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Tuesday, April 18, 2006

289. MAJOR JOB CREATION DUE TO PEAK OIL

EnergySpin has found some thought-provoking information which deserves a place here.
The global wind industry has never had it so good - our WindEnergy Study 2006 showed that new installation of wind power worldwide will be quadrupled by 2014. That is very good news - not only for the environment, but also for the economy, as the wind industry becomes a job machine. The German Renewable Energies Association (BEE) expects some 500,000 jobs in Germany alone by 2020. That would mean more people employed in this industry in Germany than in the automotive industry.(Source: WindEnergy April 2006 newsletter, from the EWEC)
This supports the view we've discussed before in 209. THE ULTIMATE PEAK OIL HERESY. Who's to say that peak oil will lead to collapse and economic recession/depression? It's very possible that peak oil will lead to massive construction, employment growth and economic boom due to the need to rebuild and retrofit everything.
-- by JD

29 Comments:

At Tuesday, April 18, 2006 at 4:57:00 PM PDT, Blogger nukeengineer said...

During the 1970s, oil prices rose and the economy sank. Yet you think high prices will cause the economy to boom? Listen kid, you need to turn off the Nintendo and read a bit of pre-1985 history to get some perspective before making a jackass of your self with posts like this one.

 
At Tuesday, April 18, 2006 at 5:17:00 PM PDT, Blogger R. C. said...

Um, J.D. is 44 years old. He was alive during the 70s. I'm sure he has considered what you just said.

 
At Tuesday, April 18, 2006 at 5:44:00 PM PDT, Blogger popmonkey said...

the dow jones went up almost 200 points today. in other news, the price of a barrel of oil hit its record high. (yes, i know there was unrelated news re: the reserve and only long term stats make any sense; just found it ironic)

going back to the brilliant insights of nukeengineer (and soon, i imagine, our latest troll PD).

there's this argument that doomers like to use that goes something like this: "the oil shocks of the 70s and 80s are nothing compared to the oil shock that is coming, because this time the limits will be geological, not political and there won't be anyone to save us by re-opening the spigots". sorry for the paraphrasing but if you're familiar with PO you know this argument.

well, this argument is used by PO doomers when someone says "well we survived the 70s oil shock, we'll survive this".

however, it can also be used against PO doomers. here's how: in the 70s we *knew* that there was more oil and that we just had to figure out a way to get the spiggots turned up again. but this time we know we need new energy. and capitalism is making the new technology viable.

so again, comparing the situation now to that of the 70s is pointless. it's a new world with a totally different set of problems and new solutions.

 
At Tuesday, April 18, 2006 at 6:54:00 PM PDT, Blogger Patrick David said...

Popmonkey said: "so again, comparing the situation now to that of the 70s is pointless. it's a new world with a totally different set of problems and new solutions."

I think Americans suffer from a certain tragic disconnectedness from history. There's a prevalent idea that "Well, we're advanced now and we can tackle anything, because gosh darn it, we're Americans." As a history teacher, I undertand why this happens. History textbooks isolate historical periods and fail to connect them to today or to each other. Slavery began, people saw it as problem and it ended. Fascism and communism arose but were defeated. For example, students are taught that there was slavery, we had a civil war and a civil rights movement, and now there is equality, the end. Or: once there was an evil communist empire, but Ronald Reagan strucked down the dragon with his nuclear sword and now Europe is free from tyranny. Its triumphalist, its shortsighted, and its dangerous. The idea that April 2006 is somehow immune to the economic viccitudes of the 1970s and early 1980s is unfounded.

I believe that there are certain physical limits to science. There are also limits to infrastructure investment when milions of consumers are out of work and no one is going to have money to buy i-pods and McMansions that keep the economy humming along.

Nukeengineer is exactly right. The oil crisis wrought massive economic devastation. Retrofit all you want, it won't matter when Americans are spending all their cash on gasoline, heating oil, and food.

Hey RC, do you commonly call people you disagree with trolls, or is it that you just have no tolorance for diverging points of view? Or is this not an open blog?
I could come up with a lot of funnier, more apt insults for people I don't agree with, but I guess I'm a bigger person, a bigger man if you will.


