[Gebari]

I have realised that simply modelling gross oil production does not tell the full story, indeed it is only the very tip of the iceberg. Beyond the gross % depletion of liquid production you have additional factors.

- The pink line (in the reference case) shows the per capita net liquid energy adjusted so it peaks with the gross energy per capita for convenience. It shows the per capita use b/pd per year.

- Declining oil quality: as time goes by, there is an accelerating rate of declining oil quality. More and more liquid production in the future will be from biofuels, NGL, heavy oil, sour crude, high API crude, refinery gain etc. This has less useful end product energy, i.e, less gasoline, diesel, kerosene etc content per barrel.

- Declining EROEI. Liquid production in the future is going to require more and more energy to produce a unit of energy. I don't have access to how much oil is required to produce a unit of oil, but estimates show that EROEI is is decreasing by half every 20 years. So, in 1940 EROEI was 100:1. 1960: 50:1. 1980: 25:1. 2000: 12.25:1.
Extrapolating this into the future, we can get an estimate of of the EROEI. I do think that most of this energy invested in the future will be from oil. For example, in the future we will need more and more oil rigs as oil will have to come from smaller fields. Oil rigs are made of metals, and oil is required to extract metals. But, in reality this line may be slightly more pessimistic as some of the EROEI is from coal, natural gas etc. But only slightly.

- Declining oil production per capita: The world population is growing. The UN estimates over 9 billion people will exist in 50 years. Now, I am a bit of a doomer so I expect we will never reach the UN predictions, but my graphs show the expected BAU (business as usual) scenario as predicted the UN.

- These predictions are not concrete forecasts or predictions. I realise that there are many unknowns and there limitations to this model. But, my purpose is more to illustrate the the fact that things are much more complex than it seems. I do welcome any input from people than can improve this model.

- Oil production data is All Liquids from the EIA, 1970-2007. I do not have data before that so I have fitted it as best as possible using an exponential curve.

Here come the graphs.


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--- First is the reference case. This assumes a decline starting this year, 2008, at a rate of gross 3.5% a year. The EROEI and Oil quality declines are 3.5%, fitting with the current halving time of 20 years.



--- Second is a more pessimistic case, with a 5% gross decline.



--- Next is the magical case where we manage to maintain our current production for 50 years. What is notable is that our net liquid energy and net liquid energy per capita declines even with steady increasing production.



--- Last of all is extrapolating the IEA scenario of increasing production at 1.6% a year for the next 50 years. Still, this still shows a peak of net liquid energy and net liquid energy per capita within 50 years timeframe.



--- Thoughts. Now, what I find very interesting is that net liquid energy per capita peaked in 1979. Since then, each person on earth has had to do with less and less liquid energy.

It is my belief that net liquid energy per capita is the ultimate cornerstone of our civilisation and economy. Therefore, our economy should have began to decline in 1979, permanently. However it hasn't, it has grown substationally.

However, this is explained with this chart.



As you can see, the amount of debt began to explode beginning around 1979. A coincidence? I think not. I think this chart shows that with declining net liquid energy per capita, we have resorted to debt to keep our economy growing. Basically, our entire economic growth since 1979 has been "made up".

Now, looking at that graph, we are in a massive debt bubble. The last time we rode such a bubble was in 1930. We all know what happened when that bubble collapsed - the Great Depression. This bubble is considerably larger than that, and the bubble has been sustained by cheap and plentiful oil. Now however this foundation of the bubble, cheap oil, is ending. So, one would expect this debt bubble to begin collapsing, which is what we are seeing with the current credit crisis.

I would thus expect a collapse of this bubble, just like in 1930. The 1930 bubble collapse led to the Great Depression, so I would expect this even greater bubble to lead to an even bigger and more serious Great Depression. Recent events only confirm my hypothesis.

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I haven't included Export Land Model. This extra factor only makes the situation worse.

