If predictions of peak oil (now), peak coal (<10
years) and peak natural gas (<20 years) are all true,
then one important consequence to the dominant
culture’s worldview that economic growth can
continue forever is …
that individuals will need to find ways to meet
their own needs while using less energy.
Systems Graph
Fossil Fuels
Extraction +
+
+
Consumer Demand
f or Fossil Fuel Energy
Consumer Demand
f or goods
+
GDP
+
Production of
Goods
By Pete Kaslik
Graph 1. US Oil production peaked in 1970 while
consumption grew after that with down turns in the
1980s because of politics and more recently because of
the recession. Consumption still exceeds production by
a large amount. Notice that the population continues to
grow, too.
Graph 2. Has world production peaked too?
That looks possible in the graph, but peaks can
only be determined in hindsight. We will be
well past the peak when we know it happened.
World Oil Production and Consumption
http://www.eia.doe.gov
90
10
180,000,000
8
160,000,000
6
140,000,000
4
120,000,000
2
100,000,000
0
80,000,000
U.S. Field Production of Crude Oil (Million Barrels Per Day)(L)
U.S. Consumption of Crude Oil (Million Barrels Per Day)(L)
US Population(R)
80
Million Barrels of Oil per Day
200,000,000
85
US Population
220,000,000
12
Mar-2023
14
Jul-2009
240,000,000
Oct-1995
260,000,000
16
Feb-1982
18
Jun-1968
280,000,000
Oct-1954
300,000,000
20
Jan-1941
320,000,000
22
May-1927
24
Sep-1913
Quantity (Million Barrels Per Day)
U.S. Crude Oil Daily Production and Consumption
and US Population
75
70
65
60
55
50
45
1965
Graph 3. The energy return on energy invested ratio is
declining and is not very high for renewable energy sources.
This implies there is no easy and cheap replacement of oil.
1970
1975
1980
1985
Production
1990
1995
Consumption
2000
2005
2010
Graph 4. Only 2 countries have a higher per capita GDP and use less energy per
person than the US. These countries are shown in the graph.
Scatterplot of Per Capita GDP (PPP) against Per Capita Energy Consumption (Thousand BTU)
90000
80000
Bermuda
Per Capita GDP (PPP)
70000
60000
Faroe Islands
United States
50000
40000
30000
20000
10000
0
-10000
-1E5
0
1E5
2E5
3E5
4E5
5E5
6E5
7E5
8E5
Per Capita Energy Consumption (Thousand BTU)
Per Capita Energy Consumption (Thousand BTU):Per Capita GDP (PPP): y = 5569.0629 + 0.0849*x;
r = 0.7321, p = 0.0000; r2 = 0.5360
Graph 5. Notice how energy consumption and GDP both
grew during the last 60 years. They are both part of a
positive feedback loop. As long as energy consumption
grows, it seems possible that the GDP can grow. Notice the
downturn in both in 2009.
Graph 6. As the price of a barrel of oil
increases, the unemployment rate in the US
increases two years later.
1E8
14000
9E7
12000
8E7
10000
7E7
8000
6E7
6000
5E7
4000
4E7
2000
3E7
0
Inflation Adjusted Cost for a barrel of oil and the US Unemployment Rate (lag 2 years)
10
9
Unemployment Rate (Lag 2 years)
16000
US Gross Domestic Product (Billion Dollars)
Total Energy Consumed (Billion BTU)
Total Energy Consumed in the US and the US GDP
1.1E8
8
7
6
5
4
3
2E7
1940
1950
1960
1970
1980
1990
2000
Year
Total Energy Consumption (Billion BTU)(L)
GDP (Billion Dollars)(R)
2010
-2000
2020
2
10
20
30
40
50
60
70
80
90
100
110
Inflation Adjusted
Inflation Adjusted:Lag 2:
r2 = 0.4979
y = 3.726 + 0.0588*x; r = 0.7057, p = 0.0000;
Assumptions
1. As the peak of oil production is passed, the law of supply and demand implies that the price will go up.
2. A barrel of oil will cost $120 in the future.
Math
The price of oil is currently about $90. Based on the regression equation y = 3.726 + 0.0588x, if
oil reaches $120 a barrel, we could expect the unemployment rate to be 3.726 + 0.0588*120 =
10.8 percent in 2 years time. This is an extrapolated result and follows on the heels of the most
recent recession when unemployment is still high, so it must be used with caution.
The gap version of Okun’s law states that for every 1% increase in unemployment, there is a 2%
decrease in the GDP. Thus if 10.8 percent unemployment is 2% higher than currently, then the
per capita GDP should decline by 4%
The regression equation for per capita GDP and per capita energy use is
y = 5569.0629 + 0.0849x where y is the GDP and x is the energy use. When the US had a per
capita GDP of 46,000 (ppp - purchasing parity power), then the regression equation predicts per
capita energy consumption of 476,291 thousand BTU. A four percent reduction in per capita
GDP would result in per capita energy consumption of 454,547 thousand BTU which is a 4.6%
 476,291  454,547

reduction in energy use 
 100  4.6%  .
476,291


Conclusion
The systems model shows a feedback loop. An increase in GDP leads to increases in demand for
goods and oil which leads to increased production which leads to increased GDP. A decline in
any of these will produce a decline in all.
We assume, based on Graphs 1 and 2 and the law of supply and demand, that as the availability
of oil declines, prices will increase.
Graph 3 suggests that there is not a reasonable alternative to cheap oil.
Graph 6 and the math shows that as oil prices increase, so does unemployment.
The gap version of Okun’s law shows that as unemployment increases, the GDP declines.
Graphs 4 and 5 and the math shows that lower GDP corresponds to lower energy use. Energy
use declines faster than GDP.
Consequently, should oil become less available and more costly, individuals will need to find
ways to meet their own needs while using less energy.
Sources
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html
http://sasweb.ssd.census.gov/cgi-bin/broker
http://www.eia.doe.gov/
http://www.theoildrum.
http://en.wikipedia.org/wiki/Okun's_law