The maths of the oil crunch

A simple understanding of compound interest is all that is needed to see that past predictions of growth where the pipe dreams of economists and financial engineers

 

Take a chess board and put one unit on the first square, 2 on the second and 4 on the third and continue doubling up. The time to each doubling is 70 divided by the rate of growth i.e. 7%/annum is equal to 10 years.

 

Add the squares together 1+2+4 = 7 i.e. the sum of all previous doublings is less than the value on the next square – 8

 

Oil was first commercially exploited in 1859 and we are now at around 30 billion barrels/year and on the 32nd square. At the present rate of growth, ignoring aviation rates, we will need more oil in the next 20+ years than in the previous 150!

 

Even if this amount of oil exists, finding, extracting and applying unknown technologies to turn the poor quality, heavy, and polluted crude we obtain into useable product is clearly not possible on this time scale.

 

And that’s without the climate crisis and the fact that we need a fair amount of the remaining oil to create a low carbon economy.

 

Now create a Google alert for ‘Oil Supply’ and watch the world unravel.

Advertisements

6 comments

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s