I think JD's thinking suffers from the fact that markets are NOT always rational. This is because PEOPLE are not always rational.
The invisible hand might sweep down and deliver us from evil or it might knock us all on our asses.

Or rather your asses, 'cause I'm going to have my permaculture garden, windmill, and and worm bin up and running. Hahaha, just kidding!

Buena suerte,
PD

 
At Tuesday, April 18, 2006 at 7:14:00 PM PDT, Blogger Patrick David said...

**Hey RD, sorry, boss. The "man" who likes to insult others isMONKEY!! **
Ooops.

See, I'm such a big person, unlike others!

Peace
PD

 
At Tuesday, April 18, 2006 at 7:28:00 PM PDT, Blogger JD said...

it won't matter when Americans are spending all their cash on gasoline, heating oil, and food.

Patrick, there are about a jillion ways to avoid this problem. If gas gets expensive, you can car pool, ride the bus, buy a scooter, bicycle, walk, telecommute, move, sleep at work etc. etc. Americans heat their homes like mental retards. You only need to heat the room you're in, and you don't need to heat while you're in bed or out of the house. If you need to heat the pipes, then heat them. You don't need to heat the whole friggin house just to keep the pipes warm. Put on a hat and a thick sweater. Long underwear. Buy a down sleeping bag. Lie on an electric blanket in front of the TV, with a thick blanket over yourself. Food isn't a problem because food isn't getting inordinately expensive. And even if it does get expensive, just move down the food chain. Eat beans instead of beef. You're entire point is about lifestyle fluff. If Americans end up spending all their money on these things, it's because they are hopeless idiots who are barely capable of wiping their own butts.

 
At Tuesday, April 18, 2006 at 8:30:00 PM PDT, Blogger DC said...

"During the 1970s, oil prices rose and the economy sank. Yet you think high prices will cause the economy to boom?"

Post hoc ergo proctor hoc.

The woeful economic performance of the 70's and early 80's is attributable to factors other than the 70's energy crisis:

Considerations like these have led a number of economists to suggest that the recessions of the 1970s reflected other kinds of shocks. For instance, Barsky and Killian (2001) argue that the great stagflation of the 1970s was the result of monetary policy alternating between periods of stimulation and restraint and not oil price shocks. Similarly, Burbidge and Harrison (1984) examine developments in five major industrial economies including the U.S. and conclude that even though the oil shocks in the early 1970s did have a significant effect, recessions were already on the way even before the jump in oil prices. They also find that the 1979-1980 oil shocks had a minimal effect on all these countries except Japan.

Others have argued that the recessions may have been caused by the Fed's reaction to the oil shocks. Bernanke, Gertler, and Watson (1997) show that postwar recessions have been preceded not only by rising oil prices but also by a tightening of monetary policy, which makes it difficult to distinguish between the effects of the two. According to them, the confusion between oil shocks and the response of monetary policy explains why oil shocks appear to have an effect that far exceeds what is expected based on a comparison of energy costs to total production costs. Their own analysis leads them to conclude that oil shocks have not played a major role in recessions and that endogenous monetary policy can account for a major portion (and sometimes all) of the effects attributed to oil shocks.


source:
http://www.frbsf.org/publications/
economics/letter/2005/
el2005-31.html

 
At Tuesday, April 18, 2006 at 8:47:00 PM PDT, Blogger Dave Lankshear said...

I have to side with Patrick David here.

JD, there is a vast difference between saying that peak oil is not dieoff, and saying that there is not going to be a major recession or Depression!

I'm no "Doomer" that believes 90% of us are going to dieoff in some Mad Max catastrophe. However, to try and portray a little growth in the wind industry as a silver bullet to preventing recession is as ridiculous and unrealistic as the Doomers you criticize.

Tell me JD, how many harvesters run on Wind Turbines? How many airlines? How many freight companies?

I love wind, solar chimney's, solar energy etc but it is just plain all too little too late to prevent a Greater Depression. Yes, construction in these industries will BOOM. Yes, we need more and more renewable energy to prevent Climate Change. But no, wind energy moving from 1% of world electricity supply to about 4% of world electricity supply by 2015 is not actually going to solve a liquid fuels crisis or stop the airlines going bankrupt.

