When we talk about resource allocation our usual perception is, that we allocate resources according to projections in profits. But what if the allocation of resources instead depended on the sustainable nature of there allocation, meaning that if you allocated too many resources towards your production you would run out, and your flow of resources would remain stagnant until the resources reached an equilibrium between inflow and outflow. This would create an entirely new form of commerce, one in which businesses would concentrate on their footprint along with profits as their bottom line. This is known as a triple-bottom line, one where businesses include, the economy, the environment, and the social equity of their business practices. Before we continue let’s define some key terms that are expressed in the resource allocation sector.
Net Energy- Is the difference between the energy expended to harvest an energy source and the amount of energy gained from that harvest.
Entropy- Is the measure of the quality of energy available, it is a physical measure of the degree of randomization of the structure or capacity of matter or energy to be useful to us.
Ricardian Land- Land as an extension, surface area, and substrate for holding things (i.e., the “indestructible” characteristics of land, excluding its fertility or underground minerals).
Recoverable Reserves- A term used in natural resource industries to describe the amount of resources identified in a reserve that is technologically or economically feasible to extract. A new reserve can be discovered, but if the resource cannot be extracted by any known technological methods, then it would not be considered part of recoverable reserves. Recoverable reserves is also often called proved reserves.
Abiotic Resource- A nonliving resource that cannot reproduce: fossil fuels, minerals, water, land, and solar energy.
Alright, now that we have established some definitions for key terms used when describing resource allocation we can begin to understand how our current system of resource allocation is flawed in every aspect, environmentally, economically, and equitably. Also how we may fix these flaws by restructuring our practices on how to allocate resources to institute a triple-bottom line in every business no matter what size.
In the oil industry every person knows that fossil fuels are a finite resource, meaning that the stock of this resource will be exhausted eventually as the outflow continues to be utilized. Experts continue to report studies that oil will run out in the next 50 years or so, this statement is somewhat accurate, only the wording of these statements is incorrect. What really is happening is, as fossil fuels and oil reserves slowly deplete the world over and demand for the once cheap resource remains high, the industry leaders will see a possibility to make as much profit as possible off the dwindling remains by increasing the price substantially. As the industry leaders extract the last ounces of oil out of the ground they will stock-pile the resource and only provide it to the highest bidder, now this scenario seems bleak but it has happened before in human history, and will happen again, unless the global population refuses to associate with oil as the largest source of energy for everything we consume in our daily lives. Once we have disassociated ourselves from oil and fossil fuels the global population may begin to innovate and create new energy technology that includes renewable energy sources and new sources only known to very few people in today’s society. So the consensus is, as the demand for oil increases and the supply of oil decreases, so along with it will price increase until it becomes economically unfeasible to extract or consume the resource, which will lead us into a new energy reality.
Along with the oil industry diminishing, ethanol (E85) fuel is being produced from corn as an alternative energy source to run our vehicles on. Unfortunately this alternative fuel has led to many externalities and negative implications that were not researched enough before the system was adopted in the U.S. First, the cost of corn and other produce has risen considerably in U.S. supermarkets since farmers have begun to divert a percentage of there annual crop towards the production of ethanol. This leads to inflated foods prices compared to the average U.S. citizens annual income putting more strain on the standard of living for the U.S. population. Next, the fuel economy of E85 is only 0.5% better than gasoline, and on a long-distance trip approx. 667 miles or more, E85 costs on average $30 more and uses 15 or more gallons of extra fuel. Overall I would estimate the entropic levels of the production and consumption of E85 ethanol by, considering the costs of food production and the necessary subsidies administered to the farmers for diverting a large percentage of their annual crop yield towards the production of E85 ethanol, then estimating the overall economic gains from purchasing E85 consistently for your vehicle and the average mpg recorded and the average carbon footprint compared to a highly efficient gasoline engine. Conclusion, the amount of energy transferred and transformed in the production, conversion, and consumption of E85 ethanol is far greater than the extraction, conversion, and consumption of an equal amount of fossil fuel oil. In all we must shift our focus from both of these energy sources and invest our precious energy in an alternative that is truly less entropic than our current resource.
