Energy decline and the growth of destitution
November 13th, 2007 by Jim JustStoneleigh at The Oil Drum: Canada, in the second of a two-part post, looks at what a 30% energy available to the world by 2050 might mean for countries around the world.
The picture is dramatically complicated by the fact that the world will be forced to transition from an energy economy largely based on fuels (oil and natural gas) to one based primarily on electricity generated from a variety of sources. In addition, most of the world’s population growth in that time will occur in the energy-poor and economically-poor developing world.
The distribution and extent of wealth and poverty over the next half century can be seen as a function of the change in per capita GDP, driven by changes in the energy supply and national populations.
Economic models predict that a 1% increase in energy inputs results in about a 0.7% increase in GDP on average. This implies that a reduction of 1% in energy will cause a corresponding 0.7% drop in GDP. So if the world’s oil supply were to decline by 30% the global GDP would lose 23% of its value. National energy budgets and GDP impacts can be roughly estimated, using the same methodology.
His research revealed profound economic and demographic changes that will affect the nations of the world over the next four or five decades. There will be winners and losers.
The interesting thing about the winners is that the size of the group has barely changed, and while their GDP has declined, it has not gone down by much. The average per capita GDP has dropped by about 30%, mostly driven by the decline in the United States. While this drop will be noticeable, given the high level of income that exists today it will not be beyond peoples’ means to accommodate. It’s a very different story for those nations on the bottom of the ladder.