And JD... can you please stop unintentionally describing a recession as you try to explain away a recession? What do you think all your cost saving, energy saving measures mean? A slow down in the consumption of goods and services IS a recession. Not buying a car? JD, for the audience can you please tell me how many American's are employed making or servicing cars? "Sleeping at work?" will somehow prevent a recession? Accountants and factory workers sleeping at work, missing their families and children half the week, is the very definition of some kind of abnormal national emergency! Give me a break!

Just the airlines going bankrupt will throw the world into a major recession... not because the airlines themselves provide so much employment, but because international tourism does! And airlines are just the beginning.

What about freight? How far is our food freighted to our grocery stores? I know we CAN grow food closer to home, that it is a physical possibility... but WHEN are we going to? See the difference? I know we CAN train food from farmlands to cities... but that's only after the actuality of building the rail.

Just discussing the physical possibility of some sort of technical solution does not mean that the solution has actually been implemented in time to prevent a major recession or even Depression (which is my bet.)

You know I am not a doomer from our email chats. You know I want solutions to this. However, sometimes you go too far in dismissing the urgency with which governments should approach peak oil. The marketplace is running blind on this, and besides... town planning (and food security etc) is a government responsibility anyway.

I appreciate your efforts to help depressed peakniks see that there are alternatives, but I really think you have missed the boat as to how many decades too late all these 'solutions' will come if you think the marketplace will just sail right through peak oil without experiencing a rather savage recession or Depression.

Your move.

 
At Tuesday, April 18, 2006 at 9:51:00 PM PDT, Blogger R. C. said...

**Hey RD, sorry, boss. The "man" who likes to insult others isMONKEY!! **
Ooops.

See, I'm such a big person, unlike others!

Peace
PD

Don't worry about it.

I think what JD is trying to say is that maybe it is possible to achieve a level of economic growth post-peak. The solutions that JD is postulating about might not seem practical now but with $10-15 gas might seem a lot more prudent. Spending half a week away from your family is not so bad if it puts food on the table.

 
At Wednesday, April 19, 2006 at 12:55:00 AM PDT, Blogger popmonkey said...

pd (Troll -1), i think you probably read only half of what you claim to read. like, for example, JD's post, or my comment. or all the FACTS you like to quote.

The oil crisis wrought massive economic devastation.

it did? in the context of the 1970s oil shock: define massive. define devastation. define economic, for that matter... please use 500 words or less.

 
At Wednesday, April 19, 2006 at 1:03:00 AM PDT, Blogger JD said...

And JD... can you please stop unintentionally describing a recession as you try to explain away a recession? What do you think all your cost saving, energy saving measures mean? A slow down in the consumption of goods and services IS a recession.

Who says consumption of goods and services has to slow down? Please read the story of Stacey Harper in #180.

Stacey started car pooling, dramatically reduced her commuting bill, and now has lots of extra money to spend. You're assuming she won't spend that money on anything. You're assuming that money saved by people who conserve will just disappear, without a trace.

Even if you just do the minimum -- conserving enough to keep your fuel/food bills constant -- it has no net effect whatsoever on consumer spending. Your household budget is still exactly what it always was. Why will that cause a recession? You still have the same amount of money left over as you always had.

Just the airlines going bankrupt will throw the world into a major recession...

For the most part, the airlines already went bankrupt, and we're not in a major recession. And even if they do consolidate and retrench, that's just an opening for nimble competitors like Megabus (express bus service from $1!) who will grow into the niche the airlines vacate.

 
At Wednesday, April 19, 2006 at 1:10:00 AM PDT, Blogger popmonkey said...

eclipse now: there is no silver bullet and no one is arguing as such. wind power doesn't have to replace airplanes or harvesters. it's just like the "oil sands 4mbpd won't be enough" argument. oil (liquid) isn't going to run out. ever. production will (has?) peak and will decline and we will need conservation and new energy sources to gradually "replace" the hole. there is major financial opportunity here. in everything from PV to plug in hybrids to wind power.

i don't think it'll be all rosy. in fact i'm expecting a recession of some sort. just not one causing civilization collapse unless civilization is to be defined as "life of driving SUVs to buy McBurgers made from cows in Brazil"...

think of the horrors of the Internet Bubble.

