How Fish Use Energy Teaches True Oil Economics
Charlie Hall, the outspoken ecologist who charges that neoclassical economists largely write fairy tales, is having a good day in Puerto Rico. The sun is shining and girls in bikinis are walking down the beach.
But Hall, as usual, is thinking about how surplus energy makes the world go around and why the U.S. economy is faltering.
Now Hall, a 68-year-old New England born professor with a gift for plain speaking, has made a name for himself by championing a revolutionary idea known as energy return on energy invested (EROI). Every plant, animal and human civilization lives by EROI.
The law isn't rocket science. Whenever a salmon, bear, lodgepole or Dow Jones company spends more energy on an activity than they get back, death follows. Or in corporate terms, debt builds and things fall apart.
While studying migrating fish in the U.S. eastern seaboard and juvenile salmon in Nanaimo, B.C., 40 years ago, Hall derived and got obsessed with the idea.
At the time he discovered that 27 species of fish in North Carolina's New Hope Creek would spend a considerable amount of energy to migrate upstream. This great swim guaranteed their offspring a rich nursery where the young wouldn't have to spend so many calories trying to find food. In fact parents of all species behave much like these temperate fish.
These novel fish studies convinced Hall that the world revolves around surplus energy: "Everything in life is about energy costs and energy gains." (In Hall's line of thinking, the best advice a parent can ever give a child is strictly fishy: invest your energy wisely.)
Puzzling picture of oil drilling
After his fish energy studies Hall, a student of the great ecologist Howard Odum, started thinking about energy gains in the oil patch in the early 1980s. He wondered if the industry experienced that same sort of declining returns over time that dogged the world's fisheries. As ships, nets and quantity of oil burned got larger, the protein returns per unit of energy invested shrank dramatically.
Cutler Cleveland, then a muscular undergraduate and now an energy brain in his own right, investigated and came up with a puzzling graph.
It was N shaped and showed energy gains for oil going up and down like a yo-yo. "The yield per foot of drilling would reach a minimum and then jump back up, then down even more sharply." Hall then asked Cleveland to add the number of feet drilled per year and then the graph showed a dramatic decline over time. "It was just like the fisheries."
The Wall Street Journal reported on the findings with a headline that declared "Increased Drilling for Oil May Consume More Energy Than It Gleans." Like most of the media it then forgot all about EROI.
"Politicians who say, 'Drill, baby, drill' have their head up their asses," adds Hall. "You don't get more oil by drilling more. You just get less efficient returns. You only get more oil by drilling thoughtfully."
But Hall's EROI work (and that of students and colleagues) unsettled the energy status quo. "We never got any money to do this," he reflects. "It all happened on weekends or pro bono. No government agency is interested in the information. Most science, to be honest, promises some form of candy. EROI doesn't do that and we don't do that."
Steep decline in energy returns
In a new analysis for Sustainability Journal (along with 19 other papers on EROI) Hall spells out how steep the decline in energy returns has become in the oil industry. The trend almost looks as dismal as catches for the wild salmon fishery.
In 1919 petrolistas got marvelous EROI returns for finding oil at 300 to one. (It simple terms, it took but one barrel to find 300 more, yielding perhaps the greatest energy surplus and capital gains in human history.) Today that EROI has dropped as low as five or three to one.
The energy returns for producing oil are plummeting too. In 1919 they hovered around 20 to one and then rose to 30 to one during the age of big oil field discoveries in the 1960s. Now they've declined to 10 to one. "Society is now living on old oil fields and we're spending more energy to find less and less energy," says Hall. Moreover North America has built a society dependent on energy returns higher than 10.
Given such grim declines, industry is exploiting ever more extreme and difficult resources (from the tar sands to Arctic oil). (Or it burns more oil to create ethanol from corn than ethanol's net return.) Yet these high-priced fuels deliver less and cost more in terms of water, land and capital. (Oil analyst Peter Tertzakian calculates that the energy-eating tar sands, for example, offer returns of seven to one for raw bitumen which drop to three to one once the junk crude has been upgraded and refined into gasoline.)
