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Running out of oil

Aha! They say. When you performed your food calculations you assumed that oil will be plentiful, and this is not the case at all.

Let's go back and recap. Oil is used in vast quantities to farm and to manufacture fertilizers. Without them, current mechanized agriculture would not be possible. We all know that we already passed Peak Oil (if you are interested in knowing the details, go to Wikipedia and search for "Peak Oil"). For the depressing picture, see the graph below.



Peak Oil

This is true. From now on oil will only become scarcer and more expensive. But let's do some calculations.

The most wasteful country on earth in terms of energy conversion into food is by far North America, or specifically the US. It is estimated that it takes about 10 barrels of oil to feed one US citizen per year.

Now, the World-Wide oil production is about 85 million barrels a day or 31025 millions of barrels a year or about 31 billion barrels a year.

If we have a population of 7 billion people and we use the worst case scenario, they will each consume 10 barrels a year or 70 billion barrels. But the entire production of crude is only 31 billion!!! And so, if every country in the world would use the same amount of oil than the US does, we would need more than double oil productivity. Alas, this is not necessary.

From the graph of food above, we can see that the world managed to produce more than sufficient food to feed every person on the planet, within the current oil production with oil to spare for everything else. The moral of the story is that the US is indeed the most wasteful country on earth, but beyond that, it is clear that it is not necessary to follow US's road to feed the world. This is a fact, not a speculation.

Beyond this fact, it is also clear that oil consumption has been going up and up and up. It's clear that food production is a side effect of oil consumption. If oil would to disappear tomorrow, the vast majority of the population would die of starvation. This is another fact. Yet, it is a farfetched fact.

The truth is that oil is just a product, and not an irreplaceable one at that. Food dependency from oil can be reduced to almost nothing, and it has been done at large scales (for example in Cuba). To this we can add organic growth, local growth, new GMO's, biofuels, new reprocessing methods, local consumption, etc.

The bottom line is this. Oil is not necessary at all. What is necessary is energy. As long as one has sufficient cheap energy, we can convert almost any molecule into anything else. This is not magic; it is plain chemistry and biochemistry, and not even a sophisticated type at that.

The problem is that oil gave us cheap energy, not that oil is irreplaceable. The solution to Peak Oil is not oil substitutes, but cheap energy substitutes. There are many such substitutes, such as atomic energy or zero point energy or bio-solar and many others. Some sources of energy convert light into organic oil-like substances (for example algae) while others generate electricity.

The point is that as oil is depleted a vast array of new sources of energy and a gigantic mixed bag of solutions will show up. All those things that during the primacy of oil were not economically viable will suddenly become viable. There is no reason whatsoever to believe that over the next 60 years none of these solutions will be realized. Of course! they will. There is money to be made and this will drive innovation.

There is no reason to believe that food production will suddenly drop in the charts. Its processes will simply be replaced by other processes. Slowly and relentlessly. The world will change as it has done ever since the first human stepped on it. This is nothing new. Sure, we are running out of oil, so what?

Planners think in planning terms and so does the government. Politicians and bureaucrats think in terms of a single supplier who will "fix" the problem, hence their obsession with a single solution. Do we have an energy crisis? Quick! Get as many nuclear reactors on-line as fast as possible. There! Problem solved!

It goes without saying that this is astronomically stupid. A single decision point can never achieve what a free market can. Think millions of people seeking solutions to problems (for a reasonable price). Think distributed solutions. Think symbiosis of market suppliers. This is the real solution, not a bunch of bureaucrats hiding in "think tanks" and dreaming up stuff.

Of course! the free market will not provide a solution, it will provide a myriad of solutions. The only question is, will governments allow it to operate sufficiently before is too late? We think so. Politicians are vote maximizers and having people hungry is not good at election time.

Well… no risk here either.

Running out of wealth

This is true. Are we running out of wealth? Sure. You may remember our article The Year The World Defaulted. Unfortunately, this wealth deficit is not due to higher consumerism, but due to politician's borrow-and-spend policies which are utterly out of control and without any practical purpose of restraining them. Lack of wealth is squarely a government problem, not a population problem. This is simple to prove. Take a look at the following graph depicting the world GDP and ignoring debt. These are the riches that people create, even against government regulations that hamper free markets at all levels and at all times. Impressive, isn't it?

World GDP

It is also to be noted that the increase of wealth is exponential in nature (not linear). This means that the creation of wealth is accelerating over time (it's speed is increasing) even beyond the linear population growth model. We are all becoming richer faster!

Well… no risk here either.