 
At Wednesday, April 19, 2006 at 1:10:00 AM PDT, Blogger JD said...

dc,
Nice find! There was news on that very topic today:

Bernanke says high energy prices will not spark inflation

 
At Wednesday, April 19, 2006 at 1:16:00 AM PDT, Blogger Roland said...

Do Energy Price Spikes Cause Inflation?

(Apparently not).

I think that PO will be economically damaging in the short term, but may well strengthen the economy in the long run.

 
At Wednesday, April 19, 2006 at 6:32:00 AM PDT, Blogger diemos said...

"Even if you just do the minimum -- conserving enough to keep your fuel/food bills constant -- it has no net effect whatsoever on consumer spending. Your household budget is still exactly what it always was. Why will that cause a recession? You still have the same amount of money left over as you always had."

Sigh. Let's go through this.

Assume prices double but you still have the same amount of money. You and everyone else are now buying half of what you were buying before. Your standard of living goes down.

The people who made their living providing the stuff that you used to buy but don't any more now have no job and thus no money. They stop buying things and their standard of living REALLY goes down. This is a recession.

 
At Wednesday, April 19, 2006 at 7:02:00 AM PDT, Blogger Patrick David said...

Monkey,

If you don't know what happened during the 1970s, check a history book. Or ask anyone over 40. I'm not your teacher.

Buena Suerte
PD

JD, do you ALLOW other to hurtfully insult others, or is it just because they're insulting people you don't agree with?

 
At Wednesday, April 19, 2006 at 9:10:00 AM PDT, Blogger HedgeFund said...

It is true that PO (whenever it happens) will lead to massive investment (biodiesel, wind, solar, coal, etc.). However, PO can be restated as expensive energy. All else equal, the world is better off with cheaper energy. Simply, expensive = BAD, cheap = GOOD.

The only way in which the world is economically better of post PO is for this investment to yield better/cheaper energy. That's possible, just not that likely.

NOTE: The term "economically better" assumes that all the externalities of *oil* are captured in market prices, which, of course, is not fully true. For example, there will be dollar savings to telling the Saudis to defend themselves should we never need their oil. I doubt our current level of gas taxes fully capture this cost. Still, I prefer cheap energy to expensive energy.

 
At Wednesday, April 19, 2006 at 11:44:00 AM PDT, Blogger Nick said...

Hedgefund,

Don't forget: prices are not the same thing as costs. Oil prices have doubled recently due to perhaps a 2% shortfall of oil supply vs demand (defined as consumption as it would have been at the old price),which in turn is 40% of energy supplies, so the total shortage was about.8%.

The world economy was deprived of .8% of it's energy, and that didn't make any difference to the productive capability of economies.

Prices doubled, and this transferred income and wealth. Some people got poorer than they would have been (US, India, New England), other got richer (Middle East, Venezuela, Alaska).

The same thing would happen with a 10% shortfall of oil, though there might be a recession at that level. There certainly would be a deep recession if oil dropped 10% per year for several years, but I think no one who's really looking at this issue realistically expects a fall that severe. The most informed seem to feel we'll have a choppy plateau for 10-20 years.

I think the biggest risk is of political disruption in the Middle East which cuts off most ME supplies. That's not peak oil, exactly, though it's certainly related. That would certainly cause depression, as transportation ground to a halt.

 
At Wednesday, April 19, 2006 at 11:51:00 AM PDT, Blogger sameu said...

wow nice post eclipse now

I fully agree

and please JD, the vast majority of the people can indeed save big amounts of cash which they now spend on commuting, heating, going on vacation and other crap


they can reduce their wastefull crap spendings and all is well

but what about the older/poor (which the last time I checked are a big and growing population in the u.s.)

they can't cut back on their bullshit spendings, cause their entire budget already fully goes to food and energy

what about them?
what's their solution?

will you provide them with heat and energy when the price of oil goes up, which you welcome because you regard this as part of the solution?

 
At Wednesday, April 19, 2006 at 11:51:00 AM PDT, Blogger Nick said...

"The only way in which the world is economically better of post PO is for this investment to yield better/cheaper energy. That's possible, just not that likely."

As you noted, current prices don't reflect all external costs.

It seems quite clear (at least to me) that wind is generally cheaper than oil, coal and nat gas if you include ALL the costs (at least in the US, which has very good wind resources). The only question is for nuclear, and I'm still not clear how to cost out the Price-Anderson subsidy, and the cost of nuclear proliferation.

