Hi Tim,
This is from The Hall Paper ( EROI of different fuels and the implications for society
Author links open overlay panel Charles A.S.HallJessica G.LambertStephen B.Balogh) https://www.sciencedirect.com/science/article/pii/S0301421513003856 ( no Paywall, downloadable PDF) As this report was partly funded by HMG there is a rather fetching PDF available to download as well.
.1. The economic cost of energy ratio of the monetary cost of energy compared to the GDP generated for the same year gives a quantitative index of how much money is invested in energy on average to generate a unit of wealth. This can be calculated by dividing the money required to buy energy by the total gross domestic product. When this ratio is low, typically around five per cent, economies grow strongly (Hall and Klitgaard,2012). When this ratio is high, about ten per cent (and, historically, up to fourteen per cent), recessions tend to occur. A sudden climb(followed by a subsequent decline) in the proportion of the GDP spent for energy occurred during the two 1970s and the mid-2008“oil price shocks”(Hall and Cleveland, 1981; Hamilton, 2009; Hall andKlitgaard, 2012). Rapid increases in the economic cost of energy (e.g.fromfive to ten per cent) result in the diversion of funds from what is typically devoted to discretionary spending to energy acquisition(Hall and Klitgaard, 2012). Consequently, large changes in energy prices influence economies strongly.
Professor Hall wrote this In the Hill last November. ” Does Trump have a bunch of ‘losers’ to thank for a growing economy”?
BY CHARLES HALL, OPINION CONTRIBUTOR — 11/16/19
“This relation among oil supplies, prices and the political winds is not new and works both ways. Presidents Gerald Ford and Jimmy Carter were in office during the economically disastrous increase in the price of oil from less than $4 a barrel in 1972 to more than $35 in 1979. Both lost in their reelection bids.
In 1980 and 1984, Ronald Reagan ran on a platform of “Let’s make America Great again” and “It’s morning again in America,” which coincided with the decline in oil prices during the 1980s. In the U.K., Margaret Thatcher was floundering in popularity in 1980, but then received most of the credit for the remarkable recovery of the U.K. economy. Was it her conservative management style, or the development of the North Sea oil, which occurred on her watch? Now that the North Sea oil boom is over, the U.K. economy is struggling again.
So again the U.S. economy is booming, continuing to grow since the large economic contraction of 2008, which in turn followed the brief but dramatic oil price spike to $140 a barrel that had occurred earlier in that year. There is a significant correlation between energy prices and presidential popularity. While oil price is not the only predictor, it is too often ignored in our personality- and social media-driven world (which, of course, is underwritten by fossil fuels).
Ironically, President Trump’s prospects there are tied in part to American investors being willing to continue to lose money seeking shale oil.”
From the first Hall and Lambert Paper again.
(4)Societal EROI(EROISOC): Societal EROI is the overall EROI that might be derived for all of a nation’s or society’s fuels by summing all gains from fuels and all costs of obtaining them. To our knowledge this calculation has yet to be undertaken because it is difficult, if not impossible, to include all the variables necessary to generate an all-encompassing societal EROI value (Hall et al., 2009). We develop a preliminary method for deriving EROISOCat the national level in another paper in this series (Lambert et al., 2013). https://www.sciencedirect.com/science/article/pii/S0301421513006447#bib29
Energy, EROI and quality of life
Author links open overlay panel Jessica G.LambertCharles A.S.HallStephenBaloghAjayGuptaMichelleArnold
Abstract
The near- and long-term societal effects of declining EROI are uncertain, but probably adverse. A major obstacle to examining social implications of declining EROI is that we do not have an adequate empirical understanding of how EROI is linked, directly or indirectly, to an average citizen′s ability to achieve well-being. To evaluate the possible linkages between societal well-being and net energy availability, we compare these preliminary estimates of energy availability: (1) EROI at a societal level, (2) energy use per capita, (3) multiple regression analyses and (4) a new composite energy index (Lambert Energy Index), to select indicators of quality of life (HDI, per cent children underweight, health expenditures, Gender Inequality Index, literacy rate and access to improved water). Our results suggest that energy indices are highly correlated with a higher standard of living. We also find a saturation point at which increases in per capita energy availability (greater than 150 GJ) or EROI (above 20:1) are not associated with further improvement to society.
