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Bill James
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Bill received a BS in 1972 from West Point with concentrations in math, physics, chemistry, and engineering. He was an NCAA All American Wrestler and captain of the wrestling team. He is an eight-year infantry veteran, Airborne, Ranger, Arctic Light and Mechanized Infantry in the United States... More
My company:
JPods, Inc.
My blog:
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  • Disposable Energy, Disposable Income's Ability to Buy Oil 0 comments
    Jun 22, 2010 12:26 PM

    Disposable Energy is a metric of Disposable Income's ability to buy oil. Surplus energy power economic growth (Chris Martenson's presentation on Net Energy).

    Assumptions:

    • Life requires energy:
      • As energy costs increase, quality of life decreases.
      • As energy decreases, life decreases. Unless efficiency increases by 10x.
    • Energy and efficiency combine to apply energy to economic work.
    • Economic work builds momentum into the economy. GDP Growth (Blue) in the following chart:
      • Decreasing Disposable Income in Energy leads economic downturns.
      • Increasing Disposable Income in Energy trails economic recoveries.
    Graph:
    • Gold Disposable Energy. Data sources are US. Department of Commerce and InflationData.com.
    • Green, Oil Supply Growth
    • Blue, GDP of Economic Growth
    • There are four distinct trends over the past 50 years;
      • Pre-1973, Stable growth as the highway network expanded productivity.  Economic growth 2.5% slower than oil supply growth.
      • 1974-1985, Turmoil as the Oil Embargo and Iran crisis destablizied the oil supply, created inflation, recession.
      • 1986-2002, Stable oil to very low oil prices with the economic boom from re-tooling communications infrastructure.
      • Post-2002, Competition for energy ratchets oil prices higher. Between 2002 and 2006 gasoline prices increased from $1.45 to $2.92 reducing disposable by $2,000 per US family.
    Disposable Energy

    Conclusions:
    • Except for 2009, since 2002 more and more disposable income has been required to buy energy for food, commutes and heating:
    • Oil based Disposable Energy is crashing:
      • World Crude Oil Production peaked at 74 million barrels per day in 2005.
      • Net Energy is dropping below 10:1.
      • Existing oil resources are depleting at 6.8% per year (IEA data).
      • Gulf oil spill and attempts to hault drilling will slow development of new oil fields.
      • Oil Supply Growth will never again make oil more plentiful and affordable. US Military's Joint Forces Command estimates zero spare capacity by 2012 and 10 million barrels per day shortage by 2015.
    • Changing the lifeblood of our economy from oil to ingenuity can increase efficiency, off-setting the crashing in Disposable Oil Energy.
    • 10x change is required to cut oil imports to zero by 2020, a 65% shift from oil to efficiency gains, solar and wind. Net Energy gains of 10:1 or better.
    • Advice from Thomas Edison, 1910 (full quote):
    "Sunshine is spread out thin and so is electricity. Perhaps they are the same, Sunshine is a form of energy, and the winds and the tides are manifestations of energy.”

    “Do we use them? Oh, no! We burn up wood and coal, as renters burn up the front fence for fuel. We live like squatters, not as if we owned the property.

    “There must surely come a time when heat and power will be stored in unlimited quantities in every community, all gathered by natural forces. Electricity ought to be as cheap as oxygen...."


    Disclosure: Author is the Founder and Shareholder in JPods, Inc. a solar-powered transportation company.
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