing and values shown, all graphs presented in this report should only be interpreted as illustrations of the scenario discussed in the associated text. Because the underlying data is based on a set of assumptions that may, or may not, occur as characterized, scenarios should never be construed as reliable predictions. As of this date, May 1, 2014, this report has not been reviewed or endorsed by any company or industry organization. The information contained in this report represents the author’s interpretation and analysis of information that has been published in various media. It is not guaranteed as to accuracy or completeness. Although the statements, comments, conclusions, and forecasts prepared for this report are based on logical research, they are presented without any warranty.

The research found in this text may be withdrawn from publication at any time at the sole discretion of the author.

Author's Notes
Trademarks and Copyrights - The product and corporate names used herein, including trademarks, sales marks and source material copyrights, are the property of their respective owners. An effort has been made to give proper attribution.

Purpose of this study
The objective of this research effort was to characterize the size and direction of the worldwide energy market, including the depletion of fossil fuel reserves and the impact alternative energy scenarios would have on world population and GDP.

Methodology 
This report is almost entirely based on secondary research. My efforts included selected reading from several reports on energy resource production and consumption, population, and food security, as well as information published by multiple national governments, industry participants, and Internet sites. I took a bottom up analysis of the collected data. Of primary interest was the interaction of energy production and consumption on world GDP and population. In order to accomplish this task, I developed a complex model that helped me to characterize the scenario presented in this report. In order to verify long term trends, the model includes data that - in some cases - goes back to 1800.

Assumptions
The uncertain quality of available data forced me to make a number of educated assumptions as I developed the material for this report. These assumptions are presented and qualified as appropriate.

Audience
Scholars will shudder at the brevity of my explanations. However, my intent is to reach the lay person - not the academic - so a thousand pardons for my humble erudition. In order to capture the attention of the lay person - the technical stuff has to be interesting.  And brief.

Scenarios 
The insights presented in this report are based on the analysis of several scenarios. Scenarios are not predictions.  Rather, they permit us to make, and then test, a hypothesis. We will then be able to challenge the assumptions, encourage debate about the model, and profile the probable result of our analysis. Scenarios are tools that give our evaluations focus, permit us to deal with the unexpected, and characterize the results of dynamic circumstances.

License
You are welcome to copy any of the material in this report for teaching, scholarship or research purposes subject to the Fair Use Notice described below.  If you chose to read or copy the information in this report, you do so with the understanding that such content is subject to the Trademarks and Disclaimer information described below. You may print one copy for your personal use. You may share this information and a printed copy thereof with your family and friends. You agree that you will not make any attempt to sell this information or any portion thereof, in any form. You agree that you will not alter the text, charts or tables found in this report in any way.

As a courtesy, please include the following attribution if you choose to excerpt or reproduce any material from this report as follows: 

Reference:
Peak Energy,
By Ronald R. Cooke,
The Cultural Economist,
May, 2014.

Fair Use Notice
This report contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. I am making such material available in my effort to research, analyze and document issues of cultural and economic significance. I believe this constitutes a 'fair use' of any such copyrighted material as provided for in Title 17 U.S.C. Sections 107 – 121. The material in this report is distributed to those who have an interest in using the information herein for teaching, scholarship and research purposes. For more information go to: http://www.copyright.gov/

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The product and corporate names used herein, including trademarks, sales marks and source material copyrights, are the property of their respective owners.  BP is the trademark of BP p.l.c. and its subsidiaries and affiliates. The name “The Cultural Economist” is the trademark of Ronald R. Cooke.


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