“Our results suggest that energy indices are highly correlated with a higher standard of living. We also find a saturation point at which increases in per capita energy availability (greater than 150 GJ) or EROI (above 20:1) are not associated with further improvement to society.”
We begin our analysis with Kaufmann (in Hall et al., 1986), who derived an explicit method to assess quantitatively the EROI of imported oil (see Eq. (1)). The concept is that the EROI for imported oil depends upon what proportion of the energy content of an imported dollar′s worth of oil is needed to generate a dollar from the export of commodities generated domestically. King (2010) developed a metric similar to Kaufmann′s EROIIO called the energy intensity ratio (EIR) and calculated it for various industrial fuels in the US over time. The results of his 2010 study support his contention that the EIR is able to act as a proxy for the EROI for individual fuels.
https://iopscience.iop.org/article/10.1088/1748-9326/5/4/044006
2.1. EIR of oil and petroleum
The EIRp, oil typically lies between 10 and 30, but from 1949 to 2008 it ranges from 7.5 (1981) to 48 (1998) with a value of 8.8 in 2008 marking the year of the highest oil price in history and the beginning of the latest time period of US economic recession. The minimum EIRp, oil of 7.5 in 1981 also coincided with the peak of an economic recession in the US as well as the time of the highest overall cost of petroleum as a percentage of GDP at 8.5% (EIA 2008). EIRe, petro from 1970 to 2006 ranged from 5.3 in 1981 to 15.9 in 1998, the same years for the lowest and highest EIRp, oil. In 1981 EIRp, oil:EIRe, petro was 1.43:1 (minimum) and in 1998 3.05:1 (maximum). The EIRp, oil from 1949 to 1972 gradually increased from 19 to 29 with little volatility in the value. This lack of volatility can possibly be attributed to the Texas Railroad Commission (TRC) acting as an oil cartel by prorationing oil production in Texas from 1935 to 1973 to create a price floor for balancing supply and demand (Prindle 1981). With Texas as the swing state oil producer until US peak production in 1970, this balancing on the price was possible.
DRILLING INTO DEBT An Investigation into the Relationship Between Debt and Oil Written and researched by: Stephen Kretzmann and Irfan Nooruddin
1. Increasing oil production leads to increasing debt.There
is a strong and positive relationship between oil production and debt burdens. The more oil a country produces,
regardless of oil’s share of the country’s total economy,
the more debt it tends to generate.
2. Increasing oil exports leads to increasing debt. There is
a strong and positive relationship between oil export
dependence and debt burdens. The more dependent on
oil exports a country is, the deeper in debt it tends to be.
3. Increasing oil exports improves the ability of developing
countries to service their debts. There is a strong and
positive relationship between oil exports and debt service. The global oil economy improves the ability of countries to make debt payments, while at the same time
increasing their total debt.
4. Increases in oil production predict increases in debt size.
Doubling a country’s annual production of crude oil is
predicted to increase the size of its total external debt as
a share of GDP by 43.2 per cent. Likewise, the same
change is predicted to increase a country’s debt service
burden by 31per cent. For example, the Nigerian government currently plans to increase oil production by
160% by 2010. Past trends indicate that Nigeria’s debt
can thus be expected to increase by 69%, or $21 billion
over the next six years.
5. World Bank programs designed to increase Northern
private investment in Southern oil production have
instead drastically increased debt. Northern multilateral and bilateral “aid” for oil exporting projects in the
South has exacerbated, rather than alleviated debt.
