National Health, Wealth, and Energy Use

Abstract

This paper (SPE 56011) was revised for publication from paper SPE 52942, prepared for the 1999 SPE Hydrocarbon Economics and Evaluation Symposium held in Dallas, 20–23 March. Original manuscript received 1 February 1999. This paper has not been peer reviewed. Summary Great disparity exists in the distribution of wealth among nations. National well-being, as measured by such commonly accepted indicators as infant mortality, child malnutrition, life expectancy, and literacy rates correlates well with national wealth, which, in turn, correlates well with energy consumption. Developed industrial nations rank high in national well-being; however, on a per-capita basis, these nations own a disproportionate share of world wealth and consume a disproportionate share of the world's energy. Economic growth correlates well with growth of energy consumption in both rich and poor nations, and, conversely, reductions in energy consumption correlate with economic decline. When energy consumption is expressed as a function of gross national product (GNP) instead of on a per-capita basis, developed nations use energy more efficiently than poorer ones. Fossil fuels furnish 90% of the world's energy (oil and gas supply 63%), and their use has grown by 14% over the last decade (oil and gas use is up 19%). Long-range concerns about depleting fossil-fuel resources and more immediate concerns about increases in atmospheric CO2 produced by their combustion and the postulated ill effects of global warming weigh against continued increase in use of fossil fuels and favor alternative energy sources. Examination of alternatives suggests that none of the alternatives, other than possibly nuclear and hydropower (both in environmental and political disfavor), offer hope for supplying more than a fraction of demand. Hence, either the natural limits on use of fossil fuels set by depleting resources or the setting of artificial limits in an effort to control CO2 emissions (tentatively agreed to in Kyoto and Buenos Aires) contrast starkly with the need for more energy consumption to improve the economic development of all nations and particularly the poorer ones. This paper explores these relationships and identifies some of the hard choices that lie ahead that inevitably will impact the use of oil and gas. Introduction For many millennia, the world's energy was supplied by wood, wind, water, and the muscle power of man and animal or, in today's lexicon, "renewable" energy. Life, worldwide, was little better than Ashton's evocative description, "There are…men and women, plague-ridden and hungry, living lives little better, to outward appearance, than those of the cattle that toil with them by day and share their places of sleep by night." 1 The earliest sustained use of fossil fuel started in 1233 with coal from Newcastle, England. Chronic shortages and high costs of firewood for cooking and heating drove the use of coal in England upward during the next 500 years, from 33,000 tons in 1564, to 529,000 tons in 1658, and to 6 million tons in 1770 in the early stages of the Industrial Revolution. Rapid growth of coal-fired steam boilers further escalated coal consumption to 84 million tons in 1861 and to a peak of 287 million tons in 1913. Concurrently, Great Britain's national wealth, or GNP, grew at a rate twice as fast as population from 1801 to 1911, because of the huge increases in productivity that steam power provided.1 The Industrial Revolution quickly spread to Continental Europe and North America. Coal was largely displaced by oil in the first half of the 20th Century as huge gains in both economic and physical well-being were experienced in all industrialized nations. Meanwhile, world population grew from approximately 0.75 billion in 1750, to 2 billion by 1930, and to 4 billion by 1975. It is approaching 6 billion as the century ends. Air pollution from burning of fossil fuels was recognized as a problem centuries ago. "Smog" from coal used for heating and cooking was reported in London as early as 1285, and a resident was actually tried and executed in 1306 for burning soft coal, possibly one of the earliest, and most severe, penalties for pollution. In the second half of the 20th Century, awareness of "near-ground-level" air pollution from fossil fuels evolved (with the application of technology) into remarkably clean exhaust gases from automobiles and from smokestacks of coal-fired electric-power plants. As the century closes, however, a new concern has emerged: the postulated ill effects of global warming induced by CO2 emissions. Today, governments are considering limiting the use of fossil fuels. Variations in Wealth Among Nations National wealth is traditionally measured by GNP, the total value of all goods and services produced. [GNP is gross domestic product (GDP)] plus net factor income received from or paid to the rest of the world. Factor income consists primarily of dividends and interest received by a nation's residents; reinvested earnings of foreign affiliates of a nation's corporations minus payments to foreign residents of interest and dividends; and reinvested earnings of affiliates of foreign corporations. For most countries, the difference between GDP—the total output of goods and services produced by a nation's labor and property valued at market prices—and GNP is less than 1 or 2%.] Per-capita GNP is a more useful measure for comparison of relative wealth among nations. These data are routinely available in Organization for Economic Co-operation and Development (OECD) and World Bank publications.2,3