Hooray! Energy-less economic growth is here!!!

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Farmer Brown's picture
Farmer Brown
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Hooray! Energy-less economic growth is here!!!

 

Hoooooraaaayyy!!!!!!!   CNBC reports this morning that we no longer need oil to achieve economic growth.  Chris, time to shut down the site.  Nice knowing everyone, you can all go home now.  Be sure to take your halucinogenics daily and keep watching CNBC.  If you do not have access to any, a baseball bat to the head 3 times daily (doses may vary) will cure any fears you may have about the veracity of all-knowing CNBC.

http://www.cnbc.com/id/35890963

Coming Soon: Economic Growth Without Oil

Published: Tuesday, 16 Mar 2010 | 10:36 AM ET
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By: Reuters

 The world may soon achieve something long dreamed of by governments and policymakers: higher economic growth without using more oil.

Rising efficiency, conservation and substitution are steadily reducing the amount of oil needed to fuel an increase in the goods and services produced around the world.

Oil demand in the rich, industrialized countries of the West already appears to have peaked and the trend in developing economies is towards an ever-smaller increase in the amount of oil consumed for every extra unit of economic growth.

Global oil intensity—oil demand growth divided by economic growth—has fallen by about 2 percent a year over the last decade and the decline is now accelerating, spurred by high oil prices, moves to alternative fuels and measures to curb global warming.

This does not yet mean that absolute oil consumption is falling because population growth and rising wealth in poorer parts of the world will push up oil consumption for some time.

But it does mean global oil use will eventually peak and start declining—and "oil-less growth" may not be far away.

"The rate of decline of oil intensity will accelerate," said Eduardo Lopez, oil demand analyst at the International Energy Agency (IEA) in Paris, which advises industrialized countries.

"There is a structural change—difficult to measure admittedly, but clear—that demand for burning fuels is no longer what it used to be."

Declining

David Fyfe, head of the IEA's oil industry and markets division, says price controls and subsidies as well as economic stimulus packages in China and elsewhere, will help prop up oil demand short-term, but longer-term the trend is downwards.

"Globally speaking, oil intensity has been declining by around 2 percent annually over the past decade," Fyfe said.

"Our working assumption is that with fuel economy standards, fuel diversification and substitution ... oil intensity lessens by just under 2.5 percent over the next five or six years."

This acceleration is probably partly due to prices: crude oil hit a record high of almost $150 per barrel in 2008 and are now fairly high historically at around $80.

Estimates of when global oil consumption will stop rising vary but many analysts see it happening over the next 15 years.

BP Chief Executive Tony Hayward said last month world oil demand would peak sometime after 2020 at between 95 million and 110 million barrels per day (bpd), compared with current oil demand of around 85 million bpd.

The trend towards better fuel economy for cars and other vehicles has been clear for some time and it is no surprise that developed economies are using less oil for power generation.

But data from the IEA shows it is not just the richer parts of the world that are weaning themselves off oil.

Although fuel intensity in the developed countries of the Organization for Economic Co-operation and Development (OECD) has consistently been far lower than in non-OECD countries, the rate of decline has been very similar, IEA figures show.

"Market at Work"

The top energy forecasters, the IEA, the U.S. Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries all make different assumptions of oil demand, economic growth and the ratio between them.

 

The IEA says 1 percent of global economic growth now needs about 0.47 percent more oil, the EIA says it needs 0.51 percent, while OPEC suggests it needs only about 0.31 percent more oil.

The lower OPEC estimate may reflect a policy bias, analysts say, since the 12-country grouping represents oil producers who take a cautious, conservative approach to demand for their oil.

A Deutsche Bank analysis of oil intensity shows over the last 30 years the annual percentage change in oil demand has equaled 0.9 percent of global economic growth minus 2 percentage points.

But all the big forecasters expect the decline in oil intensity to pick up speed over the next decade.

The trend in the biggest oil consumer, the United States, is relatively easy to assess. Mary Novak, director of energy services at Global Insight, which provides the EIA estimates for oil demand growth, says jobs and income are the key indicators.

"We have based our model on jobs ... Oil is a transport fuel (in the United States). It is not used for much more," she said.

In non-OECD countries, including China, it is more difficult to estimate since detailed oil data is not available. But it is becoming clear that oil intensity is declining everywhere.

"This is the market at work," said Mike Wittner, global head of oil research at Societe Generale. "The very high prices we have seen recently are driving consumers away from oil."

cmartenson's picture
cmartenson
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Re: Hooray! Energy-less economic growth is here!!!

The colassal error in the thinking behind the linked article above is the use of the concept of "energy intensity" as a useful means of assessing the importance of energy to economic output.

Actually, the error lies in failing to detangle the impact of debt-fueled financial speculation on economic 'growth' from real, legitimate, economic growth. 

Because Goldman Sachs, et al., raked in hundreds of billions, if not a few trillions, over the past decade from their fraudulent and socially useless activities, should we add those ersatz units of economic 'output' to to the tally and proclaim that we are now living with a much more favorable 'energy intensity' than in the past?  Well, maybe not to the thinking person, but that's exactly what's been done here.  GDP is being compared to energy consumption and conclusions are not only being drawn, but carried forward into the future.

My prediction is that the purveyors of this 'study' will quietly distance themselves from their amazing findings as we (re)learn that there's a world of difference between investment and capital-led economic growth and debt-fueled speculation and consumption.

