Economania

As the world slowly emerges from the wreckage of the global financial crash and its economies begin to move again, it might be thought that, barring accidents, we are largely out of the woods. In terms of the global financial system, even that is a debatable point and there is still plenty of scope for aftershocks: both the Governor of the Bank of England and George Soros have expressed apprehension about the future of global finance if real and significant changes are not made to the regulation of banks.

However, be that as it may, even if the global financial system can be brought to order, there still remains the question of global energy usage and supply, a matter which at the moment is the elephant in the corner of the room, which politicians are trying not to mention.

Economic activity has always been dependent upon energy but for the greater part of human history it has come from humans beings themselves or, more latterly, from domesticated beasts of burden. Energy from fuels has been used since the days when the human race discovered fire but it was not until the beginning of the Bronze Age, and the need to smelt metals, that energy usage began to increase significantly. Large swathes of Europe's forests were cleared, not so much for agriculture, but to provide the charcoal to smelt copper and tin, and subsequently iron, this latter requiring even more fuel since its melting point was higher.

Three hundred years ago, with the invention of steam power, the scene was set for the greatest transformation of human civilisation since the Agricultural Revolution. Since then, energy consumption has risen relentlessly. We are now entirely dependent upon energy for the maintenance of our civilisation, and most particularly, on the generation of electricity; if the electricity supply fails, we are back in the caves.

In researching the issue of global energy consumption, two problems arise: one is that of sources - where is the information, and how reliable is it? Many of the sources are from the various branches of the energy industry, or from environmental/conservation bodies, all of which have an axe to grind, hence one must be circumspect when considering these figures. Time permitting, one could attempt a reconciliation of all the figures but, regrettably, time is limited.

Secondly, there is the technical problem of units: some sources quote millions of tonnes oil equivalent (mTOE), some barrels of oil equivalent (BOE), some terawatt-hours (TWh, 10 12 watt-hours), some exajoules (10 18 joules) and some even quadrillions of BTUs. (A quadrillion? - sounds like a 17th century Spanish dance.) Then there is the problem of conversion: a barrel of oil is 42 US gallons or 159 litres or 35 Imperial gallons. There are tonnes (1,000 kg), long tons (2, 240 lb) and short tons, (2,000 lb). The calorific value of crude oil is averaged out at 45.7 Gj (gigajoules) per tonne, this figure being a weighted average across all types of crude oil.

To a good approximation, 1 quadrillion (10 15) BTUs = 1.055 exajoules (Ej) = 293 terawatt-hours (TWh) = 500,000 boe (barrels of oil) = 70,000 toe (tonnes of oil). In 2008, total worldwide energy consumption(1) was 474 exajoules (4741018 J, or 132,000 TWh or 11,926 mTOE, equivalent to 1,819 kg of oil per capita (2) for a world population of approximately 6.75 billion. Taking crude oil at 45.7 Gj/tonne, then 11,926 mTOE equates to 545 exajoules. There seems to be a discrepancy here already, but this may be due to the fact that some of the energy from the combustion of hydrocarbons is necessarily lost due too the inefficiencies of the combustion process. However, taking that figure and converting to terawatt-hours (1 terawatt-hour = 0.0036 exajoules), this gives use a global energy consumption of 151,400 TWh.

In the same Wikipaedia entry, another figure is given for global energy production on 2008; the figure quoted is 143,851 TWh, considerably higher than the consumption figure. The Economist 'Pocket World in Figures' gives an energy surplus for 2008 of 262 mTOE for the year, a surplus of 2 percent. The difference between the consumption and production figures given in Wikipaedia (source; US Energy Information Administration) amounts to approximately 9 percent. The reason for this discrepancy is not clear but may be due to conversion and transmission losses.

For 2008, the principal sources of energy in TWh are as follows:

From the Wikipaedia figures, 1 mTOE is approximately equivalent to 11 TWh.

It is clear that fossil fuels remain by far the most important source of energy and will continue to do so for the foreseeable future. In 2008, China consumed 1,956 mTOE, importing 7 % of its energy and making it the world's second largest consumer, while also becoming the world's largest producer of energy at 1,814 mTOE. In this same year, China produced approximately 2.5 billion tonnes of coal, most of this (77%) for electricity generation. At current rates of consumption, it is estimated that China has sufficient coal reserves for the next 48 years.

Brazil, one of the four most rapidly growing of the world's economies, is currently planning yet more hydro-electric power-stations. Currently Brazil generates over 85 percent of its power from hydroelectric installations, which, while they generate no carbon emissions when working, do require massive amounts of energy to construct them in the first place, in addition to which there are other environmental impacts.