My conclusions are that the situation is dire and that economic collapse larger than the scale of the Great Depression is inevitable. Unlike the Great Gepression there will be no recovery as net liquid energy per capita will be declining rapidly indefinitely. ELM makes the situation worse.

According to my calculation, we will have around 25% less net liquid energy left than gross all liquids production. So if current remaining reserves are 1 trillion barrels, the effective remaining reserves are 750 billion barrels. In addition, the rate of decline of net liquid energy and net liquid energy per capita increases with time.

As I said, I am very welcome to any suggestions that can refine the accuracy of this model.

[Kingcoal]

Gebari, that is the best first post I've ever seen. In fact, that is an excellent post by any standard, thanks. You need to speak up around here! PO is about convenient, portable energy. It's not really about energy per say, but about the cheap, vastly concentrated, portable, energy on demand we call liquid fuels. You are dead on in your thinking, welcome!

[MrBean]

Wellcome aboard! A pro from the first post.

I just made a wild guess, based on Russia peaking, what happended to rice market etc. and LEM that global open markets will effectively shut down about 2012-1024. What's your take?

[Cashmere]

Nice analysis and welcome.

I'll add only that "liquid energy" per capita is useful but not comprehensive.

I write that because, at least in the developed world, the more interesting number is liquid energy per capita of the developed world.

It is possible that the per capita in the developed world went up. Perhaps made possible by debt.

[SoylentGreen]

the debt bubble, What did the US do to bring the bubble down in the 1930's?

[Gebari]

Recent events are making me confident in this prediction. I find it too big a coincidence to ignore that debt started to explode in the exact same year that net oil per capita began to decline, and the bubble is now bursting in the exact same time that the net per capital is now going down quite sharpy, as oil production falters. There's a clear correlation here isn't there?

The question now is how much of economic growth since 1980 was real (based on hard, physical wealth) and how much was made up on computers in the form of debt, credit etc? And how much of the bubble will collapse? If the bubble collapses significantly a large chunk of our GDP could vanish, leading to depression. What exactly will happen, I really don't know, but I feel it will be significant.

In the last few weeks I've got the feeling that the world has changed forever... we have left the era of progress and prosperity and are now going down the other side. We are in a new world because I doubt full recovery from this financial crisis will be possible because as soon as the economy beings to pick up and grow again, oil production will be starting to decline, which will knock us back, never letting full recovery take place.

I just made a wild guess, based on Russia peaking, what happended to rice market etc. and LEM that global open markets will effectively shut down about 2012-1024. What's your take?

Global oil markets you mean? I think that will happen eventually... as oil becomes scarce I cannot see it being shared equally and fairly. I expect countries to stike up exclusive contracts with exporters to have all their oil at fixed prices... or else.

the debt bubble, What did the US do to bring the bubble down in the 1930's?

They went into depression...

[vtsnowedin]

Very interesting post indeed. I think you are over stating the case of liquid fuels vs. solid fuel or electricity generated directly from solar or hydro sources. We use a great amount of liquid fuel because it is both cheap and convienent and not always because a liquid fuel is required. When prices go up coal can and will be substituted where ever it can be in both solid and CTL form. Also electric cars trains and even electric heat for buildings may become competitive. when all these options are implimented to there maximum practical limits the worlds requirement for liquid fuels will be a lot less. It would take a while to come up with a sound figure for the possible shift from liquid to solid but I would think that it might be as high as 40% of todays liquid fuel consumption. Add in a reduction in needless trips by cars and planes which will occur as soon as prices rise and the down slope of your charts may flatten out quite a bit.

[DaleFromCalgary]

I assume the debt chart is for the USA because Canada's national debt is declining due to federal government surpluses.

One thing I haven't seen mentioned too often but which should be is that we are sliding into another Kondratieff nadir. The Kondratieff long wave cycles at about 50-60 years or two generations. The last nadir was the Great Depression, so we are due for the next one. Each cycle involves economic destruction as new technologies come to the forefront, and I suspect this time around it is alternative energy, forced change to sustainable living, and computers.