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Forum Post: resource scarcity and energy

Posted 2 years ago on June 19, 2012, 9:31 a.m. EST by flip (6786)
This content is user submitted and not an official statement

Mark Z. Jacobson, a Stanford professor we have often quoted, and whom we know well enough to say his research is thorough and excellent, has estimated the costs of building out renewable energies worldwide to be in the neighborhood of $100 trillion. For China, whose population is approximately one-fifth of the entire world’s, that would suggest expenditures in the neighborhood of $20 trillion. We actually think Jacobson is somewhat conservative here, and as we said before and in our book “Red Alert” he and so many others, ignore the problem of resource scarcity.

There is probably nothing more critical or important to a country or the world itself to develop in a way that does not run into a roadblock created by scarce resources. Thus, as some people bemoan (or cheer) the slow growth in China, they seem not able to see the areas of extraordinary and critical long-term progress. For example: the northwestern part of China is not known for its bustling industry, especially in the desert area known as Gansu.

And yet, Gansu, the home of about one million Chinese, has seen annual investments totally about $6 billion in wind, solar and other areas related to renewable energy. The result has been noteworthy. An area once known as a center for oil has largely replaced the now depleted wells with solar farms, wind farms and a smart grid. By 2020 the area should be more or less free of oil and largely running on renewable energies.

If you multiply the million people in Gansu by 1,500 (i.e., to arrive at the approximate total population of China of nearly 1.5 billion), you’ll see the scale at which China is hoping to build out its renewable energies: Gigawatts of wind and solar are likely to be eventually measured in four digits. If you do the math and make a few assumptions, you can see how China could easily spend $20 trillion on these efforts.

And to assume a country on its way to spending this kind of money is headed for some sort of Armageddon is just silly. Remember too that renewable energies are labor- as well as resource-intensive.

The real question comes down to longer-term shortages of copper, silver and other metals and minerals destined to become scarce. A thousand gigawatts of solar would surpass the current yearly supply of silver by several-fold. And a thousand gigawatts would be a very modest long-term goal for China. How about the rest of the world?

For example, Asia has another very large economy called Japan. Recently that country announced plans for ramping up solar energy to 3.2 gigawatts, simply a fraction of one percent of the amount of electricity they will eventually needed in Japan. But even these 3.2 gigawatts move the needle in silver, as it represents nearly 1.5 million ounces of the metal.

Is it really hard to see why we like silver, which is a crucial component in solar energy technology, or why we like copper, whose role in smart grids and hybrid cars will eventually come close to exhausting all available supplies of copper?

Gold, of course, is a different animal, but, as we’ve said so many times, how in the world can you ration scarce resources with paper money? Another sign that China “gets it” is their massive imports of gold at the same time as they are achieving the world’s highest rate of gold production internally.

China’s intention of making the Yuan the world’s major reserve currency is also evident, as recent financial reforms included liberalizing the amounts banks can pay their customers for deposits.

That China can do more than one thing at a time – i.e. liberalize their banking system while building out new energies – can also be seen from the record amounts of long term loans that took place there in the second half of May, the majority of which went to – you guessed it – renewable energy projects.

Yes, we are still betting on stocks and indeed think the U.S. market will rally, but if you want to play the game the Chinese play so well, think long term, and “long term” in this case means “think commodities”.

Clearly, this article is very much informed by my frustration with our political process. While it still may not be too late to come together and develop a world we want our children to live in, our politics are marred by mudslinging and arguments over matters that have little to do with the year after next, let alone the rest of the century. We need to get our act together pronto – and stop fighting about it.

38 Comments

38 Comments


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[-] 2 points by timirninja (263) 2 years ago

China with their plans to the future is far from green energy economy. they mostly rely on human resources. Japan desperately need more room to turn around. that is why its pushing them to create fuel-official technology. When i see red-alert first what comes to my mind is anticommunist propaganda. The better world possible by dividing and using resources efficiently . i'm trying to refer to socialism with their limitation of gigantic private corporations. he he he too many questions need to be answered. Why do you think your brandname RAM memory in your computer has gold contacts? http://www.youtube.com/watch?v=AnIMjNWyxLM&feature=player_embedded

[-] 2 points by MattLHolck (16833) from San Diego, CA 2 years ago

gold is chemically inactive

[-] 1 points by timirninja (263) 2 years ago

you are genius Matthew. gold contacts in memory plates maintain same level of conductivity or 0 resistance in that case

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

gold is not a super conductor without resistance

it is a good conductor

[-] 1 points by flip (6786) 2 years ago

The better world possible by dividing and using resources efficiently . - good idea - as to the rest of it i don't get it!