While for the foreseeable future we will remain dependent on fossil fuels, there is an urgent need to move to alternative sources of energy. Global warming is a contentious issue and arouses an almost religious zeal among both its proponents and its opponents, but one thing we can say for certain is that fossil fuel reserves are finite and must at some stage run out. Oil and gas reserves continue to be discovered but they are increasingly difficult to reach and of lower yield. Although oil-drilling began in Texas in 1894, it was the Lucas gusher at Spindletop in 1901 that defines the beginning of the oil boom. Since that time, Texan oil-wells have pumped 60 billion barrels and it is estimated that a further 10 billion barrels remain to be extracted. However, given the rate of oil consumption today compared to that of the early 1900s, that 10 billion barrels, or about 1.5 billion tons of oil, represents about 8 year's supply of oil. Granted, Texas is not the only source of oil but it does sound a warning note.

The current orthodoxy is that we can meet our energy demands using renewable energy sources, but recent research indicates that this is not the case. An article by Mark Buchanan in New Scientist (30th March 2011, Issue 2806) reports research by Axel Kleidon of the Max Planck Institute and concludes that: "... it is a mistake to assume that energy sources like wind and waves are truly renewable. Build enough wind farms to replace fossil fuels, he says, and we could seriously deplete the energy available in the atmosphere, with consequences as dire as severe climate change."

In other words, if we extract energy from the wind, waves and ocean currents, we will do as much damage to the environment as we will do by burning fossil fuels. It seems then that we are caught in a cleft stick. Furthermore, an article in the Observer/New York Times supplement this week (17/4/11) warns of the dangers of biofuel, whose production is displacing food crops, leading to rising food prices, starvation and political unrest. Not only that, but the production of biofuels is now thought to be detrimental to the environment because of the amounts of fossil fuel and fertiliser used in their production.

There seems no simple, quick fix to our energy problem; whatever we do will have an impact on the environment. The only viable solutions in the short and medium term are to use less energy and to produce such as we need as efficiently as possible.

Average energy consumption, in oil equivalent per capita, is 1,819 kg. We in Britain consume 3.464 kg per capita while the average US citizen consumes 7.766 kg. The average Chinese person consumes 1,484 kg, a good 25 percent less than the global average, but that disguises the fact that a further one billion people in China have yet to enjoy the benefits of its current economic growth. As things stand at the moment there may well not be enough energy to pull that one billion people out of rural poverty.

Interestingly, the amount of energy consumed per unit of GDP is dropping in the developed world as it moves way from heavy industries and into high added-value production with low material content. This variable is called the Energy Intensity, and it is interesting to look at some values. These are taken from The Market Oracle website and are quoted in kg oil equivalent per $1,000 GDP at Purchasing Power Parity.

The figure for Singapore is surprisingly high given that it has less manufacturing as a percentage of the economy than the UK yet it consumes 5,831 kg OE per capita against our 3,464 kg OE. The UK figure reflects our move away from heavy industry over the last 30 years.

Nevertheless, the world will still need heavy industries, particularly the gross consumers of energy such as the metallurgical industries and so if global consumption is to continue to rise then someone somewhere will have to produce the fuels, mine the ores and smelt the metals with all the attendant consumption of energy.

Above and beyond the simple physics of energy, there is the matter of the international politics surrounding energy, not least our accommodation to the repressive regimes in those countries where the world's largest oil and gas reserves are situated. In the very near future, the pressing need for energy will dictate ever more the shape of international politics. At the end of 2008, the global per capita GDP was $ 9,040. If we wish the entire world to reach the same standard of living as we have in Britain ($43,540 per capita) and if we accept energy consumption as a proxy measure of that standard of living, then we have to increase global energy production almost fivefold. Or alternatively, we have to increase our fuel efficiency fivefold. This latter option would require a major rethinking of our approach to the design of buildings, and also our approach to transport. Ironically, in the short term this would require an increased consumption of energy.

Whatever we do we have to start doing it soon because there is the very real prospect that we will run out of fossil fuels before we have a viable alternative. Nuclear power is, of course, one option, but the lead time for a nuclear power-station is, at present, about 20 years. However, in the light of recent events in Japan, the nuclear option might be a difficult sell.

In the longer term, the Holy Grail of energy production is hydrogen fusion, but even the most optimist voices suggest that this will not be viable for another thirty years. The less optimist suggest that fifty years is a safer bet, while the real Jeremiahs claim that hydrogen fusion will never be made to work commercially. If the 'fusion Jeremiahs' are correct then we are fast heading for a fall, but one should never discount human ingenuity. When push comes to shove, we have always managed to pull a rabbit out of the hat. However, neither should one be complacent: the population of planet Earth will soon top the 7 billion mark and that Earth is no longer making oil and coal; we are living on our Permian and Carboniferous inheritance. Whatever the technology, there seems currently to be a lack of acceptance among many politicians of the scale of the problem and the speed at which an energy crisis is approaching. The greatest deficit at present seems to be political will.

Sources
Wikipaedia (citing the US Energy Information Administration)
The Economist, Pocket World in Figures 2011
The Market Oracle

Chris Waller - Permission granted to freely distribute this article for non-commercial purposes if attributed to Chris Waller, unedited and copied iin full, including this notice.

Members can discuss this and other articles on the economics forum at International Mensa.