Oh, ok, I get a bit better what youâre saying. (yeah, itâs tough arguing on EROI, people usually have very different views on it).
I agree that the cost of unit equipement matters a lot too.
However, Iâd argue that these costs are increasing when EROI is declining. The simple reason is that you need more stuff to do the same thing. This is not a 100% correlation of course, the cost of labor matters too, but thereâs a general trend, I think.
For oil with 50:1 EROI at the Ghawar field in Saudi Arabia, you just had to put a drill in place and get the oil. Shale oil, in the other hand, with an EROI between 5 and 10, requires complex chemical compounds, horizontal drilling, hundreds of trucks transporting water, and a lot of financial investment. If the EROI of shale oil was 50:1, then youâd get back 10 times more oil, so itâd be much cheaper, youâd need less materials, and youâd have more resources to power the rest of the economy.
Since there is a strong coupling between GDP and material use and resource use (at a global level), it would make sense that an increasing material and energetic cost translates to an increased financial cost.
There can be improvements of courseâlike solar panels getting a higher EROI and being much cheaper at the same time.
Now, letâs take the automated robot that sent solar energy back to Earth (a purely theoretical prospect with not relevance to the problem of energy depletion as will exist for the next decades, of course). With an EROI of 1.01:1 instead of 100:1, then it would need to depoly 10 000 more solar panels for the same thing. Youâd need 10 000 times more solar panels, so 10 000 more materials, more rockets, more robots to build these, more factories, more maintenance⌠Not talking about the fact that all the computing stuff would require specialty metals that are in a finite amount.
Also, the process would be 10 000 times longer, which is of great importance.
SoI have a hard time seeing how this wouldnât multiply the price by at least several orders of magnitude.
The main point about EROI, and I donât think we disagree on this, is that the raw amount of produced energy that needs to be put in is only one factor. You also need to know how much human labor has to be put in, and how much physical stuff has to be put in.
Iâd note a lot of the complaints here that in a bad EROI environment with needing to build more stuff, you are also running out of key metals is double counting. The reason that the EROI is 2 to 1 in that scenario, instead of 10 to 1 is because weâve run out of the easy sources of those metals, so pointing out that the metals are also hard to acquire in that context doesnât say anything new.
âSince there is a strong coupling between GDP and material use and resource use (at a global level), it would make sense that an increasing material and energetic cost translates to an increased financial cost. â
I donât know if I really want to dig into this very deeply, since it involves a familiarity with economics that you clearly donât have, but theings like this claim, and the â99 percent correlation between energy use and gdp growthâ simply do not mean what you think they mean.
For example, you might get a correlation that is nearly as strong between gdp growth and fast food purchases, or clothes purchases, or home improvement purchases, or almost anything except for medical and government spending.
That is what a recession literally is: It is when people buy less of stuff that can be cut back on easily. And booms are when people buy more of that stuff. You are going to find extremely high correlations between gdp growth and any variable consumption good if you are looking for that, but it is meaningless in terms of saying what is causally important for allowing continued economic growth.
In a similar way that recessions usually follow very high energy prices (which is causal), does not actually mean that the economy cannot deal with energy taking up that big of a proportion of total resources without going into a permanent recession. It means that if in a given year everyone has to spend way more money on energy, they wonât have as much money left to spend on everything else they want, so they will buy less of it, so the economy will enter a recession.
But if the energy prices stayed high, this would be a one time thing, where improvements in productivity through out the economy would allow higher profits and wages again, and thus with the fixed high energy price, they would be able to purchase more non energy things in year two of high energy prices than in year oneâie the economy would be growing.
Having ten percent of the economy go to a sector simply doesnât mean the other sectors canât keep increasing total output per capita over time. For example, in most countries the health care sector has been becoming bigger and bigger relative to the total economy over time. In the US it is around 20 percent of the economy now, while it was 7 or 8 percent (I think) in the 80s. Despite this, the non health care sectors have consitently been getting bigger at the same time. Of course the giant allocation of resources to health care does cause bad things, and we are poorer than we would be if all health care happened by magic and didnât cost anything, and it possibly has crowded out capital investments that would have led to growth elsewhere, and thus we are poorer in dynamic terms in addition to static terms due to health care costs. But it has not, and will not, cause a permanent recession (ie the rest of the economy makes fewer things per person each year until at the limit nothing is ever made) if it gets sufficiently big.
You also need to know how much human labor has to be put in, and how much physical stuff has to be put in.
Ok, I can agree with that.