[-] 1 points by bensdad (8977) 2 years ago

Plentiful, renewable resource --
A koch brothers soylent green factory is coming to a town near you!

[-] 1 points by francismjenkins (3713) 2 years ago

China is also working on developing thorium reactor technology. Whatever we can say about how much this will cost or what consequences we will suffer as a result of CO2 emissions, one thing we can say for sure, oil (and fossil fuels in general) is a finite resource, and the major suppliers of oil are the most unstable regimes on earth.

[-] 1 points by Builder (4202) 2 years ago

Excellent post. Thankyou.

[-] -2 points by Krowell (-69) 2 years ago

Why would we invest money in unproven technologies that three, four, and even five times more expensive than natural gas? It makes absolutely no sense. I hope the Chinese spend all of their money on renewables and that they improve the technology so that we don't have to take that risk.

[-] 2 points by geo (2638) from Concord, NC 2 years ago

Because capitalism isn't about risk anymore is it?

Lets let our competitors due the R&D and jump ahead in technology.... thats how America became the strongest industrialized nation..... yeah sure.

[-] -2 points by Krowell (-69) 2 years ago

Capitalism is always about measuring risk and return. That trade-off is at the base of all decisions.

America historically, never had the lead in industrial technology so I am not quite sure what you are saying. We could always implement better but never could design better.

[-] 2 points by geo (2638) from Concord, NC 2 years ago

Post WWII you would have a very very hard time proving your point. From computers, telecommunications, aerospace, materials science, military hardware, medical innovations,... on and on. It has been our designs copied and used by the rest of the world. The basic discoveries and inventions that make modern life what it is we played a major role in:

Bell Labs discovered invented the transistor (lasers and a billion other devices), Texas Instruments- the integrated circuit, IBM - world standard in business computers, Cray - the standard in super computing, IBM & Apple - personal computers, DARPA - created the Internet, Watson & Crick - the double helix structure of DNA, Professors from Stanford and Harvard developed the MRI, Space Exploration we dominated being still the only country to have boots on the Moon, The Hubble Telescope, etc, etc, etc, and so on...

Maybe you can see a pattern developing here ....

[-] -1 points by Krowell (-69) 2 years ago

I have no problem proving my point. The quality of American goods have historically been average. Who had better equipment in WWII? how many US tanks did it take to take out one German tank? Who was leaps and bounds ahead of the US in physics. You mention rocketry, where did we get that technology?

Americans have always been better at the execution than the discovery. It has only been since 1980 that we have seen sharp increases in productivity and hence technology.

[-] 1 points by geo (2638) from Concord, NC 2 years ago

"Post WWII you would have a very very hard time proving your point."

Did you miss this statement I made?

[-] 1 points by geo (2638) from Concord, NC 2 years ago

Whatever, we could go tit for tat on each invention made and it wouldn't matter. That's what you want to believe fine.

[-] -2 points by Krowell (-69) 2 years ago

Really mature response, what are you 12?

[-] 1 points by geo (2638) from Concord, NC 2 years ago

Thats funny. No, the response is based on the recognition that we are dealing with a subjective topic... quality. If lists of great discoveries that made by us that led to dominance in a field by us, aren't going to sway you then nothing will. You believe the quality of foreign mfg is higher, thats subjective and your opinion.

[-] 1 points by Builder (4202) 2 years ago

The Chinese are really spending all your money, and ours.

They are looking a century into the future.

At the rate they are using resources, they have a fairly good idea of when they will use up all of their's, as well as yours and ours.

Capitalism, on the other hand, looks to the end of this financial year, and thinks of nobody other than the CEO and Co., and shareholders.

[-] 0 points by Krowell (-69) 2 years ago

Capitalism is a better allocator of assets than any controlled economy so I don't think the Chinese will be right.

[-] 1 points by flip (6786) 2 years ago

the world runs on oil natural gas can only do so much - if you want to educate yourself google "time to wake up investors" by jeremy grantham

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

liquid fuel is easy to package

[-] 1 points by flip (6786) 2 years ago

i am off to bed some don't hurry - take your time - leeb is another good source - he wrote the post above

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

right

invest in renewable energy

[-] 1 points by flip (6786) 2 years ago

check out grantham never mind here is some of it - there is more if you are interested - if not we don't have much to talk about - unless you have done some serious research and know something i don't - then i am interested. if it is the usual mainstream "we have unlimited resources" shit then don't bother - Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever

Jeremy Grantham

Summary of the Summary The world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value. We all need to adjust our behavior to this new environment. It would help if we did it quickly.