 
At Wednesday, April 19, 2006 at 11:58:00 AM PDT, Blogger Nick said...

Sameu,

I think we all agree that higher energy prices will hurt the poor, both in the US and elsewhere.

I think JD, and most here, would agree that we should do something to help them. The best thing, of course, would be better energy planning to prevent big price spikes. I also think JD and most others here would agree with that.

 
At Wednesday, April 19, 2006 at 12:03:00 PM PDT, Blogger sameu said...

yes well maybe the thought that we would like to do this will warm their hearts

and there you have your die-off

 
At Wednesday, April 19, 2006 at 1:12:00 PM PDT, Blogger HedgeFund said...

Sameu -- The US already does supply heating & food subsidies to its *poor*. Sizeable ones in fact -- our *poor* people are quite fat as a matter of fact. I expect such subsidies would continue post-PO.

One of the purposes of a gas tax (or an even higher gas tax) is to provide funds for the *poor* to meet their needs, such as subsidized, fuel efficient mass transit -- which also already exists in certain parts of the US (NY, Chicago, Boston, ...). Simply providing the *poor* with cheap gas for their cars as some might do would be economically inefficient. This group of people IS the market for mass transit and such.

Nick -- My basic point is that globally, the world is worse off when energy prices go up. Growth rates drop, and as you correctly point out, at some point a recession (output falls) occurs. However, the existence of a recession is not a necassary condition for concluding that the world is worse off with higher energy prices.

 
At Wednesday, April 19, 2006 at 2:05:00 PM PDT, Blogger Floccina said...

More jobs is not good if it means more work to produce a given amount of goods and services. Unemployment is more often a result of rapid change and of government policy. There always plenty of work to be done. If I can more energy out of fewer hours worked that is good. If get less energy for more hours worked that is always bad.

But I do agree that peak oil will not be the end of the world as we know it but it may lower standard of living for a few years as a result of more man hours required to produce a given unity of energy (energy is not really what we consume but comfort, transportation, light and other goods and services).

 
At Wednesday, April 19, 2006 at 11:53:00 PM PDT, Blogger EnergySpin said...

nick wrote:

As you noted, current prices don't reflect all external costs.

It seems quite clear (at least to me) that wind is generally cheaper than oil, coal and nat gas if you include ALL the costs (at least in the US, which has very good wind resources). The only question is for nuclear, and I'm still not clear how to cost out the Price-Anderson subsidy, and the cost of nuclear proliferation


Regarding the FFs you are right .. the EU just recently released a report that did the enviro accounting for the transportation sector. Guess what? European prices should more than double to fully account for the externalities of gasoline/diesel.
If you were to translate the results to the US you are looking at something close to 15-20$ per gallon, given the difference in CAFE standards between the 2 systems.

Source:
http://reports.eea.eu.int/eea_report_2006_3/en


Regarding nuclear ... there is no need to re-invent the wheel. The externE study has the numbers for your:

http://www.externe.info

 
At Thursday, April 20, 2006 at 12:13:00 PM PDT, Blogger Nick said...

EnergySpin,

Thanks for the info. I had trouble finding good data on nuclear, though. The only table I could find was site-specific, and many of the sites appeared to have values of zero (while others were as high as .5 cents), which makes no sense.

I was also troubled by their dismissal of the importance of a very large accident as "value-driven". They seem to multiply the cost of a very large accident by a small probability, and call that a low "expected" value. I'm very familiar with that in statistical analysis, but I don't regard it as valid in this context - that's the whole purpose of insurance, after all, to deal with catastrophe's beyond the capacity of the insured (i.e., very high cost, low probability).
If you can't get insurance at any cost, that appears to be a judgement by the insurance industry
that the risk in question is unacceptable. As I said in my post, I'm willing to consider the risk acceptable, but there is a separate and additional cost to such an incident that is associated with the very large size of the possible accident that is not being considered here. It's like the old joke about the statistician with one foot in boiling water, and one in ice water: on average he's comfortable.