The past 30 years have seen the largest expansion of debt in all of history and to extrapolate that period indefinitely into the future without factoring out the impact of said debt is simply an inexcusable analytical error.   Its the same as saying that the energy intensity of your neighbor's personal GDP reading is much, much better than yours because s/he borrowed and spent $1 million while you lived within your means. 

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Ready
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Re: Hooray! Energy-less economic growth is here!!!
Farmer Brown wrote:

 

Hoooooraaaayyy!!!!!!!   CNBC reports this morning that we no longer need oil to achieve economic growth.  Chris, time to shut down the site.  Nice knowing everyone, you can all go home now.  Be sure to take your halucinogenics daily and keep watching CNBC.  If you do not have access to any, a baseball bat to the head 3 times daily (doses may vary) will cure any fears you may have about the veracity of all-knowing CNBC.

FB, I think you and MachineHead should start writing for the blogs!

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joemanc
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Re: Hooray! Energy-less economic growth is here!!!

This line caught my eye(bold mine):

Quote:

 

Mary Novak, director of energy services at Global Insight, which provides the EIA estimates for oil demand growth, says jobs and income are the key indicators.

"We have based our model on jobs ... Oil is a transport fuel (in the United States). It is not used for much more," she said.

Really? What about for farming? What about all of the things that are made of plastic, that is derived from oil? What about heating our homes?

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Davos
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Re: Hooray! Energy-less economic growth is here!!!
joemanc wrote:

This line caught my eye(bold mine):

Quote:

 

Mary Novak, director of energy services at Global Insight, which provides the EIA estimates for oil demand growth, says jobs and income are the key indicators.

"We have based our model on jobs ... Oil is a transport fuel (in the United States). It is not used for much more," she said.

Really? What about for farming? What about all of the things that are made of plastic, that is derived from oil? What about heating our homes?

I want to see that data! IMO the key question might be: What if the price of oil precludes the importation and average 1,500 mile journey food takes to get to us? In other words: Does her model take into account we aren't in Kansas anymore and we might be doing a lot more local? Then how much oil will we use - just to grow food.

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Davos
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Re: Hooray! Energy-less economic growth is here!!!
Ready wrote:
Farmer Brown wrote:

 

Hoooooraaaayyy!!!!!!!   CNBC reports this morning that we no longer need oil to achieve economic growth.  Chris, time to shut down the site.  Nice knowing everyone, you can all go home now.  Be sure to take your halucinogenics daily and keep watching CNBC.  If you do not have access to any, a baseball bat to the head 3 times daily (doses may vary) will cure any fears you may have about the veracity of all-knowing CNBC.

FB, I think you and MachineHead should start writing for the blogs!

+1 !!! Heck a good name for a blog would be NOCNBBSHere: No Cable News Business BS here!

V's picture
V
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Posts: 849
Re: Hooray! Energy-less economic growth is here!!!

Boy finally some good news

V

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Dogs_In_A_Pile
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Re: Hooray! Energy-less economic growth is here!!!
joemanc wrote:

Really? What about for farming? What about all of the things that are made of plastic, that is derived from oil? What about heating our homes?

Joe -

There go those pesky details again.....

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Mike Pilat
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Re: Hooray! Energy-less economic growth is here!!!

I also love how articles like this describe an apparent trend: the GDP / energy consumption ratio allegedly declining, without defining the inputs into their equation more clearly. A barrel of oil today is pretty much the same as it was 30 years ago (if anything it is worth less as crude quality is declining). But of course "dollar" is never defined. Come to think of it, none of our genius leaders have really bothered to define a "dollar" either...so I guess this oversight is excusable on the part of the author.

But, there is a trend discussed, with no discussion of limitations of that trend. Let's say we really are reducing oil intensity in real terms (that's a bit of a stretch). Eventually something has to replace the oil's energy...either efficiency, or other energy sources. This article completely ignores the fact that it is not dollars alone that keep the lights on, the car running, and the house warm. We can borrow money into existence, but we cannot do the same with energy and anyone that falls into this trap is utterly delusional. In short, we live in an era where people seem to have fallen completely out of touch with our basic human needs and vulnerabilities. We don't even have to think or consider energy issues, apparently, because the extra money we print is creating a favorable trend that will allow us to maintain our illusion a little longer.

The individuals that are influenced by the mindset of soporific articles such as this one will have the misfortune of being the future slaves of the power playerz. It's sad to watch.

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signalfire
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Re: Hooray! Energy-less economic growth is here!!!

Mary H. Novak
Energy – North America

Mary H. Novak is the managing director of North American Energy Services. She is also responsible for developing and managing the company's global environmental consulting engagements. With 25 years' experience at IHS Global Insight, she has expertise in North American fossil fuel and electric power market analysis and environmental policy analysis. She has a graduate degree in economics from the University of Maryland. 

 

Figures.  An Economics Major.

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Dogs_In_A_Pile
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Re: Hooray! Energy-less economic growth is here!!!
signalfire wrote:

She has a graduate degree in economics from the University of Maryland. 

Figures.  An Economics Major.

On the plus side, it's not an Economics degree from an Ivy League school. 

All evidence to date would indicate that the worth and utility of a degree from an Ivy League institution can be measured in how much can be placed on a roll next to your toilet.

strabes' Harvard sheepskin being the 5 CEP outlier and lone exception.

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