Specifically, an examination of those countries where
the World Bank Group conducted “Petroleum
Exploration Promotion Programs” (PEPPs) reveals debt
levels (debt-GDP ratios) in those countries that are 19%
higher than those countries that did not undergo this
form of structural adjustment.
6. The relationship between debt & oil is most likely
caused by the interplay in between three factors:
a. Structural incentives for and direct investments in
the oil industry by multilateral and bilateral institutions, such as the World Bank Group and export
credit agencies.
b. Oil fueled fiscal folly – both in the North by creditors
over eager to lend to nations perceived as oil rich,
and in the South by unwise fiscal policies.
c. The volatility of the oil market.
https://www.statista.com/statistics/531833/national-debt-of-nigeria/
Embodied energy and carbon – The ICE database
Embodied energy is the amount of energy consumed to extract, refine, process, transport and fabricate a material or product (including buildings). It is often measured from cradle to (factory) gate, cradle to site (of use), or cradle to grave (end of life). Likewise, embodied carbon footprint is the amount of carbon (CO2 or CO2e emission) to produce a material.
Embodied energy and carbon is a topic of rising importance. In fact, it is normally possible to reduce the embodied energy and carbon of a building or construction project by 10-20% without adding to the build cost. What’s more embodied carbon is often 20-50%, or so, of the whole life energy and carbon of a building, i.e. when operational carbon emissions are considered.
The embodied energy and carbon life cycle of a building can be expressed on a single diagram, as below.
https://www.ice.org.uk/knowledge-and-resources/briefing-sheet/embodied-energy-and-carbon
https://www.yourhome.gov.au/materials/embodied-energy
https://www.designingbuildings.co.uk/wiki/Embodied_energy_in_construction
http://clarityenv.com.au/envest/
https://www.youtube.com/watch?v=hYfrDLu8kw4
Overall, the energy use embodied in international trade has reached
ninety percent of global energy use, in which the energy use trade in-
duced by intermediate production is about five times that for final
consumption. Different trading patterns are noticed when the energy
trades embodied in intermediate production and final consumption are
discussed separately. Russia and Saudi Arabia are the two biggest net
exporters of embodied energy in intermediate trade, but in final trade
they become net importers with significant dependence on foreign en-
ergy. There are few discussions on the issue of energy security for
Russia and Saudi Arabia as they are energy-abundant countries (Warner
and Jones, 2017). However, their remarkable indirect energy imports in
final trade make this issue noteworthy, because any obstacle to the final
imports can impact the daily life of local resident immediately.
Therefore, the scale of non-energy goods import and the structure of
final goods import should arouse the attention of local governments. In
addition, mainland China is a net importer in intermediate trade but a
net exporter in final trade, acting just as a factory absorbing inter-
mediate goods and producing final goods. Japan’s energy trade im-
balance is mainly caused by intermediate trade while final trade con-
tributes the most to the United States’trade imbalance. Therefore,
intermediate and final trade should be regarded as the focus,respectively, in the trade structure adjustment for Japan and for the
United States, in order to address the trade imbalance issue.
As the size of a region’s economy has been greatly decoupled from
its direct energy use for production or consumption, this embodiment
analysis adds to the growing literature showing the importance of
considering indirect effects in the pursuit of global energy conservation
and carbon reduction.
https://drive.google.com/file/d/1jlcoMGZWSXVwGuStQgHfhZ1CDy84zyWX/view
https://surplusenergyeconomics.wordpress.com/2018/05/30/128-gfc-ii/
@djerek
on June 7, 2018 at 3:58 am said:
“Solutions for an “abundance economy” aren’t going to help us as we enter an age of scarcity.”
I would like to see the evidence regarding Material scarcity. Regarding Peak Energy, we are still at a high level of output although the expense EROEI for the historically very cheap Oil extraction is clear in the evidence from SEEDS.
On Output generally I think there is an Abundance but we have a distribution and accounting problem.
These I have suggested can be tackled in the following stages.