Most troubling, however, is the complete omission of any consideration of the costs of nuclear weapons proliferation. The US may spend close to a trillion dollars on Iraq for a war that was justified on WMD. How many billions are we willing to spend to induce North Korea not to go nuclear? To keep Pakistan and India under control? A lot of people lose sleep every night about terrorism, and people who seem reliable say that the single largest risk of terrorism is their potential use of nuclear weapons. Last but not least, we're currently in the middle of brinksmanship with Iran about the conversion of nuclear plant technology to weapons. Don't these things make nuclear proliferation perhaps the single largest problem the US and the world faces? How can that be omitted from the analysis?

Have you seen any other analyses?

 
At Thursday, April 20, 2006 at 11:36:00 PM PDT, Blogger EnergySpin said...

No I have not seen any other energy analysis and I find such analysis very difficult if not impossible to do.
The only way to deal with proliferation in my mind is to do away with the factors that make someone want nukes in the first place.

There exist technical approaches to ensure that nuclear power does not lead to proliferation, but none is fail safe. The same goes for biotech: one person will be using his PCR/cloning kits for diagnostic/research/medicinal chemistry purposes while a terrorist will be using the exact same tools to engineer biological weapons agents? Should we factor the cost of dealing with a putative biological agent attack to the cost of PCR kits/ATCC cell lines etc?

It is important to take home the correct points from the recent standstill with Iran. If you ask me, it proves many points but the important one is the following: we should not have "neutralized" the UN as a means to handle international policy like we did decades ago. Situations like this, would not have happened if the "nuclear commons", which I define as the right to have access to nuclear electricity, were managed by an international authority.
In any case, the burden of definitive proof about the sufficiency of the current forms of renewables to reliably deliver baseload at a reasonable price rests with the anti-nukers. Unless some really big breakthroughs happen in the next 2-3 years, the only carbon-free option for baseload is nuclear electricity.

 
At Friday, April 21, 2006 at 12:28:00 AM PDT, Blogger JD said...

In any case, the burden of definitive proof about the sufficiency of the current forms of renewables to reliably deliver baseload at a reasonable price rests with the anti-nukers.

I agree, ES, but I think the sufficiency of renewables is an interesting, unsettled question, which all objective parties can contribute to. I don't have any particular bias against nuclear power, and a big nuclear build isn't going to bother me much if it turns out to be necessary. Nevertheless, nick makes very good points against nuclear, so I think the sufficiency of renewables merits some deep, serious consideration.

For example, do we really need to build nuclear plants just to power clothes dryers for everybody, even though the same purpose can be achieved with the sun? For that matter, how many nuclear power plants do we need to power homes -- considering that homes can be built, even today, so as to require almost no grid power at all? I think these are very important questions which all objective parties should be interested in.

Strict analysis may show that nuclear is indeed essential, particularly for industrial processes. And that's fine. I don't have a problem with nuclear per se. But I don't think we should make a massive committment to nuclear without a close examination of the demand side. Otherwise, there is a risk of getting played by another Big Business propaganda machine. You know: "We need massive nuclear now... never mind what we need it for."

 
At Friday, April 21, 2006 at 2:48:00 AM PDT, Blogger EnergySpin said...

Hi JD ....
You make pretty good points about nuclear. In fact if it had not been for the nasty business of climate change and the well documented health effects of fossil fuel power generation one could forget about the nuclear options (except of course deep space, deep sea and industrial ecology type of set-ups).

I am not the one arguing the sufficiency or not of renewables. Global wind potential is 80 TW which at 25% capacity factor gives one 20TW of high quality, economically productive power. I would go even further to say that if it had not been for the intermittancy and the associated high cost of storage then nuclear would probably be un-necessary. A careful appraisal of the literature suggests that by mid-century these problems will be solved once and for all. That still gives us 50 years that we need to make appropriate plans for. Throw in the uncertainties of global climate change that will require MASSIVE amounts of power for things like a) water desalination b) agriculture and you get an idea of why I think our approach should include the following elements:
a) increase nuclear with breeders by a huge factor
b) increase renewables by another huge factor
c) curtail the use of FF pronto for national security, environmental and health related issues
d) institute conservation measures to ensure that the powerswitch happens without running into energy deficits
By mid century we will know how the whole thing of GCC will play out. At the very least we will have established a secure non-polluting energy infrastructure from indigenous or semi-indifenous resources.

 

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