Thank you for your interest, please comment and subscribe!
Onward,
Hayden van Andel
*All information regarding the efficiency and cost of E85 ethanol is sourced below.
Edmunds, Dan. (05/21/2007). Running on Alcohol Fumes. E85 vs. Gasoline Comparison Test.
http://www.edmunds.com/fuel-economy/e85-vs-gasoline-comparison-test.html
Thursday, September 13, 2012
Tuesday, September 11, 2012
What Is Up With Our Energy and Resources?
To begin let’s establish some definitions of key words that occupy the foundations of our knowledge in energy and resource allocation.
Entropy- a thermodynamic quantity representing the unavailability of a system's thermal energy for conversion into mechanical work, often interpreted as the degree of disorder or randomness in the system.
Stock-flow Resource- Resources materially transformed into what they produce (material cause); are used up rather than worn out.
Fund-service Resource- Resources not materially transformed into what they produce (efficient cause), which can be used only at a given rate, and their productivity is measured as output per unit of time; cannot be stockpiled; are worn out, rather than used up.
Excludable Resource- Is one whose ownership allows the owner to use it while simultaneously denying others the privilege.
Non-rival Resource- Is one whose use by one person precludes its use by another person.
Now that we have established some defining terms, what is the purpose? When we are talking about energy use and resource allocation, we are talking about the economy, the biosphere, our own standards of living, and everything in between. The economic wealth of societies affects the environment, because as wealth and affluence increases the population’s demands for more goods and services grows exponentially. In a free market economy this trend goes unchecked and becomes imbalanced, only until the environment enacts its own limits, which can result in collapses of market economies. So as the economic wealth of our world’s societies increases exponentially, the destruction of the environment follows unchecked and grows exponentially causing unforeseen consequences. With this steady increase in wealth and affluence, the environment of the U.S. over the past 200 years has changed drastically. We have seen the entire country, coast to coast settled and developed; we have witnessed an industrial revolution causing development of urban areas to spike, leading to social inequality due to the scarcity of resources in these centralized locations. We have also seen the natural resources stripped, mined, extracted, and absorbed, into an economy that has not changed fundamentals in the past 200 years. In the past 200 years we have seen the environment pass through many drastic changes in the many different ecosystems, but at the same time our fundamentals in economics and our energy consumption and resource allocation have stayed the same leading to the global predicaments we face today.
So in the energy sector our consumption patterns have led to the biosphere enacting its own limits towards our resources, this has led to investments in alternative energy practices. Now you must not deny that we have had the technology for clean, free, abundant, and renewable energy since Nicola Tesla’s era. There are many devices out there that have proven to power more than our current systems could ever complete, and these devices do not require finite resources, or dirty energy. So what are we talking about when we, “calculate payback” on alternative energy investments? Well look at this way, when the oil and coal industries were being developed the technology was expensive (just like the other forms of clean free energy) so the economists of the time developed a system of calculating the payback periods of the investments into the oil and coal energy infrastructures. This system took the amount it would cost for investment and divided it by the annual cash inflows from privatizing the energy market. With these payback calculations the economists and businessmen found it to be economically sound to invest in the oil and coal energy markets, leaving the clean, free, renewable energy by the way side. So why not invest in this clean alternative energy? The reason behind this is the businessmen found the payback period for the alternative energy to be far too long, meaning it would not profit them in the short-term, but it would profit the majority of the population in the long-term. This concept did, and still does not fit into our economic model we use today. For myself, a reasonable payback period for investments in renewable, clean, possibly free alternative energy would be 50-75 years. This being said, because I use different forms of energy all day every day, so if I may use the energy that comes from a source that will benefit me not only economically, but physically, and socially, I am willing to make my payback period 50-75 years, even if it means I do not receive full compensation, but instead goes to the future generations of my family. I based my time frame of payback on the concept that, the investment I would be making would not only make economic sense in my economic theories, but it would make logical sense as well.
