Notes on
Beyond Oil: The Threat to Food and Fuel in the Coming DecadesBy John Gever, Robert Kaufmann, David Skole, Charles Vörösmarty
1986; 2nd edition 1991
Read February-March 2007
This book, first published in 1986, argued that the fate of the American economy and our agricultural infrastructure is tied to the fate of oil, and that oil is running out soon. The authors predicted that the economy would be in a downward slide starting by 2000 at the latest, until we moved to energy sources other than oil.
From reading between the lines, it looks like this book is a response to actions by the Reagan administration which relaxed the Carter administration’s emphasis on conservation and energy independence.
Ok, so they were clearly wrong in their predictions. Even knowing that, I still chose to read the book for several reasons:
i) I wanted to see where they went wrong.
ii) The book has been described as “seminal” on several peak oil websites. Of course, such sites don’t consider that the book’s thesis has been disproven, just that their timing is a little off. So the underlying arguments may still be in play.
iii) It still looked interesting.
Let me see if I can summarize the book’s positions. I’ll try; I’m not sure I understand them completely. I’ll save editorial comments until later.
1. Human progress can be broken into two components: technological advances that let us take better advantage of energy sources, and advances that have increased the supply of energy. The technical advances in the former generally consist of ways to apply more energy to a given problem to reduce labor or capital needed, not to solve the problem using less energy. If the supply of energy ever decreases, then those technological advances won’t buy us much.
The standard counterargument by the “cornucopian” economists is that the resource extraction rate per worker-hour, or per dollar, has steadily decreased throughout the course of human history, and there is no reason to believe that this will not continue to be the case.
The counter-counterargument: (i) the quality of resource stocks is steadily declining, in oil, mining, and agriculture. For oil and minerals; this is natural, since the purest deposits are recovered first. It takes more and more energy to recover the same amount of resource from the earth. This hasn’t been a problem because the decrease in price of energy supplies has outpaced the decline of resource quality. But this doesn’t apply when the resource in question is energy. You can’t throw energy at the problem to create more energy.
2. The book’s analysis shows that per-capita GNP tracks very closely with energy consumption per-capita. If energy consumption goes down because of energy depletion, so does GNP.
The standard counterargument here is that according to the actual numbers, the ration of per-capita GNP to energy consumption has increased significantly over the last sixty years, indicating that our economy is becoming less and less dependent upon energy.
The counter-counterargument: (a) the composition of energy sources have changed significantly over those last sixty years, so it’s not an apples-apples comparison. (b) You can break energy consumption down into industrial + household usage. The household consumption is essentially defined as the energy that the workforce uses on its own time. It turns out that all the change in the GNP:energy consumption ratio is due to decreases in household energy. So industrial efficiency gains have been minimal, and this is actually the component that tracks one-for-one with energy consumption. Reduce energy supplies and industrial output is reduced by the same proportion.
Demand elasticity for energy is much lower than most economists think.
3. It’s the same story for agriculture. Farming yields have been rising impressively over the past century, but that has been mostly due to adding energy inputs. Mechanization and use of fertilizer are the most important.
4. The U.S. is running out of oil. By 2000 there will be no more domestic exploration, as it will take more than a barrel of oil to discover a barrel of oil. Moreover, we will not be able to rely on imported oil for long. I didn’t really understand the logic here, but it sounds like they are saying that if imported oil prices are too high, there will be no point in trading for it since the energy we import will all have to be consumed in manufacturing goods to pay for the oil. Honest, that’s what it says.
5. No good energy alternatives are in place. Hydro is maxed out; nuclear is problematic; coal quality is declining and mining efficiency will go down as strip-mining gets to be too expensive. Alternatives will eventually be developed, but not before we suffer a major hit to the GNP.
6. If all that doesn’t convince you, they also ran a computer program that simulates the U.S. economy. They punched in a bunch of inputs, and found out that yes, we’re screwed.
7. Policy recommendations: start fostering alternative energy. That probably won’t hit the mainstream in time to keep us from feeling pain, but we can get a leg up on it. In the meantime, try to educate the populace about conservation and energy efficiency, and try to slow the rate of population growth via popularizing birth control and limiting immigration.
Ok, that ends my summary of their logic. So where did they go wrong? Or maybe I shouldn’t get ahead of myself; did they go wrong? Certainly, their predictions have not come to pass, although some would say that we only need to wait a short while.
The argument that I found the least comprehensible was that in item #4, that compensation for our declining internal production of oil by importing oil would be limited in scope. That has clearly not turned out to be the case. The argument probably didn’t make sense in 1986 either; Japan was doing just fine despite its limited domestic supply of energy. And they actually raised the question of why the U.S. couldn’t be like Japan, but so far as I could tell never technically answered it. Maybe they bought into their energy reductiveness a little too much – saying that if GDP really does track 1-1 with energy consumption, then there is no point in trading for it, since you give out what you get back? They do mention that “the trade of services for fuel is not considered” because it was too hard for them to calculate. Nobody would possibly trade oil for technology, would they?
Once the assumption of declining energy is undermined, the rest of the book’s logic is somewhat pointless, as it’s all about how everything is peachy so long as there’s plenty of energy.
The chapter about running a computer program to simulate and forecast the American economy made me laugh. Like that’s supposed to prove anything. Maybe in 1986 that sort of thing impressed more people.
The economics arguments are interesting. What they’re saying basically sounds like it comes down to the fact that they don’t believe that there have been any industrial gains in energy efficiency in the sixty years prior to the book. I find that a bit hard to believe, but I don’t have the data to argue my point.
Actually, that really is the main point of the book, that our welfare, in terms of the economy and our food supply, is strictly tied to our energy supply. Cut the energy supply by 5% and you reduce our standard of living by 5%. And since so much of our energy comes from oil and coal, which are declining, we are looking at a dismal future.
One of the threads running through the book (and the peak oil movement in general) is a refusal to admit the possibility that pricing can affect demand. The claim that the elasticity of energy demand has been low in the U.S. might well be true, although it doesn’t impress me much. Electricity, for example, is such a low proportion of the average American household’s budget – and is steadily getting lower – that there has been little incentive to be respond to price changes. I find it hard to believe that would remain the case if prices rose to a significant amount.
A few other points stuck out. There’s a weird section in Chapter 3 about the true meaning of “conservation” and how it differs from what they call “curtailment”, the latter meaning what you think it does. To the authors, “conservation” means increasing efficiency, for example, adding insulation to your house, not lowering your thermostat. That whole passage was kind of funny since I’ve been reading other books that complain about people confusing “conservation” with “efficiency”.
Another funny note was in the introduction to the second edition, five years after the book was first published and ten years after the core data was collected. The authors had a chance to reconsider anything they said, any predictions they made … maybe tweak some dates … nope, in their words they were “proud” not to revise it since they got the assumptions and logic right the first time. Yikes. Of course, the U.S. was in a recession for much of that time, so maybe the data wasn’t trending that badly according to their predictions … but still, you think five years would be enough to learn at least something new, so that you’d want to fine-tune something. The final words of the prologue to the second edition are “In summary, the stagnation and eventual decline in the U.S. standard of living that is described in Beyond Oil is not pessimism, it is here.” Kind of funny as that was written as the American economy was preparing to skyrocket.
Ok, so you might be getting the idea that I think this is a pretty bad book. Certainly, it contains assumptions and arguments that are quite incorrect. That’s too bad, as I’m generally sympathetic with the authors’ end goals – reduced reliance on nonrenewable energy, and intelligent population growth, i.e. growth with an eye to what the earth can support and to the quality of life that we all want to have. But I can’t really buy the arguments in this book.