The problems in Political Economy as it stands presently and the question of future Political Economy based upon future Energy realities are I think helpfully separated which is something Prof. David MacKay is very successful with, in his presentation of the question.
The Problems are only weakly related with respect to future solutions and breaking the process into 3 parts is useful rather than lumping them all together. It is clear that the existing Form of Market economy and political economy is not able to solve the problem at stage 3 ( I.E Post 2050 post-Oil Economy)
Stage 1 requires a reform of the existing paradigm which involves facing up to the broken debt-based money system. Pension provision, the sovereign debt crisis and Public debt crisis are all addressable and will see improvements even within the deteriorating Cost of energy inputs as a share of output. We could call this stage lets fix what we know is not working.
Stage 2 covers the Post Financialised ( Big Bang Experiment) period to the oil running out in 2050.
This requires a much more long-term investment horizon and complicating the energy mix by overstating the ”Climate Change question** seems to be counterproductive, again I like the way Prof David Mackay dealt with the question including stating the necessities of **Clean Coal and Nuclear”. In this stage, we will be implementing ideas previously barred due to the denial inherent in clinging to a failing system.
Stage 3 Post 2050, This part is much easier than Stage 2 and stage 1, in my opinion, the myth-busting and levelling out inherent in solving the political problems at stage 1 and the challenge to vested interests in stage 2 are by far and away the largest obstacles to getting down to Brass tacks in my opinion.
The Earth Is Greening our distribution model under capitalism prioritises Profit and not minimising Waste or maximising resource use.
Optimizing Fertilizer Formulations for Improved Grain Yields
http://letthemconfectsweeterlies.blogspot.com/2018/03/energy-returned-on-energy-invested.html
Click the Link Below and please read this book, written by a Physicist, Engineer and sadly now departed all round good egg Prof. Sir David MacKay. https://en.wikipedia.org/wiki/David_J._C._MacKay
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So I can get back to my own number crunching I have made my blogging task easier by leaving what I find pertinent links to the question at the Surplus Energy Economics Blog of Dr Tim Morgan, ( Sorry Tim) Here are the two Blogs and Attachments concerned:
This is a complex topic, to put it mildly. But what we are facing is an energy viability crisis, and it links directly to ECoE.
OIl production has for some years been carried by US shale, itself, being non-viable, carried by investors and lenders. I made the (admittedly radical) case here last year that the US has a national interest case for subsidizing shale, from which production could otherwise slump rapidly, because the “drilling treadmill” and ultra-rapid decline rates from individual wells. Similar arguments could be made for oil production more broadly.
On the other hand, RE needs subsidy as well. In the past, wind, solar and other REs have been subsidized. This has ceased to be affordable as take-up has increased. This is why, in 2018, capacity additions were unchanged from 2017, whilst capex was lower in real terms than it had been back in 2011.
These are threats to energy supply, and I would remind you that the IEA and EIA central case numbers show the world needing about 11% more oil and about 32% more gas in 2040 than in 2018, with coal use roughly the same.
So it seems that, unless we subsidize energy supply, there are going to be large and worsening shortfalls. Ultimately, subsidy comes from ‘us’.
An existing example is the UK, where every electricity customer has to pay about £185 annually in a ‘climate change levy’ used to subsidise RE (I believe it pays for just over half of all RE investment in Britain). Because this number is expected to increase, there are debates about transferring it from electricity bills to general taxation.
In this example, the customer is left with £185 less to spend on everything else. This would remain the case if it was funded from taxation instead. This, in microcosm, is ECoE at work. With ECoE at 2%, we have 98% of output to spend on other things, but with ECoE at 8%, that falls to 92%.
Now let me take you back to some SEEDS analysis. Western countries’ prosperity starts falling once ECoE hits 3.5% to 5%. The threshold for less complex EM economies is 8-10%. As ECoE rises, we have to do without other things in order to maintain energy supply – and ‘have to do without other things’ equates to having less prosperity.