Tuesday, August 14, 2012

At Constant Consumption - Not

There are a lot of reports coming out lately that say we have 100 or 500 year supply of resource x, y, z, and especially oil "at current consumption". Which really means, at the current rate of consumption. Say, n units per year. It also assumes that the n units of consumption per year will remain constant, and never change. Which of course is not realistic at all, as the world population grows and demand for oil and everything else increases.

As Dr. Albert A. Bartlett notes in "The Most Important Video You Will Ever See", this totally ignores the fact that consumption rates are going up exponentially.

In finance, there is the "Rule of 72". It's a simple finance rule to determine how quickly money will double at a given compound interest rate.

72/interest rate = years required for the money to double

We can use the Rule of 72, for some quick calculations. If you have a population growth rate of 7%, in ten years, the population has doubled. And in 20 years, the population has quadrupled! If your city's sewer system in inadequate now, think how bad it will be in 20 years!

I was thinking about this, and decided to model it in Excel. Just how much remains, and how quickly does it run out? It's amazing how fast things do run out.

Even if there is only a 1% increase in consumption, the "500 year supply" will only last 181 years!  Less than half the time of the original 500 year prediction.

At just a 2% growth rate, a "100 year supply" will be exhausted in 56 years!  And a "500 year supply" will be exhausted in 122 years!

At a 7% growth rate, the 100 year supply is exhausted in only 31 years!  And the 500 year supply is exhausted in 53 years!

What's interesting to note, is that at 8 percent or higher consumption, the remaining 100 and 500 year supplies are pretty close to each other. The "100 year supply" is totally exhausted in 29 years, and the "500 year supply" is totally exhausted in only 49 years. That's only a 20 year difference, even though the "500 year supply" started as five times larger, and 400 years longer, than the "100 year supply".

So, next time you hear that there are so many hundreds of years of a resource left "at current consumption", don't believe it. Since the consumption rate is going up, the number of years remaining is much lower.

Blogspot won't allow me to upload a spreadsheet. But it's is simple exercise to make one. Try it! The results should blow your socks off!

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