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2013 January 26 Saturday
Economic Growth Went Into Reverse 10 Years Ago?

Tim Morgan of broker Tullett Prebon lays out an argument for why economic growth has stopped and reversed in some Western countries and why it may go into long term reverse.

This report is not, primarily, about debt, and neither does it suggest that the problems identified here are unique to the United States. Rather, the massive escalation in American indebtedness is one amongst a host of indicators of a state of mind which has elevated immediate consumption over prudence throughout much of the world.

This report explains that we need only look beyond the predominant short-termism of contemporary thinking to perceive that we are at the confluence of four extremely dangerous developments which, individually or collectively, have already started to throw more than two centuries of economic expansion into reverse.

Before the financial crisis of 2008, this analysis might have seemed purely theoretical, but the banking catastrophe, and the ensuing slump, should demonstrate that the dangerous confluence described here is already underway. Indeed, more than two centuries of near-perpetual growth probably went into reverse as much as ten years ago.

Declining EROEI (energy return on energy invested) is the most important element of his argument:

The killer factor is the non-linear nature of EROEIs. As fig. 1.5 shows, the effects of a fall-off in EROEI from, say, 80:1 to 20:1 do not seem particularly disruptive but, once returns ratios have fallen below about 15:1, there is a dramatic, ‘cliff-edge’ slump in surplus energy, combined with a sharp escalation in its cost.

Research set out in this report suggests that the global average EROEI, having fallen from about 40:1 in 1990 to 17:1 in 2010, may decline to just 11:1 by 2020, at which point energy will be about 50% more expensive, in real terms, than it is today, a metric which will carry through directly into the cost of almost everything else – including food.

Since I've been reading The Oil Drum for years these arguments are not new to me. If EROEI is new to you or if you want to read a finance guy's take on the implications of declining EROEI this report is quite interesting. The future trends in EROEI will determine the rate at which living standards decline in the United States. This is one of the reasons why I find mainstream inside-the-beltway DC political debate so irrelevant. The problems facing America (e.g. rising oil extraction costs, demographic decline, less low hanging fruit for innovation) are off the table for those who debate within the bounds defined by what is politically correct.

Also see a couple of Economist posts on the debt crisis and Tim Morgan's report.

Share |      By Randall Parker at 2013 January 26 11:35 AM 


Comments
Engineer-Poet said at January 26, 2013 3:39 PM:
Research set out in this report suggests that the global average EROEI, having fallen from about 40:1 in 1990 to 17:1 in 2010, may decline to just 11:1 by 2020
There are huge reserves of energy available to us for little energy investment, just waiting for us to build the right systems.

I'm referring to thorium and the uranium and transuranics in our spent-fuel pools and depleted uranium inventory, of course.  One can argue that tapping this requires lengthy and expensive certification of new reactors, but that's not true:  CANDU reactors can re-burn the existing stocks of LWR fuel in a process called DUPIC, Direct Use of PWR uranium In CANDU.  We have on the order of 60,000 tons of spent nuclear fuel (SNF) in the USA, at around 1% U-235 and 0.8% Pu isotopes; figuring that about 0.5% of that is fissionable Pu (not Pu-238 or Pu-240), the total fissionables in SNF are around 900 tons.  If it takes 1 ton of fissionables in 200 tons total fuel load to run 1 GW(e) of CANDUs, we could start 900 GW(e) of CANDUs on our existing inventory.  Once started, they burn thorium.

One major energy investment for CANDUs is the D2O.  IIUC, the hydrogen sulfide process for production requires about 10 tons of low-pressure steam to produce 1 gram of D2O.  CANDUs require about 750 tons of D2O per GW(e).  I have not calculated the net energy requirement for this.

Randall Parker said at January 26, 2013 7:42 PM:

E-P,

My fear with nuclear power: The energy return on initial energy investment takes a long time. By the time the energy crisis due to declining world oil production is clear the amount of energy needed for short term needs will so trump long term considerations that diverting large amounts of energy to construct large numbers of nukes (which take years before return starts) will not be feasible.

So what's going to be the EROEI for LFTR and what is the EROEI for a new AP1000 or Areva reactor?

Engineer-Poet said at January 26, 2013 10:28 PM:
The energy return on initial energy investment takes a long time.
There isn't much energy invested in a nuclear plant before ground is broken, aside from the energy-equivalent that's paid out to the adversaries in the regulatory battle for the right to build it.  Why do we even have this battle?  Because anti-nukes chartered the NRC.
By the time the energy crisis due to declining world oil production is clear the amount of energy needed for short term needs will so trump long term considerations that diverting large amounts of energy to construct large numbers of nukes (which take years before return starts) will not be feasible.
There are absurd amounts of energy available in "spent" nuclear fuel from PWRs.  Re-sinter the fuel pellets and use them in CANDU reactors as DUPIC fuel, and roughly 1/3 of a fuel load is enough to supply the whole reactor.  What of the other 2/3?  Make it thorium oxide recovered from rare-earth refining, and it becomes new fuel from neutron capture.

We don't need to divert energy from anything, we just need to properly value what we have.

So what's going to be the EROEI for LFTR and what is the EROEI for a new AP1000 or Areva reactor?
Ask the people in charge of handicapping the competitors.  The system is corrupt.

Sam said at February 6, 2013 11:09 AM:

I agree with Engineer-Poet on the vast amounts of energy at our disposal. The problem is we won't be allowed to use any of it. The "powers that be" are making to much money monopolizing the supplies of energy left. The war against coal is about constraining supplies further.

James said at February 14, 2013 4:54 PM:

Look here for GDP data that has been calculated without the distortions deliberately introduced over the last 30 years.

http://www.shadowstats.com/alternate_data/gross-domestic-product-charts

Want to know why the last decade had growth but no increase in employment? Easy, they fiddled the growth stats. Except for a small growth blip in 2004, America has been in recession since 2000.

Want to know why times are so tough when we have 2% growth? That's easy too, they fiddled the growth stats. We actually have a 2% contraction per annum.


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