The Industrial Revolution took place in two very distinct stages. The first stage began around 1770 and, by 1900, approximately 44 Gigatonnes of energy-related carbon dioxide had been released into the atmosphere. The second stage began in 1900 and by 2016 approximately 1,300 Gigatonnes of carbon dioxide had been released. This thirtyfold increase in energy-related carbon dioxide during the second stage of the Industrial Revolution was obviously caused by the fossil-fueled internal combustion engines and the power stations which came into existence around 1900. However these fossil-fueled sources of energy have been instrumental in bringing about:

  1. A fivefold increase in the global population, which has been the most rapid increase in the course of history;
  2. A sevenfold increase in the average real income in the developed world. This is the direct result of the enormous increase in individual productivity which began when humans started,
    • to replace hundreds of millions of labourers and horses with machines powered by petrol-fueled and diesel-fueled internal combustion engines. Recently, humankind made a second quantum leap in individual productivity when we deployed robots and computers. This sevenfold increase in average real income compares with a 10% increase during the first stage of the industrial revolution.
    • to build the coal-fired and gas-fired power stations to supply electrical energy to both industry and domestic consumers;
  3. A continuing and potentially disastrous change in global climate.
Adam Smith wrote the Wealth of Nations in 1776 and he should not be faulted for not having foreseen that during the 20th century, humankind would make inconceivable advances in technology that enabled us to harness the energy in fossil fuels and achieve enormous increases in individual productivity. This was unpredictable in 1776 because the first steam-powered locomotive did not appear until 1803; hence Smith had no basis on which to extrapolate into the future. As the transition from the old low-productivity economy to the new energy-dependent, high-productivity economy progressed, machines and then robots and computers relentlessly replaced people. This provided people with both the incentive and the time to engage in research and development which resulted in unprecedented technological progress in every conceivable area from medicine to the exploration of space. Furthermore, considerable transferable technological progress was made during two world wars and the cold war.

Effects of rapid technological progress

Since 1900, humankind has developed everything from aircraft weighing 500 tonnes at take-off and fly 14000km, to Hybrid PET/CT scanners. Interestingly, the first radio programme was broadcast as late as 1920 and today hundreds of millions of people facetime around the world simultaneously! This extremely rapid technological progress,
  1. brought about the expansion and mechanisation of the old industries, namely the agricultural industry, the construction industry, the steel industry and the textile industry.
  2. created entirely new high-technology industries, for example the aerospace industry, the electronic industry, the IT industry, the motor industry, the chemical industry, the pharmaceutical industry etc.
  3. involved the construction of the new infrastructure, namely the highways, the electric power systems, the telecommunication networks, the airports etc.
All of this technology-generated economic progress created highly-productive, highly-paid employment for the hundreds of millions of workers who were being made redundant by the mechanisation of the older industries including agriculture which was the largest industry at the beginning of the last century. It was progress in agriculture which achieved the Green Revolution during the 1950s and 60s which is credited with saving one billion people from starvation. It was progress in both medicine and agriculture which brought about the fivefold increase in the global population, and the greatest increases took place in the third world. The population of Kenya for example was estimated at 3 million in 1920 and it is now over 48 million. This paper simply points out that at the beginning of the second stage of the Industrial Revolution, humankind embarked on the most radical and rapid economic transition ever made in the course of human history. The problem is that this transition is unsustainable without the enormous mechanical energy output of more than a billion newly-invented oil, coal and gas-fuelled machines which have caused atmospheric carbon dioxide to reach 400 parts per million. Recently the World Meteorological Organization (WMO) reported that the past five years have been the hottest on record, the very hottest being 2016. Sea levels have risen due to the rapid melting of polar ice and rains have failed in several regions. The global average surface temperature increased by 1.1˚C between 1906 and 2005 and this has caused the recent unprecedented hurricanes including Hurricane Irma. There are meteorologists who are concerned that runaway global warming has already started. It goes without saying that the second stage of the Industrial Revolution is irreversible and must be sustained by new energy sources because the vast majority of people now reside in cities and earn their living in economic sectors which did not exist before 1900. These people cannot now return to their great grandparents’ employment in agriculture which has been mechanised. By comparison:
  • The first stage of the industrial revolution was sustainable because the relatively small quantity of energy it required was provided by water-wheels, wood and a relatively small amount of coal.
  • Much earlier the gradual transition from hunter-gather to farmer was sustainable because a farmer lived a more ordered life than a hunter-gatherer hence he spent less energy than a hunter-gatherer to obtain the same quantity of food, and then less energy again after he had harnessed bullocks and horses.
There is no way of knowing which will occur first, unprecedented global depression caused by declining oil production for which we are totally unprepared, or climatic catastrophe. We are depending on Carbon Credits to limit the rate at which the planet is warming and failing abysmally. A rhetorical question follows. Consider that a government decides to reduce motor accidents:
  • Should it deter the population from reckless driving by establishing a quota of acceptable accidents per year called Accident Credits, and then tax the general population when this quota is exceeded?
  • Should the government determine the causes of accidents and devise and implement a  plan to eradicate these causes as far as possible?
  • Should it do both of the above?

