“The most powerful force in the universe is compound interest”

I am not writing about compound interest alone, but about compound growth in general

Any rate of growth produces an associated doubling period. At 3% for example something will double in 23.3 years. If oil production is growing at 3% and starts at 20 million barrels per day than at the end of 23.3 years oil will be flowing out of the ground at the rate of 40 million barrels per day.

But the reverse is also true. If oil production is declining at 3% per year, then in 23.3 years, oil production will be cut in half, so if you are producing 40 million barrels per day in year one, then 23.3 years in the future you will only be producing 20 million barrels per day. So when the rate of growth is negative there is an associated halving period.

One thing you can say about rates of growth is that they are progressively more difficult to maintain. This is because each new doubling period adds on an amount equal to all previous doubling periods. Start at 2 and you must add 2 to double that to 4; Then to double 4 you must add another 4, an amount equal to the sum of all prior additions. This is why the plot of a positive growth curve looks like a hockey stick, where eventually the curve goes almost vertical.

When it comes to something like oil production, this becomes a huge problem, simply because you are looking a a finite resource. And of course, the "low hanging fruit" principle applies; the first oil that was found was the easiest to find; bigger fields were easier to find that smaller ones; shallow pools were easier to find that deeper ones; local fields were more easy to find than remote ones.

So here is the future, and it is based on the growth curve of oil.

First the nearly invisible part. It takes a certain amount of energy to find, drill, pump, transport, and refine oil. Back in the 1930's it took only about 1% of a barrel of oil of these energy costs to get back 1 barrel. As it turns out this cost was growing at near 3.5% per year (a 20 year doubling period), but nobody noticed; who could see the effect of 1% doubling to 2%, since instead of having 99% profit you had 98%. And the next 20 years brought cost up to 4%, but still nobody really noticed because you still had 96% profit, a huge amount. The progression is 2, 4, 8 16, 32, 64, and then 100 because you can't go past 100% cost since that would mean that you spent more energy than you got back. So when is that 100% reached? Probably sometime around the middle of the 21st century (2050 to 2070), but the oil industry will collapse before absolute zero is reached. When oil companies say the era of cheap oil is over, this is what they are talking about without telling you the full implications.

The second growth curve of importance is the total daily oil production. As it turns out oil production curves have been studied by oil companies as early as the 1950's and the known curve is bell shaped. If you plot the production of an oil field from the first drop that is produced until the last drop is produced the plot takes the shape of a bell curve. The rate of production is not constant. It has long been known that world oil production would eventually reach the top of this curve and then begin to decline, but the exact date and the exact amount of production at peak was not known. What is known is that we are approximately at that point today.

Once world production begins to decline we will enter the period when production relentlessly halves, and then halves again. And consider that the first halving period will cut oil production by the largest absolute amount of all subsequent halving periods, simply because what will be cut in half during that first period of decline will be the highest level of production ever reached.

If we reached production of conventional oil at 74.8 million barrels per day last July, 2008, then, depending on the actual rate of decline than production will fall to 1/2 of that, in my opinion, over less than the ensuing 20 years. And during that time frame the cost of what is produced will double. Use you imagination to conclude what this will do to the 6.5 billion world population hopelessly dependent on this production to provide them the necessities of life.

Of course there are wrinkles. It is my view that the house of cards monetary system that has begun to collapse was triggered by the our approach to peak oil production and the progressively increasing cost of acquiring oil. Of course the debt bubble at the base of the monetary system had its own unsustainable compound growth curve which made it easy to be triggered into collapse.

Of course demand for oil is off currently as a result of the economic contraction. We still are pumping oil out of the existing fields, but efforts to acquire more oil are on hold because of the sharp drop in oil prices and because of the credit crisis, so we are replacing depleting reserves at an even more inadequate rate than before the panic.

When the debt bubble finally washes out and the economy begins to recover there will be inadequate flows of oil to fuel the recovery, and we will be faced with even further contraction of the economic pie as a result. The depression will not end. The economic pie in the US could be 1/4 of what it is today by 2030. How many can survive on 1/4 of the income they now have?

I conclude that the future is indeed bleak. Civil war in the US in my view is almost certain. Massive starvation, failure of the electric grid, failure of water systems, failure of sewerage systems, failure of factory farms, failure of delivery systems, failure of just about everything. Mad Max +++.

It is all in the numbers; the magic of positive compound growth, and the devastation of compound negative growth.

As for solutions; none are adequate, and there is not near enough energy left to implement even the least inadequate ones.

Mispost

but if you do not know what the most powerful power in the universe is, you need to keep looking. Oh, and don't waste your time looking in physics books. If you sincerely look, you will find your answer.

Compound interest isn't the problem, or even a problem.

Hopefully you all understand what the problem actually is.

From a guy that helped invent a device that's killed hundreds of thousands that's really deep.

Don't you get sick of Einstein and all of his gibberish?

Like,

Q: How will the next war be fought?

Einstein: I don't know, but, the one after that will be fought with sticks and stones.

ago told me almost the same thing. She knew all about it thought it was amazing.