I hope anyone who reads this blogpost thought a little differently about our economic system, and the reactions to our actions we make in investing in our future.
Onward,
Hayden van Andel
Entropy- a thermodynamic quantity representing the unavailability of a system's thermal energy for conversion into mechanical work, often interpreted as the degree of disorder or randomness in the system.
Stock-flow Resource- Resources materially transformed into what they produce (material cause); are used up rather than worn out.
Fund-service Resource- Resources not materially transformed into what they produce (efficient cause), which can be used only at a given rate, and their productivity is measured as output per unit of time; cannot be stockpiled; are worn out, rather than used up.
Excludable Resource- Is one whose ownership allows the owner to use it while simultaneously denying others the privilege.
Non-rival Resource- Is one whose use by one person precludes its use by another person.
Now that we have established some defining terms, what is the purpose? When we are talking about energy use and resource allocation, we are talking about the economy, the biosphere, our own standards of living, and everything in between. The economic wealth of societies affects the environment, because as wealth and affluence increases the population’s demands for more goods and services grows exponentially. In a free market economy this trend goes unchecked and becomes imbalanced, only until the environment enacts its own limits, which can result in collapses of market economies. So as the economic wealth of our world’s societies increases exponentially, the destruction of the environment follows unchecked and grows exponentially causing unforeseen consequences. With this steady increase in wealth and affluence, the environment of the U.S. over the past 200 years has changed drastically. We have seen the entire country, coast to coast settled and developed; we have witnessed an industrial revolution causing development of urban areas to spike, leading to social inequality due to the scarcity of resources in these centralized locations. We have also seen the natural resources stripped, mined, extracted, and absorbed, into an economy that has not changed fundamentals in the past 200 years. In the past 200 years we have seen the environment pass through many drastic changes in the many different ecosystems, but at the same time our fundamentals in economics and our energy consumption and resource allocation have stayed the same leading to the global predicaments we face today.
So in the energy sector our consumption patterns have led to the biosphere enacting its own limits towards our resources, this has led to investments in alternative energy practices. Now you must not deny that we have had the technology for clean, free, abundant, and renewable energy since Nicola Tesla’s era. There are many devices out there that have proven to power more than our current systems could ever complete, and these devices do not require finite resources, or dirty energy. So what are we talking about when we, “calculate payback” on alternative energy investments? Well look at this way, when the oil and coal industries were being developed the technology was expensive (just like the other forms of clean free energy) so the economists of the time developed a system of calculating the payback periods of the investments into the oil and coal energy infrastructures. This system took the amount it would cost for investment and divided it by the annual cash inflows from privatizing the energy market. With these payback calculations the economists and businessmen found it to be economically sound to invest in the oil and coal energy markets, leaving the clean, free, renewable energy by the way side. So why not invest in this clean alternative energy? The reason behind this is the businessmen found the payback period for the alternative energy to be far too long, meaning it would not profit them in the short-term, but it would profit the majority of the population in the long-term. This concept did, and still does not fit into our economic model we use today. For myself, a reasonable payback period for investments in renewable, clean, possibly free alternative energy would be 50-75 years. This being said, because I use different forms of energy all day every day, so if I may use the energy that comes from a source that will benefit me not only economically, but physically, and socially, I am willing to make my payback period 50-75 years, even if it means I do not receive full compensation, but instead goes to the future generations of my family. I based my time frame of payback on the concept that, the investment I would be making would not only make economic sense in my economic theories, but it would make logical sense as well.
I hope anyone who reads this blogpost thought a little differently about our economic system, and the reactions to our actions we make in investing in our future.
Onward,
Hayden van Andel
Subscribe to:
Posts (Atom)