Do carbon credits solve the problem?

Carbon credits on their own disregard the probem that three kilowatthours of fuel must be burned in a coal-fired power station to provide one kilowatthour of heat at the consumer’s electric heater. The other two kilowatthours of heat flow up the stack at the power station and lost into the atmosphere with approximately 1.2 kg of hot carbon dioxide. If the consumer installed an efficient biomass central-heating system he could obtain this one kilowatthour of heat from 0.6kg of biomass which is carbon-neutral. Carbon credits are no substitute for a strategy or plan, and when one fails to plan, one plans to fail. In fact carbon credits are not merely useless, they are dangerous in exactly the same way as defective brakes or a defective parachute are dangerous! In spite of several Climate Change Conferences at Kyoto, Copenhagen, Mexico, South Africa and Paris the concentration of carbon dioxide continues to increase by 2% per annum except in 2009 when due to the global economic slowdown we released 2% less than in the previous year. This simply confirms that global economic activity is dependent on, and proportional to the consumption of fossil fuel. The following chapter explains exactly why this is so. Although the World Meteorological Organization (WMO) have declared what amounts to a global emergency they did not call upon the United Nations to devise an integrated and comprehensive Global Climate-Energy Strategy based on cost-benefit analysis which first identifies and prioritises the measures to be taken. It would not be difficult to devise such a plan, and clearly the people with the competence to select, develop and deploy the new carbon-neutral energy sources required to sustain this new economic environment are the people who developed the technology which created this environment in the first place. At this very early stage it seems that oil which fuels all of the worlds’ land, sea and air transport will be the most difficult fuel to replace. Nuclear reactors which are already well-established will replace coal-fired and gas-fired generation. Biomass will become the major heating fuel. The overall solution lies in the establishment of an organisation headed by technically competent persons which would obtain global credibility by publishing an authoritative, multi-disciplinary mission statement.

The Human Productivity Multiplier

The writer now introduces a new metric which quantifies the truly astronomical increase which oil has had on the productivity of a single worker. This will be called the Human Productivity Multiplier (HPM). Before the advent of tractors, one ploughman could plough an acre in a day with two horses. Today, a single man can plough 200 acres in a day with a 400 horse-power tractor, providing he has access to 700 litres of diesel. The reason is simply that it requires ten Gigajoules of mechanical energy to plough 200 acres and this can be provided by either:
  • One man with two horses in 200 days, or
  • One man with a 400HP tractor in a single day because a 400HP tractor working at maximum output has the mechanical power output of 400 horses.
Clearly 700 litres of diesel and a 400HP tractor have increased the productivity of a single man by a factor of 200. In other words a 400HP tractor has introduced an HPM of 200 to ploughing. This establishes,
  • that today oil is invaluable, and
  • that modern productive processes require both
    1. the application of technology and
    2. the controlled expenditure of energy, in this case ten Gigajoules. (The writer explores this assertion in the Appendix where the concept of Entropy is introduced.)
An oil-burning heater does not increase anybody’s productivity. It has an HPM of zero hence heating oil is wasted oil, yet over 30% of global oil production is used for heating. Moreover the 700 litres of diesel emits almost 2 tonnes of carbon dioxide, yet biomass is an alternative which is both carbon-neutral and cheaper than oil. Humankind should at least exploit market forces to solve our Climate-Energy problem, and clearly the development of the global biomass heating industry should be given top priority. As surely as there were people like Borland who were able to achieve the Green Revolution, there are people who have both the enthusiasm and the competence required to develop this essential global industry which would achieve the following five objectives:
  1. It would replace oil, coal, gas and electricity as a source of heat and thereby greatly reduce the emission of carbon dioxide.
  2. It would provide cheaper heating.
  3. It would conserve oil, the most valuable fuel on the planet.
  4. It could provide people in the third world, particularly Africa with a cash crop and thereby enable them to buy food.
  5. It could and should initiate reforestation, dedesertification and carbon capture.
At present 12 million hectares of semi-arable land is lost through desertification every year according to the United Nations Convention to Combat Desertification, (UNCCD). It is entirely conceivable that research could either discover or develop a biomass crop which could be grown on this semi-arable land. Furthermore deforestation has reduced the convectional rainfall in areas of Africa and this is a major cause of famine. Returning to the Human Productivity Multiplier (the HPM), as technology advanced the HPM values of new equipment increased into the tens of thousands. The largest dragline ever used by the coal mining industry had a bucket which dug out 300 tons of coal at a time. Similarly the largest dump truck used by miners carries 500 tons of ore. These are just two of the thousands of energy-consuming machines which have transformed the global economy, and without which the new economy cannot survive. Presently the TPES (Total Primary Energy Supply) per capita in the United States has reached 7.1 toe (tons of oil equivalent) per annum. This is the equivalent to 1,800 imperial gallons of oil for every woman, man and child. Interestingly the corresponding figure in Bangladesh is thirty five times lower. As already mentioned, within the last fifty years humankind made a second enormous technological leap when industry deployed microprocessor-controlled robots which increased productivity in the manufacturing sector to extremely high levels. Robots are not only orders of magnitude faster than human beings, they are also orders of magnitude more accurate and consistent. Initially the investment required to install an automated mass-production line (robots) was considerable but inevitably technology evolved and both the investment and the time required to install modern automation has decreased considerably.

