[CAMWEST-discuss] Future economic challenges

Danny Hannan danny_hannan at yahoo.com
Thu Jul 29 04:53:15 UTC 2021

G'day all,Appart from the obvious government deficit and debt, corporate and private debt there are multiple challenges not so obvious facing us.

Issues facing future economic challenges

There are multiple issues that will challenge futureeconomic growth:

§               Energy supply

§               Global Warming

§               COVID 19

§               Climate change actions by other countries
EnergyAs you may be aware I and many others far better qualified thanI am have warned of global peak oil production. Peak coal production is also an issue, between the two they supply over60% of global primary energy.  Both oiland coal have already past the peak energy of production in that the “energyreturned on the energy invested” (EROEI) is falling rapidly for both.
While some uninformed commentators say it is just a matterof supply and demand, the accurate statement should be:  “Supply will meet the demand that has theability to pay.”  The ability to pay is thecrux of the matter.  For energycommodities it is far more complex. Energy is valued for the work that it will do.  Once the cost of the energy exceeds about 10%of the value of the work; the economics are no longer viable.  Australia is particularly vulnerabledue to rapidly declining local oil production, the high dependency; on roadtransport, imported liquid fuels, and a low Australian dollar.

The future profitability of large centralised powergenerators of any fuel source is bleak. The rapid expansion of photovoltaics and now batteries means thatresidential and commercial power demand can be managed more cheaply than newgrid power.  The future is distributedrenewable power and storage with the possibility of small modular nuclear reactorsto power electricity hungry industries, such as metal smelters.

The electrification of energy supplies requires about atripling of current electricity resources but the essential industrial metalsare not only in short supply but global average ore bodies are at such lowconcentrations that the energy demand for refining the metals is climbingrapidly.

While global coal production is on a plateau, oil is wellinto the peak of production and prices will rise rapidly as economic activityexpands after COVID this decade.  Themarginal supply determines the price of oil; the marginal supply is the highestcost oil which furnishes the final percentages of demand.
Global WarmingGlobal warming is a result of long lived greenhouse gases inthe atmosphere, the main gas being carbon dioxide.  Carbon dioxide level in the atmosphere hasrisen from below 300 parts per million before 1900 to 420 ppm this year.  With the understanding of radiating blackbodies, that was mathematically described by Max Plank in 1900.  Models for global warming were firstdeveloped in 1890 and 1924 that are still useful today.
The only years that fossil fuel consumption did not increasewere 2009 with the GFC and 2020 with COVID 19. For every tonne of fossil fuel that is burned (from 2.75 tonnes formethane up to 3.5 tonnes for anthracite) about 3 tonnes of carbon dioxide isreleased into the atmosphere.  In 2019global consumption of oil was 4,422,700,000 tonnes in 2020 4,006,700,000tonnes.  Global coal production for 2019was 8,133,400,000 tonnes and for 2020 7,431,600,000 tonnes.  The carbon dioxide emission calculated fromthe stated consumption of fossil fuel far outstrips the stated carbon dioxideemissions.  For Australia the calculatedemissions from the stated fossil fuel consumption is 3 times the government statedemissions and when fossil fuel exports are added; Australia contributes over10% of emissions calculated from the stated global fossil fuels consumption.

Data from the BOM and CSIRO show as a direct result ofglobal warming Australiasouth of the Tropic of Capricorn is losing rainfall at a rate of about 13% perdecade.

Agricultural production is dependent on two things; waterand energy.  Energy is 95% the cost ofagricultural production and oil supplies about 75% of that energy.  That doesn’t count the cost of other morefrequent severe weather; cyclones, floods, droughts and wild fires that arealso a direct result of global warming. We have already seen the economic devastation of Cape Town in South Africa when a city runs out of water.
COVIDCOVID 19 has been circulating since late 2019; in less than2 years four, more infectious variants have been identified.  With the high populations of Southeast Asianow being infected more virulent, more infectious strains of the virus shouldbe expected, maybe even strains that are unaffected by the current vaccines.
Climate Change action by other countriesThe European Union is already threatening taxes or tariffson imports that have no carbon costs or taxes imposed.  This is likely to spread as global warmingcauses more disasters and economic damage. Australia’sexports are very vulnerable to these tariffs. Australia should levyits own fossil fuel excises so that taxes are collected in and for Australia and notin other countries.

danny_hannan at yahoo.com
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