Summary

Until about 1800, our species had no safety margin and lived, like other animals, up to the limit of the food supply, ebbing and fl owing in population.
From about 1800 on the use of hydrocarbons allowed for an explosion in energy use, in food supply, and, through the creation of surpluses, a dramatic increase in wealth and scientifi c progress.
Since 1800, the population has surged from 800 million to 7 billion, on its way to an estimated 8 billion, at minimum.
The rise in population, the ten-fold increase in wealth in developed countries, and the current explosive growth in developing countries have eaten rapidly into our fi nite resources of hydrocarbons and metals, fertilizer, available land, and water.
Now, despite a massive increase in fertilizer use, the growth in crop yields per acre has declined from 3.5% in the 1960s to 1.2% today. There is little productive new land to bring on and, as people get richer, they eat more grain-intensive meat. Because the population continues to grow at over 1%, there is little safety margin.
The problems of compounding growth in the face of fi nite resources are not easily understood by optimistic, short-term-oriented, and relatively innumerate humans (especially the political variety).
The fact is that no compound growth is sustainable. If we maintain our desperate focus on growth, we will run out of everything and crash. We must substitute qualitative growth for quantitative growth.
But Mrs. Market is helping, and right now she is sending us the Mother of all price signals. The prices of all important commodities except oil declined for 100 years until 2002, by an average of 70%. From 2002 until now, this entire decline was erased by a bigger price surge than occurred during World War II.
Statistically, most commodities are now so far away from their former downward trend that it makes it very probable that the old trend has changed – that there is in fact a Paradigm Shift – perhaps the most important economic event since the Industrial Revolution.
Climate change is associated with weather instability, but the last year was exceptionally bad. Near term it will surely get less bad.

[JR: Well, it may get less bad, but not "surely." This year is pretty extreme already and 2012 could be as bad or worse than 2010, according to Hansen here.]

Excellent long-term investment opportunities in resources and resource efficiency are compromised by the high chance of an improvement in weather next year and by the possibility that China may stumble.
From now on, price pressure and shortages of resources will be a permanent feature of our lives. This will increasingly slow down the growth rate of the developed and developing world and put a severe burden on poor countries.

We all need to develop serious resource plans, particularly energy policies. There is little time to waste. Introduction

The purpose of this, my second (and much longer) piece on resource limitations, is to persuade investors with an interest in the long term to change their whole frame of reference: to recognize that we now live in a different, more constrained, world in which prices of raw materials will rise and shortages will be common. (Previously, I had promised to update you when we had new data. Well, after a lot of grinding, this is our first comprehensive look at some of this data.)

Accelerated demand from developing countries, especially China, has caused an unprecedented shift in the price structure of resources: after 100 hundred years or more of price declines, they are now rising, and in the last 8 years have undone, remarkably, the effects of the last 100-year decline! Statistically, also, the level of price rises makes it extremely unlikely that the old trend is still in place. If I am right, we are now entering a period in which, like it or not, we must finally follow President Carter’s advice to develop a thoughtful energy policy and give up our carefree and careless ways with resources. The quicker we do this, the lower the cost will be. Any improvement at all in lifestyle for our grandchildren will take much more thoughtful behavior from political leaders and more restraint from everyone. Rapid growth is not ours by divine right; it is not even mathematically possible over a sustained period. Our goal should be to get everyone out of abject poverty, even if it necessitates some income redistribution. Because we have way overstepped sustainable levels, the greatest challenge will be in redesigning lifestyles to emphasize quality of life while quantitatively reducing our demand levels. A lower population would help. Just to start you off, I offer Exhibit 1: the world’s population growth. X marks the spot where Malthus wrote his defining work. Y marks my entry into the world. What a surge in population has occurred since then! Such compound growth cannot continue with finite resources. Along the way, you are certain to have a paradigm shift. And, increasingly, it looks like this is it!

Malthus and Hydrocarbons

Malthus’ writing in 1798 was accurate in describing the past – the whole multi-million year development of our species. For the past 150,000 years or so, our species has lived, pushed up to the very limits of the available food supply. A good rainy season, and food is plentiful and births are plentiful. A few tough years, and the population shrinks way back. It seems likely, in fact, that our species came close to extinction at least once and perhaps several times. This complete link between population and food supply was noted by Malthus, who also noticed that we have been blessed, or cursed, like most other mammals, with a hugely redundant ability to breed. When bamboo blooms in parts of India every 30 years or so, it produces a huge increase in protein, and the rat population – even more blessed than we in this respect – apparently explodes to many times its normal population; then as the bamboo’s protein bounty is exhausted, the rat population implodes again, but not before exhibiting a great determination to stay alive, reflected in the pillaging of the neighboring villages of everything edible. What hydrocarbons are doing to us is very similar. For a small window of time, about 250 years (starting, ironically, just in time to make Malthus’ predictions based on the past look ridiculously pessimistic), from 1800 to, say, 2050, hydrocarbons partially removed the barriers to rapid population growth, wealth, and scientific progress. World population will have shot up from 1 to at least 8, and possibly 11, billion in this window, and the average per capita income in developed countries has already increased perhaps a hundred-fold (from $400 a year to $40,000). Give or take.