CP/MP metric

The writer now introduces another new metric, the CP/MP. This metric gives the Cost of Producing a product, its CP as a fraction of its Market Price, its MP. Since the introduction of automated mass-production the cost of producing goods has decreased for the second time since the beginning of oil-fueled mechanisation and the CP/MP of products is now a fraction of what it used to be. Today production is cheap. Selling one’s particular product is the challenge. Previously the printing of money caused price inflation whereas today we refer to it as Quantitive Easing or QE, and it works in the so-called developed world provided it is prudent. During the recent financial crisis in the US, the pragmatic Ben Bernanke pronounced, “Quantitive Easing is wrong in theory but it works in practise, and the Fed will drop money from helicopters if required.” If something is wrong in theory but works in practise then query the theory. In the situation Bernanke found himself conventional economic theory had become obsolete and by dropping money from helicopters he averted an unnecessary decline in demand in the US economy which is now consumer-driven since the cost of production is so low. Prof Joseph Stiglitz, the Nobel prize-winning economist, made the same point when he said,“…the notion of taking billions out of an economy in austerity budgets, as has happened in Ireland was totally absurd and economists know it does not work. Why this was not understood by European leaders was beyond me.” Today an increase in the money in circulation causes an increase in demand which causes an increase in the quantity of products coming down existing, paid-for, automated mass-production lines (and from China, Korea etc.) This benefits manufacturers, distributors, retailers, and consumers. On the other hand in Germany in the early 1920s every increase in the money supply resulted in another increase in the market price of products rather than an immediate increase in the quantity of products being produced. The problem now facing manufacturers is how to persuade the masses to buy their particular product and the solution is advertising which has now become an enormous industry. In the US over 200 billion dollars were spent on advertising last year. According to a study carried out by Maximilien Nayaradou, France and the United States spent €700bn on advertising between 1990 and 2000 and this exceeded the spending on research and development during this period. This enormous explosion in advertising has created a generation often referred to as the entitled generation and people now use the relatively new expression ‘in this day and age’, which indicates that they assume that we have now reached a safe economic plateau and the free-market incorporates the checks and balances required to sustain our unprecedented mass-prosperity. In fact the exact opposite is true and the following chapter makes the irrefutable case that the free-market has within itself the seeds of its own destruction.

