Guest essay by Roger E. Sowell, Esq.5
Recently on WUWT, a post1 by Willis Eschenbach was made advocating the almost doubling of energy consumption worldwide, by increasing energy use per capita in the poorest countries. This post addresses the issue of increased energy consumption and poses a few questions. I say at the outset that I agree that improving the quality of life is an important goal, and energy consumption per capita is probably a good indicator of quality of life.
First, what do the following countries all have in common? Nigeria, Indonesia, Algeria, Libya, Iran, Iraq, Venezuela, Mexico, Russia, Canada, and United Kingdom?
Each country is a major oil producer and exporter, but with Indonesia and UK experiencing decreased exports recently. The first seven countries all are, or were, a member of OPEC, the Organization of Petroleum Exporting Countries.2 Yet, all but the last two, Canada and United Kingdom, have below-average GDP per capita, gross domestic product, according to the World Bank statistics.3
Second, while it is true that a correlation can be made between energy consumption per capita and quality of life, there must be something else at work that prevents the oil-rich countries Nigeria, Indonesia, Iran, Iraq, and the others from enjoying that high quality of life. There are fundamental issues that prevent energy-poor countries from copying the success of another energy-poor country, Japan. Japan has essentially no natural energy resources, but found the means to import energy as oil, coal, and liquefied natural gas, LNG, to power its industry, commerce, and residences.4
Until some fundamental issues are resolved, simply increasing energy consumption in the poorer parts of the world will not improve the quality of life.
Among these fundamental issues are, in no particular order, economic system, a fair justice system, and the political or governing system. I don’t imply that I am an expert on any of these countries, or their economic systems, justice systems, or political systems. I have done a fair amount of study, and also have traveled to and worked extensively in five of the countries mentioned above: Indonesia, Mexico, Canada, Japan, and UK.
Perhaps the most important issue is the political system, for the justice system and economic system may depend on who is in power and the type of power exerted. It may be that a representative constitutional democracy is a favored political system. It may be that the degree of official corruption is a major factor. It may also be that civil discord is a major factor. Having a modest degree of government regulation to ensure fair treatment, but not an onerous burden, is surely important.
A fair justice system ensures that those with a legal grievance will be heard, and treated fairly according to laws that do not change on someone’s whim. Having a contract honored, or being allowed to bring a lawsuit for breach of a contract, are important issues. Having a means to collect on a judgment is also important, as it does little good to win a lawsuit, be awarded money as damages, and be unable to collect the money.
A brief anecdote to illustrate the importance of a justice system: during my time in law school, US Supreme Court Justice Anthony Kennedy spoke to an assembly of professors, staff, students, and guests. Justice Kennedy spoke on many things that night, but what I most remember is him telling us that he had met recently with members of Iraq’s judiciary. It was soon after the war to remove Hussein ended and Iraq was building up its new government and judicial system. According to Justice Kennedy, the Iraq delegation thanked him tearfully for bringing to the world the US Constitution and its many provisions for legal rights, especially the first ten Amendments known as the Bill of Rights. They intended to copy as much of those rights as they could into their new governing documents.
The economic system may be important, perhaps not as important as other issues. Economic systems in the oil exporting countries range from absolute monarchies to dictators to elected representative.
It is interesting to note that OPEC has existed for more than 50 years, having been founded in 1960, so ample time has passed to allow oil-rich countries to improve their standard of living. A few have, such as Saudi Arabia, but most have not. Clearly, other factors must be addressed besides access to basic energy, if the goal is to improve quality of life.
It is further interesting to note that even within a country with high energy consumption per capita, such as the United States, enormous differences exist between citizens and their energy consumption. It may be that energy per capita in the US is distributed according to a bell curve, with a few percent of the population consuming vast amounts of energy in their mansions, jet airplanes, and fast motorcars. Likewise, a few percent of the population are poor and have very low energy consumption. The majority of the population likely fall in the middle, with about average energy consumption. Clearly, again, other factors must be at work that prevent the poorest from achieving a better quality of life along with higher energy consumption even in an energy-rich nation like the US.
Citations
1 WUWT, article of August 21, 2013 “Double The Burn Rate, Scotty”
2 OPEC membership at www.OPEC.org
3 World Bank GDP per capita, 2012 data.worldbank.org/indicator/NY.GDP.PCAP.CD
4 EIA data for Japan www.eia.gov
5 The author is an attorney in California, practicing in engineering, science and technology law. He is a frequent speaker on climate change, energy, and engineering issues. He worked worldwide as a chemical engineer in the energy industry with oil refining, petrochemicals, basic chemicals, and power plants. He blogs at http://sowellslawblog.blogspot.com
The US and Canada are the unique countries in the world. They have prosperity chiefly from the fact that they were started explicitly with the pretense of being free and democratic with constitutions guaranteeing certain rights to ordinary people.