As I wrote three years ago, this growth process accelerated as time passed. Britain, leading the charge, doubled her wealth in a then unheard of 100 years. Germany, starting later, did it in 80 years, and so on until Japan in the 20th century doubled in 20 years, followed by South Korea in 15. But Japan had only 80 million people and South Korea 20 million back then. Starting quite recently, say, as the Japanese surge ended 21 years ago, China, with nearly 1.3 billion people today, started to double every 10 years, or even less. India was soon to join the charge and now, officially, 2.5 billion people in just these two countries – 2.5 times the planet’s entire population in Malthus’ time – have been growing their GDP at a level last year of over 8%. This, together with a broad-based acceleration of growth in smaller, developing countries has changed the world. In no way is this effect more profound than on the demand for resources. If I am right in this assumption, then when our finite resources are on their downward slope, the hydrocarbon-fed population will be left far above its sustainable level; that is, far beyond the Earth’s carrying capacity. How we deal with this unsustainable surge in demand and not just “peak oil,” but “peak everything,” is going to be the greatest challenge facing our species. But whether we rise to the occasion or not, there will be some great fortunes made along the way in finite resources and resource efficiency, and it would be sensible to participate.

[-] 2 points by DKAtoday (28443) from Coon Rapids, MN 2 years ago

Some of the text in your comment runs off of the screen. This happens a lot with pasted articles. If you hit the edit button you can back-space that altered text towards the left margin. When you have done this to the two sections of text they will take on the same font as the rest of your comment and will be on the screen and the scroll bar will disappear.

[-] 1 points by JadedCitizen (4277) 2 years ago

Why would anyone stinkle that comment? Here....I'm giving you a twinkle for being a good neighborly sort of person and sharing your knowledge.

[-] 1 points by DKAtoday (28443) from Coon Rapids, MN 2 years ago

I for some reason am a favorite target of the forum attackers. Don't be seen to associate with me as they will also attack you.

[-] 1 points by JadedCitizen (4277) 2 years ago

It must be bling envy (9205).

[-] 1 points by DKAtoday (28443) from Coon Rapids, MN 2 years ago

HahahaaaaAhhahaha.... for a couple of them - yes very much so as they bring it up constantly.....but it is also part of their round about way of trying to discredit me.

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

got post scroll issues

[-] 1 points by flip (6786) 2 years ago

not sure what you mean but you might want to look into this - we have a coming shit storm and nobody wants to face it. oil is $85 a barrel with the world in recession - it was in the neighborhood of $20 in the late 90's and early 00's. if you look at other commodities you will see the same problem - the low hanging fruit has been picked and now takes much more energy to get at the energy or most other raw materials. that is why we are drilling for oil 3 miles below the ocean and 2 more miles below the sea bed!

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

there is a sideways scroll bar in the post above

[-] -2 points by shadzworth (-394) 2 years ago

Why we're having to drill in inconvenient and more dangerous places in part are because of the ridicules environmental regulations and restrictions put upon us by your buddy Barry and his bitch at the EPA,Val the Gestapo Gal. They make it impossible to drill practically any place.

[-] 2 points by flip (6786) 2 years ago

you need to read up on the subject a bit more

[-] -1 points by shadzworth (-394) 2 years ago

Actually no,what I've stated is correct.

[-] 1 points by flip (6786) 2 years ago

really - so what do you know about saudi oil production (they are the big dog as i am sure you know) - do they have excess capacity. and what would that mean for world oil since it is a world commodity. oil is $85 a barrel with the world in recession - what do you think it might be if we recover? how about brazil's oil - how far down is it. and all this oil in the states is where - in the rockies - the gulf or off the shore of california? now also you can tell me how much it is costing to get a barrel of oil out of the ground these days - not like the old days in texas when you could put a stick in the ground and get it. tell me what you know!

[-] 0 points by Krowell (-69) 2 years ago

The shift to nat gas is already happening. Jeremy Grantham is wrong more than he is right.

[-] 1 points by flip (6786) 2 years ago

time will tell - nobody knows the future - you included - seems to me to be a bad bet though - i will be happy if you are right but personally trying to make the safe play