1. Peak Economy Peak Economy Richard Heinberg Post Carbon Institute September 2009 Richard Heinberg Post Carbon Institute September 2009

2. The economic crisis changes everything before crisis I after crisis

3. Understand the crisis and its historical context, so that we can Respond effectively It is essential that we….

4. What is economic growth? GDP: total amount of money changing hands

5. What is economic growth? GDP: total amount of money changing hands Money is a claim on goods and services

6. What is economic growth? GDP: total amount of money changing hands Money is a claim on goods and services Provision of goods and services requires energy and material resources

7. Economic growth correlates with energy usage

8. Winning the energy lottery

9. During the fossil fuel era we developed an economy…

10. …based on the expectation that growth can go on forever

11. Tomorrow’s growth is collateral for today’s debt

12. With compound interest, fractional reserve banking, and debt leverage, growth became necessary to the monetary health of nations Growth becomes institutionalized

13. Remember…growth requires more energy!

14. World oil discoveries

15. Global oil production falls when loss of output from countries declining exceeds gains from those expanding

16. 2007 oil production balance year on year change (thousand barrels/day

17. How did Peak Oil contribute to the financial crisis?

18. 1.Energy growth becomes difficult and expensive (oil at $147 a barrel!) The drivers of crisis:

19. Past recessions & oil spikes

20. 1.Energy growth becomes difficult and expensive 2.Growth-and-debt-based economy goes bust The drivers of crisis:

21. Mortgage/finance crisis and oil price spike would each have caused a recession Both happened at the same time Result: simultaneous crises in auto, airline, banking, housing sectors Once the house of cards started falling, debt de-leverage created a snowball effect Colliding recessions

22. Cost of the Wall St. Bailout

23. “The value of global financial assets including stocks, bonds, and currencies fell by more than $50 Trillion in 2008, equivalent to a year of world GDP.” --Asian Development Bank

24. Demand destruction Hedge funds in, hedge funds out Why did oil prices drop?

25. Though demand is down, depletion of existing fields continues: capacity erosion July 2008: the all-time oil peak

26. Though demand is down, depletion of existing fields continues: capacity erosion Lack of investment (given low oil prices and credit crisis) means new oil projects are being cancelled. Not enough capacity is being replaced! July 2008: the all-time oil peak

27. Raymond James Associates Macquarie Investment Bank Jeff Rubin (Formerly CIBC) Energy Watch Group Association for the Study of Peak Oil

28. The post-peak dilemma Oil price needed to justify the development of new oil production capacity: $60-70 (and rising) Minimum oil price likely to trigger economic recession: $80

29. The trap If oil prices rise, economic recovery is nipped in the bud If oil prices fall, not enough investment is made in future supply; this leads to high oil prices later (see above)

30. But it’s not just oil

31. AntimonyChinaThermoelectric/paraelectric materials Barium China Thermoelectric/paraelectric materials BismuthChina, Mexico Thermoelectric/paraelectric materials CobaltKinshasa, AustraliaPhotovoltaics GalliumChinaPhotovoltaics GermaniumBelgium, CanadaPhotovoltaics IndiumChina, CanadaPhotovoltaics, thermo/paraelectric mat’ls ManganeseGabon, S. AfricaPhotovoltaics NickelCanadaFuel cells Platinum S. AfricaFuel cells, para/thermoelectric materials Rare EarthsChinaFuel cells, para/thermoelectric materials TelluriumBelgium, GermanySolar cells, semiconductors TitaniumAustralia, S. AfricaSolar cells ZincCanada, MexicoPhotovoltaics, fuel cells Depleting materials

32. World water use km 3 / year

33. Marine fish catch

34. A giant science experiment

35. So, back to the economic crisis…

36. Unemployment nears 10%

37. “We’re in the midst of a once-in-a-lifetime set of economic conditions. The perspective I would bring is not one of recession. Rather, the economy is resetting to a lower level of business and consumer spending based largely on the reduced leverage in the economy.” Steven Ballmer Chairman, Microsoft Corp.

38. V The shape of the recovery

39. U

40. W

41. L

42. Unemployment Homelessness Bank failures Hunger Crime Political instability International conflict What to expect

43. Will reduced energy per capita result in reduced carrying capacity? Not necessarily; there are other factors: Equity Efficiency

44. But the end of growth means we have entered a new era If population increases, per-capita consumption will decline more rapidly Resource conflicts likely

45. What are our levers? Population Equity Development of renewables Efficiency (we also need a steady-state economy and global conflict resolution)