It is much more difficult to impose that on older well established countries that have had generations of dictators who rule by force and oppression.
That will never change, and if anything, socialist tendencies of Western Countries, continuously adding laws restricting freedom, will only erode what freedom we have.
Economic turmoil often means the general public will vote for even more socialism, making matters even worse, like we have seen many times in the past in many countries.
“Mexico has the resources to produce 10 times what it has been producing”
“Hard to see how since Cantarell, their biggest deposit, is in terminal decline, producing less than 400,000b/day from the 2.3mb/day at its peak. http://static.seekingalpha.com/uploads/2009/8/23/saupload_reuters_cantarell_through_june_20093.jpg
Mexico’s over all production is down: http://www.indexmundi.com/energy.aspx?country=mx&product=oil&graph=production
They rely on oil revenue to keep their country functioning. Thus there is the incentive to produce as much as possible, not as little as possible.”
REALLY?
The President of Mexico “sees” it as he is proposing sweeping reforms to increase production by allowing foreign firms back into the country even modifying the Constitution. Mexico is the perfect example of what happens when a corrupt government system controls anything including energy. The same problem exists in Venezuela where all the experienced oil engineers have let the country and started looking for and producing heavy oil elsewhere. The decline is due to the political system, not the lack of potential resources.
I worked with PEMEX many years ago, even then the workers were competent and willing to do things correctly if supervised properly. The management was corrupt, made poor decisions, and lied about the schedules for completion of a major project. Even years ago, the honest employees we worked with told us that little progress was made discovering new sources of oil since they nationalized the oil industry. The poor people of Mexico are burdened by a system that deprives them of economic growth and good paying jobs although they have rich national resources.
Here is the latest news report:
“Mexico’s President Enrique Pena Nieto proposed sweeping reforms of the country’s oil sector Monday that would allow foreign energy firms back into the industry 75 years after being thrown out.
Pena Nieto proposed a constitutional reform that would allow state oil monopoly Pemex to partner with private energy companies in oil and gas exploration and production.
The joint deals aim at tapping foreign oil company capital and technology to revive oil and gas production, which has sagged under Pemex in recent years.
But the giant Pemex — Petroleos Mexicanos, which has dominated the industry since the 1938 nationalization — would maintain the state’s ownership of all hydrocarbon resources.
And Pemex itself, a key source of government revenues and a crucial driver of the economy, would remain in state hands.
The reform would modify Article 27 of Mexico’s constitution to allow private companies to form joint ventures with Pemex in energy exploration and
Article source: http://nz.sports.yahoo.com/news/mexico-proposes-private-partnerships-pemex-174303922.html
Nothing to do with this article, but I don’t know how else to draw attention to this “problem”.
When I open the Wattsupwiththat page, it opens then the screen goes blank. Usually when I re click it opens and stays open.
It could be my machine (iMac & Safari) but it doesn’t happen on any other site.
I thought it best to speak up in case some one is trying to bugger up the Wattsup…;. works
@ur momisugly john Naylor – lately I have been getting lots of reports of trouble on Macintoshes, especially in the UK, and unfortunately since I don’t own one, I can’t see what is going on. I suspect the issue has to to with Safari, which may be out of date, or there may be other things out of date.
WUWT works just fine for most people, but a few like yourself report problems like this. Look within your machine for things that need to be updated rather than blame the site. You could also use a different browser as Safari has all sorts of incompatibility issues, especially if it is an older version. Thanks – Anthony
@jrwakefield
And that is another example of why the US energy/mineral model succeeds over the long and short term where others fail. Even if the US government went bankrupt, people with oil on their land still have an incentive to drill it for profit. Private energy companies will still have an incentive to sign contracts with private individuals. The production still flows. Make energy production a function of a government ministry and they’ll soon prove that excuses are easier to pump and sell than oil.
wws has touched on most of what I would say about “the curse of resources.” The curse strikes countries where there’s either no clear conception of property ownership, or tribal conceptions of property ownership (both land and mineral) such as are prevalent throughout most of the world, or the idea that the state owns mineral resources. The latter includes parts of Europe that inherited the Roman concept of land ownership, in which all the land belongs to Rome and citizens are just sort of leasing it.
In some of these places a country never really formed as a coherent entity until a resource-find concentrated enough power and money to form a functional state, with an organized government and military, with the most powerful warlord or tribal leader crowning himself king or becoming president-for-life. In countries that were already modern and stable, the result is usually a state-run oil or energy monopoly, inevitably a bureaucracy with little incentive to innovate or maximize production.