Neoclassical economists, of course, reply that technology and markets will magically overcome depletion and even resolve dramatic losses in energy gains, the heartbeat of every civilization.
But Hall says that's bunk. He argues that economics -- which is currently touted as a social science, is really about "stuff" and how people change the natural world to get stuff. Not surprisingly, he wants to reconnect economics with the reality of resource depletion, and has started a whole new school of thinking called biophysical economics. (He's even written a provocative book on the subject: Energy and the Wealth of Nations.)
How can you capture more surplus energy from a resource that is increasingly getting more costly to produce with lower and lower energy returns? asks Hall.
He also notes that neo-classical economic thinking is pretty much a byproduct of hugely increased oil consumption. Prior to the petroleum age, which begin in the late 1850s, and didn't start galloping along until the 1900s, people mostly lived on farms and thought a lot about work, muscle and effort all the time. As a consequence, earlier "classical" economists wrote about limits, scarcity and prudence.
But oil seemingly banished these conservative deliberations. Fossil fuels returned such extraordinary energy surpluses and so much easy wealth that economists got dumb and stupid. They even dropped land, resources and energy from their models and equations. Thanks to oil they became a faith-based group that worshipped markets. Or as Hall puts it, "The abundance of oil allowed them not to think about energy."
EROI, however, explains a lot of dismal realties. On an island like Puerto Rico, where Hall has studied energy returns in the rain forest for years, the importance of EROI rolls sharply into focus.
Before the advent of oil, the island was a poor and hard-working village that sacrificed its forests for calories. But after oil and Operation Bootstrap, well, Puerto Rico became an industrial marvel in the Caribbean. Thirty per cent of its forests promptly grew back.
Now that the price of oil has reached $100 a barrel, and given that most of the island's power is generated by oil-fired generators, Hall wonders if the clock won't turn back. "I'm beginning to wonder when energy becomes less available if the same parameters that drove Puerto Rico development will have to be run backwards."
Why the US is in decline
Hall also thinks that EROI explains the damnable predicament of the United States. The world's first petro state, a resplendent creation, dazzled the planet with energy returns of 300 to one. But now the nation's energy jazz has shrunk and sputtered with returns of 10 to one or less.
"I have seen the future and it's here. Do you get what I'm saying?" says Hall. "Everywhere you turn in the United States you see economic constriction. About 46 of 50 states are broke. Our universities are broke. All the Tea Partiers are bent out of shape by the national debt. The country just can't do a lot of the things that it used to do. We have had no increase in GDP and no increase in energy use for six years. And that's not a coincidence."
Hall doesn't see another future of exponential growth in the cards either. The U.S. economy will either hover around no growth or barely exceed one per cent. The nation that got the world hooked on oil culture, Chicago school economics and cheap stuff has simply peaked and spent all of its cheap energy returns.
"We are sitting around waiting for growth to happen," says Hall. But like fishermen waiting for another catch, the nets are coming up empty and the big boats are spending more fuel to chase smaller fish or the ghosts of fish.
Now being a good ecologist, Hall doesn't think that EROI should necessarily become the only scientific tool for decision-making. But he thinks it's one critical and important idea that regulators and policy makers need to ponder.
Before building more wind farms or digging more bitumen mines or polluting more groundwater for shale gas, policy makers need to ask what they are sacrificing for energy as well as what the real energy costs and gains will be.
Given the declining returns for difficult oil and shale gas, as well as low EROIs for most green alternatives (solar is moving up), Hall predicts that EROI will shape our lives in the days ahead as much as the fish he studied in New Hope Creek.
Not so long ago the biologist stood in the middle of Puerto Rico's Luquillo Experimental Forest and talked about the importance of energy costs and gains for the Discovery channel. What works in a rainforest, he told viewers, also works for civilized society and empires based on oil.