Itâs just that today, human muscles are such a small part of the labor produced (one barrel of oil = 4.5 years of manual labor, after conversion losses) that I didnât though of including it.
For the metals, I understand that itâs extraction is already in the theoretical 2:1 figure. I just mentioned them to point out that we donât really know how energy costly it is to get specialty metals of electronics in a âsustainableâ way (from either extremely abundant ores or from common ground). My personal impression on the topic is that, except for iron and aluminium and maybe a few others (rare earths, ironically?), getting stuff like indium, tellurium or molybdenum from common ground (for electronics) would be so ridiculously expensive that weâd give up before that.
For example, you might get a correlation that is nearly as strong between gdp growth and fast food purchases, or clothes purchases, or home improvement purchases, or almost anything except for medical and government spending.
I agree here that just using the energy/âGDP correlation is not enough. This is why I tried to make a section listing the scientific papers that study this correlation, and conclude that it is more serious than, say, the relationship between GDP and tomatoes.
Here is one account that you might find of interest:
âWhile the classical economists Adam Smith and David Ricardo generally thought that it was human labor that was the principal generator of wealth, natural resources, in particular land, still played a major role as a source of value and as a constraint to unlimited economic growth. Later Karl Marx, while still seeing human labor as the source of value, removed this constraint by referring to the evolution of the âmeans of productionâ (that is, technology) that only depended on (principally unlimited) human ingenuity.â
âIn the twentieth century, the explanation of wealth left natural resources behind and focused on capital and labor only (see production functions by Cobb and Douglas, 1928 and Solow, 1956). As in mathematical calculations there remained a large âresidualâ, this was attributed to technological innovation [the Solow residual] (that could not, however, be properly measured). Authors like Cleveland et al. (1984a), Cleveland (1991), Ayres and Warr (2005) and Hall and Klitgaard (2012), in contrast, attributed this residual to energy (or exergy) input into the economy and were able to provide convincing empirical evidence. Unexplained residuals disappeared.â
So we are not dealing with a random commodity here. We are dealing with a factor of production.
If we look at a biophysical standpoint, the economy is the production of goods and services. Energy is what allows to produce these goods and services (and the food/âtransport/âhousing of the workers). It seems unlikely that we can produce ever more and more goods and services using less and less energy. Maybe for a short period as we use the lowest-hanging appels, but not in a sustained way.
The historical record seems to indicate that less energy and more GDP at a global level is a very strong departing of the current trend, and unlikely to happen. Maybe not impossible (for how long?), but we shouldnât assume this as he default scenario.
Of course, itâs possible to decouple GDP from producing goods and services. This may be what the finance sector is doing, generating money (8% of US GDP) while not contributing much to the well-being of society. Iâd be tempted to see something similar with healthcare in the USâit has quite a reputation for being extremely expensive compared to what you get for the same price in Europe. Iâm tempted to ask, is growing GDP any use if it doesnât contribute to society ?
Oh, ok, I get a bit better what youâre saying. (yeah, itâs tough arguing on EROI, people usually have very different views on it).
I agree that the cost of unit equipement matters a lot too.
However, Iâd argue that these costs are increasing when EROI is declining. The simple reason is that you need more stuff to do the same thing. This is not a 100% correlation of course, the cost of labor matters too, but thereâs a general trend, I think.
For oil with 50:1 EROI at the Ghawar field in Saudi Arabia, you just had to put a drill in place and get the oil. Shale oil, in the other hand, with an EROI between 5 and 10, requires complex chemical compounds, horizontal drilling, hundreds of trucks transporting water, and a lot of financial investment. If the EROI of shale oil was 50:1, then youâd get back 10 times more oil, so itâd be much cheaper, youâd need less materials, and youâd have more resources to power the rest of the economy.
Since there is a strong coupling between GDP and material use and resource use (at a global level), it would make sense that an increasing material and energetic cost translates to an increased financial cost.
There can be improvements of courseâlike solar panels getting a higher EROI and being much cheaper at the same time.
Now, letâs take the automated robot that sent solar energy back to Earth (a purely theoretical prospect with not relevance to the problem of energy depletion as will exist for the next decades, of course). With an EROI of 1.01:1 instead of 100:1, then it would need to depoly 10 000 more solar panels for the same thing. Youâd need 10 000 times more solar panels, so 10 000 more materials, more rockets, more robots to build these, more factories, more maintenance⌠Not talking about the fact that all the computing stuff would require specialty metals that are in a finite amount.
Also, the process would be 10 000 times longer, which is of great importance.