Why do some countries prosper and others do not? This question was posed 2 centuries ago by Adam Smith. One of the most comprehensive and persuasive answers, IMO, is provided by Ralph L. Bayrer in his recent, extensively cited book: “Free People, Free Markets: Their Evolutionary Origins”. I commend it to all who are seriously interested in the underlying issues this thread only begins to touch upon.
That was why I liked the idea presented in Mosher’s link. If you can distribute the energy production and use down to the individual level then you stand a chance of bypassing the corruption and other problems listed above. Protecting it is another matter.
So what is required to protect your stuff? Regrettably it still comes down to force of arms in most of the world. A working justice and political system won’t help much if it can’t be enforced at the individual level. Everyone just runs around stealing from others instead of making their own.
‘2012 IMF working papers project $200/bbl oil and emerging absolute scarcity by 2020, which other IMF papers point out will cause grave disruptions globally.’
Sounds like another type of forecasting I’ve read about lately…
@John naylor @Anthony Watts:
I have no trouble with WUWT using Safari on my Mac — but I’m running a completely-up-to-date system. I suggest that Anthony is likely correct that you should check for issues locally first.
That said, I must take minor exception with Anthony’s observation about Safari and incompatibility issues. Safari has been (and remains) closer to full W3C standards compliance than any of the other major browsers. Most (but certainly not all) Safari “incompatibilities” are more along the lines of “behaves as required by the standard, rather than in the common-but-incorrect way seen in certain other browsers.” Some of the other WebKit-based browsers sometimes run a bit ahead of Safari in terms of standards compliance, but that’s only because they release new versions more frequently.
REPLY: I was referring to older versions, note he said he was running an iMac, which is ancient by today’s standards and that era of Safari is as well – Anthony
@jrwakefield and others
Remember that Hubbert’s curve was based on databases of onshore fields using vertical drilling and production data. That is to say vertical drill holes and related probabilities of discovery and production from migrated oil in oil basins. Long after Hubbert’s modeling effort we invented horizontal drilling of the source beds for migrated oil and gas and fracking for shale source beds. While some significant innovation was allowed for in Hubbert’s model and the related databases it was not radical like the dimensional shift from vertical drilling of hidden pockets to horizontal drilling of source layers over vast areas of the basins. I would say we have the grounds for saying model failure at this point but further drilling tech and related cost reductions will be needed to prove it for the underinformed (and the laggard oil majors that missed it).
Anthony, thank you for posting my little article.
All, I appreciate the comments. I am unable to respond more fully until this evening, Pacific Daylight time. Clients await, with all that that implies. Best regards, Roger.
I’m not sure it’s a valid assumption that oil availability equals energy availability.
The ability to “keep the fruits of your labors” is an impediment to progress worldwide.
Years ago we were living and traveling in Mexico and got to know many of the local people. Without fail they told the same story. Why did they not work harder and save up some money? Because if they did the rich man on the hill would pay the police to come and take it from them.
Closer to home we see the same thing. Why not work overtime? Because it all goes to taxes. Is there really any difference between the two situations?
“Long after Hubbert’s modeling effort we invented horizontal drilling of the source beds for migrated oil and gas and fracking for shale source beds.”
That has allowed us to get more of the oil in place, leaving less behind. That skews the Hubbert curve, but the basic principle is still there. Flow rate increases, peaks, then drops. There is no technology that can prevent that.
“Closer to home we see the same thing. Why not work overtime? Because it all goes to taxes. Is there really any difference between the two situations?”
At the peak of my working career my total tax load was 63.5%. I retired soon as I figured that out, now they get less than 20%. Atlas Shrugged (read the book).
George Turner says:
August 23, 2013 at 7:44 am
The production still flows. Make energy production a function of a government ministry and they’ll soon prove that excuses are easier to pump and sell than oil.
===========
so true. private industry is all about shipping the product, regardless of excuses. government is all about having a ready excuse why it did not ship. the secret to success in government lies in how fast you can get rid of the “hot potato” (work) and pass it to someone else. so long as you aren’t holding the potato when the music stops your job is safe.
jrwakefield says:
August 23, 2013 at 9:03 am
That has allowed us to get more of the oil in place, leaving less behind. That skews the Hubbert curve, but the basic principle is still there. Flow rate increases, peaks, then drops. There is no technology that can prevent that.
==============
assuming that natural gas resources decrease with depth, as one might expect if they were the fossilized remains of dead animals. however, if they are the result of the reduction of water and fossilized CO2 in the presence of iron, then the resource is likely much larger than believed. the methane deposits on the ocean floor suggest natural gas production by the earth is both ongoing and quite large. what get trapped in rocks may only be a small fraction.
It may be that energy per capita in the US is distributed according to a bell curve, with a few percent of the population consuming vast amounts of energy in their mansions, jet airplanes, and fast motorcars.