The real value of oil

Free-market economists maintain that the Real Value of any product or commodity is the price it commands on the open market, on its Market Price. This is what Alan Greenspan implied when he said,“I'm a free-market economist from years and years back, and I've never veered from that.” Oil is the exception because the demand for oil is tied to the level of global economic activity, and there is no alternative. This became clear in 2008 when the price of oil increased to $147 due to increasing demand, and then crashed to $35 when the global financial crisis struck and demand declined. The writer now assesses the CP/MP of oil which gives the Cost of Producing oil as a fraction of its Market Price and this reveals what the motorist actually pays for when she or he buys petrol at the pumps. The situation in Ireland in 2013 will be examined rather than the situation in the US because the tax on petrol/gasoline in the US is particularly low. The cost of transporting oil will be taken as $4 a barrel.
  • It costs approximately $4 to put a barrel of crude oil on board a tanker in the middle-east, and typically it costs $8 to refine it. Say the total cost is $16!
  • This barrel emerges from the refinery as 159 litres of petrol/gasoline. In 2013 petrol retailed in Ireland for around €1.60/litre. Hence in 2013 a barrel retailed at €255, the equivalent of $340.
Since $16 is approximately 5% of $340 the real value of petrol/gasoline is so enormous and the cost of producing it is so low that when an Irish motorist bought petrol which originated in the middle-east in 2013 only 5% of what she or he paid at the pumps was the cost of obtaining and refining the crude. In other words the CP/MP of petrol was 5% in Ireland in 2013. This should not surprise anyone since after the collapse of former USSR in 1991 they flooded the global oil market and the price dropped to $12. Yet the oil companies survived. The remaining 95% of what the Irish motorist paid at the petrol pumps,
  • paid for actually running the oil-producing countries. This becomes clear when one realises that all of the oil-producing countries in the middle-east export less than Finland, if oil is excluded;
  • went into oil company coffers;
  • went to the Irish government as 6% of its total revenue.
Clearly oil is both the most valuable resource on earth, it fuels the worlds’ land, sea and air transport. Oil is also extremely difficult to replace because of its low CP/MP. Why should any highly profitable oil company be serious about developing an alternative-to-oil which is less profitable than oil? And there will never be another oil! The United States economy is particularly vulnerable because it was built on cheap oil, and it runs on cheap oil. Today less than 5% of the world’s population live in the US, and they consume more than 20% of global oil production.

Correlation between GDP and oil consumption

When Dr Jerome Sheahan, a statistician at University College Galway, researched the 23 countries with the highest GDPs in the world in 2013, he discovered that:
  • There is a correlation of 0.85 between the GDPs of these 23 countries and the oil they consume.
  • There is a correlation of only 0.68 between the GDPs of these 23 countries and their populations.
A comparison between the United States and China is particularly revealing. In 2013 the GDP generated per barrel of oil in the US (the GDP/bbl) was $2,418. The GDP generated per barrel in China was only 10% higher at $2,665. Yet China has over four times the population. The free-market has within itself the seeds of its own destruction.
  • The laissez faire, free-market attitude towards fossil fuels particularly in the US can be summed up thus, ‘while it is there we burn it as fast as possible to make money as fast as possible’. Recently this became clear in the case of natural gas. In late 2005 the production of conventional natural gas declined and its price increased to an all-time high of $15/MMBtu. After fracking was successfully introduced, production increased and the price plummeted to a low of $1.6/MMBtu in late 2016.
  • It is highly significant that before fracking and the advent of shale oil, there was media speculation that a senior director of a major oil company who was expected to become the CEO was forced to resign due to his interest in impending peak oil production and the development of an oil replacement. His colleagues, like almost everyone else in the capitalist world live from quarter to quarter and they were concerned about the negative effect his policy could have on the price of their oil shares.
A pragmatic solution presents the best chance of developing an alternative-to-oil, and the most pragmatic solution is surely for governments to incentivise anyone including the oil companies themselves to develop an alternative. This would have the following results:
  • It would persuade the oil companies to become concerned about the long term.
  • It would compel the oil companies to compete against each other in the development of an alternative.
Without personal motivation we would not now be the most prosperous generation in human history. Without personal motivation we could become the most prosperous generation in human history which fell irretrievably into the deepest economic abyss. Time is running out and absolutely nobody appears to be aware of the macroeconomic fact that the global economy is totally dependent upon 95 million barrels of irreplaceable oil every single day. In the words of Donald Hodel, the former United States Secretary of Energy: “We are sleepwalking into disaster.” The passage of time has revealed that the situation is worse than Hodel realised since we are now sleepwalking into both climatic and economic disaster. Author: Michael O’Halloran was reared in Kenya, obtained a degree in electrical engineering at University College Cork and returned to work in Kenya for a few years. He moved to Canada and worked with consulting engineers before returning to Ireland where he lectured in engineering at the Dublin Institute of Technology for over thirty years. He has also acted as an expert witness in the courts.      O’Halloran has also developed a boiler specifically for fuels with a high volatile content, namely turf and biomass, which operates at high efficiency over a wide range of output. This boiler is novel in that it burns the fuel in a devolatilisation chamber located in the upper region of a flame chamber. The liberated burning volatiles are turbulated as they exit the devolatilisation chamber and then they are forced to spiral downward around the devolatilisation chamber before the resulting flue gases exit through the exhaust located at the bottom of the flame chamber. The merit of this method is that it operates at high efficiency over a wide range of boiler output by exploiting thermal buoyancy to concentrate the burning volatiles as they spiral downwards around the devolatilisation chamber irrespective of boiler output.