So I have a hard time seeing how this wouldnât multiply the price by at least several orders of magnitude.
The main point about EROI, and I donât think we disagree on this, is that the raw amount of produced energy that needs to be put in is only one factor. You also need to know how much human labor has to be put in, and how much physical stuff has to be put in.
Iâd note a lot of the complaints here that in a bad EROI environment with needing to build more stuff, you are also running out of key metals is double counting. The reason that the EROI is 2 to 1 in that scenario, instead of 10 to 1 is because weâve run out of the easy sources of those metals, so pointing out that the metals are also hard to acquire in that context doesnât say anything new.
âSince there is a strong coupling between GDP and material use and resource use (at a global level), it would make sense that an increasing material and energetic cost translates to an increased financial cost. â
I donât know if I really want to dig into this very deeply, since it involves a familiarity with economics that you clearly donât have, but theings like this claim, and the â99 percent correlation between energy use and gdp growthâ simply do not mean what you think they mean.
For example, you might get a correlation that is nearly as strong between gdp growth and fast food purchases, or clothes purchases, or home improvement purchases, or almost anything except for medical and government spending.
That is what a recession literally is: It is when people buy less of stuff that can be cut back on easily. And booms are when people buy more of that stuff. You are going to find extremely high correlations between gdp growth and any variable consumption good if you are looking for that, but it is meaningless in terms of saying what is causally important for allowing continued economic growth.
In a similar way that recessions usually follow very high energy prices (which is causal), does not actually mean that the economy cannot deal with energy taking up that big of a proportion of total resources without going into a permanent recession. It means that if in a given year everyone has to spend way more money on energy, they wonât have as much money left to spend on everything else they want, so they will buy less of it, so the economy will enter a recession.
But if the energy prices stayed high, this would be a one time thing, where improvements in productivity through out the economy would allow higher profits and wages again, and thus with the fixed high energy price, they would be able to purchase more non energy things in year two of high energy prices than in year oneâie the economy would be growing.
Having ten percent of the economy go to a sector simply doesnât mean the other sectors canât keep increasing total output per capita over time. For example, in most countries the health care sector has been becoming bigger and bigger relative to the total economy over time. In the US it is around 20 percent of the economy now, while it was 7 or 8 percent (I think) in the 80s. Despite this, the non health care sectors have consitently been getting bigger at the same time. Of course the giant allocation of resources to health care does cause bad things, and we are poorer than we would be if all health care happened by magic and didnât cost anything, and it possibly has crowded out capital investments that would have led to growth elsewhere, and thus we are poorer in dynamic terms in addition to static terms due to health care costs. But it has not, and will not, cause a permanent recession (ie the rest of the economy makes fewer things per person each year until at the limit nothing is ever made) if it gets sufficiently big.
Ok, I can agree with that.
Itâs just that today, human muscles are such a small part of the labor produced (one barrel of oil = 4.5 years of manual labor, after conversion losses) that I didnât though of including it.
For the metals, I understand that itâs extraction is already in the theoretical 2:1 figure. I just mentioned them to point out that we donât really know how energy costly it is to get specialty metals of electronics in a âsustainableâ way (from either extremely abundant ores or from common ground). My personal impression on the topic is that, except for iron and aluminium and maybe a few others (rare earths, ironically?), getting stuff like indium, tellurium or molybdenum from common ground (for electronics) would be so ridiculously expensive that weâd give up before that.
I agree here that just using the energy/âGDP correlation is not enough. This is why I tried to make a section listing the scientific papers that study this correlation, and conclude that it is more serious than, say, the relationship between GDP and tomatoes.
Here is one account that you might find of interest:
So we are not dealing with a random commodity here. We are dealing with a factor of production.
If we look at a biophysical standpoint, the economy is the production of goods and services. Energy is what allows to produce these goods and services (and the food/âtransport/âhousing of the workers). It seems unlikely that we can produce ever more and more goods and services using less and less energy. Maybe for a short period as we use the lowest-hanging appels, but not in a sustained way.
The historical record seems to indicate that less energy and more GDP at a global level is a very strong departing of the current trend, and unlikely to happen. Maybe not impossible (for how long?), but we shouldnât assume this as he default scenario.
Of course, itâs possible to decouple GDP from producing goods and services. This may be what the finance sector is doing, generating money (8% of US GDP) while not contributing much to the well-being of society. Iâd be tempted to see something similar with healthcare in the USâit has quite a reputation for being extremely expensive compared to what you get for the same price in Europe. Iâm tempted to ask, is growing GDP any use if it doesnât contribute to society ?