More likely the distribution has more to do with heating/cooling degree days and population density within a given wealth band then on some sort of great social disparity.
I.E.
If I look at the daily highs and lows for Bombay India and assume that a human being can adapt to a temperature centered on 80F and can withstand temperatures within +- 15F without aid of energy sources then the amount of energy a citizen in Bombay where average daily low and high varies seasonally between 65F and 95F is totally different then the amount of energy a person living in Wyoming where the average daily seasonal low and high varies between 15F and 80F.
A simple cinder-block structure with a tin roof is going to be inadequate to protect a human being from the elements in much of North America(Southern California being a possible exception) absent a large energy consumption. It’s more then adequate in Bombay, India.
@jrwakefield
You go tell the billionaire oilman Harold Hamm he’s wasting his time.
“however, if they are the result of the reduction of water and fossilized CO2 in the presence of iron, then the resource is likely much larger than believed.”
Abiotic oil formation has been well debunked. Every oil field can be shown to be of a biological source. For example, the Bakken deposit is a source rock. That means the organic source for the oil formed in that formation. Oil and gas shale show that it must be biological, because they are so tight the rock has to be fractured to get it out. Hence the oil and gas cannot have migrated from below.
“You go tell the billionaire oilman Harold Hamm he’s wasting his time.”
No idea what you are referring to. Of course oil and gas deposits will be exploited until they become uneconomic. Some gas shale deposits are not economical at today’s price, but they keep pumping it.
“. the methane deposits on the ocean floor suggest natural gas production by the earth is both ongoing and quite large.”
Methane on the sea floor is from decaying organic matter.
From the article:
“A fair justice system ensures that those with a legal grievance will be heard, and treated fairly….”
Well, duh. Bit of tautology, much? The being-treated-fairly is how we know it’s a fair system, yes?
All it takes to have a decent government is to have it staffed & run entirely by decent people.
Otoh, decent people are going to behave decently even in the absence of any formal “government”.
And there is no system, no mechanism that can force bad people to behave decently. There is no code — computer or legal — that can’t be “hacked”. The USA’s code was hacked in less than a century, and then again and more brutally half a century after that, and today sitting presidents can refer disdainfully to “that scrap of paper” when referring to the original code, which itself is only historical window-dressing now.
From richardscourtney:
“… any benefits of anything (including greater energy supply) are accrued by the powerful alone in the absence of a Rule Of Law and its enforcement.”
And in the presence of a rule of law and its (concentration of) enforcement, the powerful can buy the enforcement. They do and they have.
Decentralized enforcement (e.g., armed teachers) at least makes the enforcement mechanism harder to co-opt.
Mike Jonas says:
August 23, 2013 at 3:51 am
Mike, you are quite correct about what I said.
Roger, I’m more than aware that there are a whole host of things that need to be in play to increase the per-capita GDP. My point in my essay was all about the size of the energy aspect of the task. I’d always thought it would take five to ten times current energy consumption to lift the poor out of poverty … so I was surprised to find out that that’s not the case at all.
Finally, despite being an excellent post overall, your comparison of the GDP/capita is fatally flawed because you are using MER exchange rates rather than PPP exchanges. If you use the proper metric (available here) you’ll see that a number of the countries you listed are above, sometimes well above, the global average per capita GDP. You list eleven countries above. All of them except four (Iraq, Nigeria, Indonesia, Algeria) have a GDP above the global average … so it’s a poor example of your valid point, which is that access to cheap energy is a NECESSARY but not SUFFICIENT condition for economic prosperity.
Thanks for an interesting post,
w.
Beginning at this paragraph:
and following for a few more you make a ridiculous mistake – you are equating energy production by governments and industrialists with energy consumption at the per capita level. Clearly there is no logical way to claim that because your kings, princes and dictators create huge amounts of oil (and oil revenue) that this directly leads to energy consumption by the population for anything but air conditioning (as an earlier and wiser person has said, “The steam that blows the whistle will never turn the wheel”). In fact you have only pointed out that making affordable energy available to the population for the purpose of industrializing is a decision left undone by despotic nations and we already know that. Many of the shoeless people living in your low GDP nations have no opportunity, education, or motivation to industrialize, and grind grain in the same stone bowl their grandparents used.
Cheap power enables but does not empower the masses to acquire wealth. You need both and that is the advantage of western civilization and particularly, as Margaret Thatcher said, the English speaking world.
John West says:
August 23, 2013 at 4:15 am
And their indigenous population isn’t capable of producing the oil they DO produce. In other words, it is expatriot workers that make it happen; without those, you’d have an 11th-century country run by warlords–much like Afghanistan.
Figure out why entire dole-subsidized Arab nations (which requires $80 crude oil to maintain) would rather sit on their wallets than work and you’ll understand the recipe for eventual national disaster.