That's basically it

Sure, we could add another 20 or 30 parts to this article, analyzing in detail all the other things that planners accuse world population of, but what for? We have already covered all the basics and everything else pretty much depend of these basics and we still see no major risk!


The socialist view

The problem with the scary population growth scenario is that it is being looked up, again, from a socialistic point of view. For socialists, the size of the pie is fixed. We only have so much stuff we can distribute and therefore the growth potential is limited. Socialists look at people as consumers, while the government is the producer through its policies. As such, they believe that the maximum amount of goods and services that can be produced depends upon planning.

This limit is imposed by their capacity for planning which is, to say the least, dismal. If it's not planned, it does not exist. In other words, if we choose to ignore it, it does not exist. To an extent they are right, because the effect of "ignoring" this "other" stuff (which we will address below) is to constrain it and limit it too! It is a self-fulfilling prophecy. In this respect, we truly are headed for a disaster of gigantic proportions, population-wise.

We do have a gigantic risk here but it has nothing to do with population.

The free market view

Free markets, on the other hand, operate on the basis of entrepreneurs. They are the secret weapon that socialist do not have because they choose not to see them, to ignore them. Entrepreneurs are the true human engine of the economy. It is these people who strive to fulfill customer's needs by taking risks. We, on the other hand, count with them not because they are some sort of mythological creature, but because it is in human nature. We are all entrepreneurs to a degree or other. It is impossible not to be an entrepreneur because it is impossible not to be selfish. Entrepreneurs do not act based on social planning or political considerations; they act based on the desire to obtain personal gain. The only snag in the process is that in order for them to get what they want, they need to give us (the customers) what we want. Voila! A win-win scenario.

For free market advocates, it is clear that the more entrepreneurs there is, the greater the productive level. This means that the higher the population, the greater the amount of goods and services! In a free market people are consumers but they are also producers! There is a natural and constant balance of this process. So paradoxically enough, the more people there is, the more we can sustain!

For entrepreneurs population growth is just another opportunity to make money. The only real question is this: will politicians allow entrepreneurs to operate sufficiently freely to avoid disaster? Our forecast is again yes… strangely enough, because of the selfishness of politicians! How about that!

Well… no risk here either.

Science and technology

One of the standard arguments for planning is that science and technology cannot solve everything. In absolute terms, this is correct. Science and technology are not absolute religions that can provide absolute truths and solutions; they are disciplines that strive to provide the best possible model of reality (for a longwinded explanation see What Is Science And How It Works). Today. Tomorrow, it will come up with something better. As such, it will indeed create faulty models, but these models will solve the current problems. Future models will solve future problems.

Consider this simple example. Up to 1800 the horse was the primary engine driving transportation within cities. The only problem it had was that it produced enormous amounts of by-products (i.e. caca). The amount of manure produced was so immense, that large cities such as London were at the brink of collapsing. The accumulation of horse shit was so large that it began to block streets; not to mention the enormous health hazard that it presented. City dwellers had only two choices: starvation or being buried under a growing pile of caca. Yet, somehow this problem was solved. How did science and technology do it? By inventing the internal combustion engine and with it the car. Sure, cars created air pollution, but this pollution was orders of magnitude less toxic and dangerous than mountains of horse shit. Did planners solve this problem? No. Engineers did.

Science and technology cannot be "planned". It can only be directed to a degree. However, in so doing we are again in the same spot as we were before with trying to "manage" the economy. Science and technology are doing just fine by themselves (i.e. they are optimized). Any interference with their workings will produce less progress. This is so for two reasons:

  1. Scientists and engineers are entrepreneurs. Most scientific and technological innovations are created by either lonely people working alone or small teams. It is the drive of these people that creates science and technology, not planning.
  2. Science and technology depend on serendipity. Discoveries and innovations that are pretty much useless today become critical in the future. The fact is that it simply not possible to predict today what will we need in the future in terms of new information. We may know what we will need in general terms e.g. more food, but we have no idea today what scientific discovery will be instrumental to produce it. If you enjoy watching TV, we encourage you to watch the -somehow outdated- series titled "The day the universe changed" by James Burke (and yes, you can also look it up in Wikipedia). This series very elegantly points out the random links between critical discoveries and innovations and seemingly useless ones.

This fact is easy to corroborate historically, just compare the technological advances of communist versus capitalist countries (for example see Dear Leader). There is no comparison. In the former, science and technology are planned, hence lagging severely; in the latter they are less planned hence growing much faster.

As a matter of fact, it is estimated that the amount of scientific information doubles every nine years! This is far, far faster than either the linear or compensated population growth models.

Well… no risk here either.

Note: please see the Glossary if you are unfamiliar with certain words.

Continue to Overpopulation for the masses - Part 3


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