Monday, September 1, 2014

World trade is not ending

Peak oilers and energy decline theorists both believed that world trade would rapidly come to an end around 2005. They believed that world trade would collapse as oil peaked and started declining, or as a consequence of declining ERoEI. This was one of the cornerstone beliefs of the peak oil and energy decline movements.

As usual, it was totally wrong. World trade did not collapse. In fact, the opposite happened. World trade, and especially ocean-going trade, has increased tremendously since that time. For example, the panama canal is now booked to capacity every single year, and must be expanded. The Suez canal must also be expanded.

In this article I will examine why world trade has not collapsed, and why it is not collapsing in the foreseeable future. I will divide my discussion into separate sections for the different modes of transportation (ships, trains, and trucks) and will explain why the transportation of cargo for that mode is not declining.


Cargo transportation by ship will not decline in the foreseeable future. That's because ships are becoming more fuel-efficient at a rate of about 2% per year and will continue doing so for decades, thereby offsetting any declines in oil production.

To a significant extent, shipping companies choose the fuel efficiency they want. Shipping companies could easily order ships with twice the fuel efficiency as those of today. Or, they could order ships with half the fuel efficiency. Ships which are more fuel-efficient are more expensive, so are only worth it when fuel prices are high enough to justify the added cost of the more expensive ship. As fuel prices increase, however, shipping companies order more fuel-efficient ships, and thereby drive down the amount of fuel consumed per ton-mile, and offset the decline in oil production.

The fuel efficiency of ships is a function of their size and speed. Larger and slower ships are far more fuel efficient. By halving the speed of a ship, fuel consumption is reduced by 75% per ton-mile. Furthermore, by quadrupling the size of a ship, fuel consumption is reduced by another 50% per ton-mile. As a result, a ship which is 4x the size and half the speed, consumes only about 12.5% as much fuel per ton-mile.

Ships have been getting much larger and slower over the last few decades. As a result, the amount of fuel per ton-mile has been deceasing for decades, and continues to decrease. When oil prices tripled back around 2006, the largest shipping company (Maersk) responded by ordering the triple-E class of ships which consume half the fuel per ton-mile as the average long-distance ocean ship of today. Other shipping companies followed suit. By just ordering the same kind of ship for the next 30 years, shipping companies will reduce the amount of fuel per ton-mile by half over that period, as they gradually retire their older and less-efficient ships and replace them with more efficient ones.

As a result, even if oil peaked today and declined by 2% per year for the next 30 years, we could still deliver the same amount of cargo in 30 years as today, because of increases in fuel efficiency which are happening anyway and will offset declines in oil production. By just ordering the same kind of ships which they are ordering now, the fuel consumption per ton-mile will drop by half over the next 30 years as older and less-efficient ships are retired.

Of course, there is a limit to the fuel efficiency of ships. When ships are traveling at only 8 knots, it saves no fuel to slow down any further. Also, ships could only be made approximately 4x larger than those of today before they start to buckle under their own weight. As a result, it would be impossible to improve the fuel efficiency of ships by more than 8x relative to today.

However, that is still enough to offset any plausible declines in oil production, well into the future. Even if oil production peaks in 2020 and follows a bell-shaped Hubbert curve, the shipping industry will offset the declines of oil by increasing the efficiency of ships, until at least 2050.

Of course, it would be possible for shipping companies to accelerate the improvement of fuel efficiency if fuel became scarce, so the shipping industry could withstand greater than 2% yearly declines without a reduction in cargo ton-miles.

Even after oil production has peaked and declined by 80%, it still will pose no serious problem for the shipping industry. Ships fundamentally do not require oil for their propulsion. Ships can be built with STEAM TURBINE engines, and such engines do not require oil. Steam turbine engines can be designed to use virtually anything that will burn as fuel. Ships with steam turbines could use coal, gas, wood pellets, old newspapers, pelletized switchgrass, pelletized animal shit, sewage, corn husks, weeds, old paper plates, or whatever else. Steam turbine engines can also use very low-quality fossil fuels, such as oil shale (without extracting the oil), which are found in vastly greater quantities than crude oil ever was. Steam turbine engines were the most common kind of ship propulsion from 1950 to 1970, and could become so again. Since those ships can use almost any fuel, we are not running out of fuel for ships.

Some of the possible fuels are renewable, such as wood pellets or switchgrass. These fuels have an ERoEI of approximately 10 (or 3 if you subtract waste heat losses), making them only slightly worse than oil in terms of ERoEI. Such fuels can be grown indefinitely on marginal land.


Cargo transportation by train is not ending. More likely, it will increase in the decades ahead.

Trains fundamentally do not require oil for their operation. Trains can easily operate using electricity from overhead wires. This is already the case in many parts of Europe and Russia. The technology to do this is older than the widespread adoption of internal combustion engines. As a result, we could gradually replace diesel-burning trains with electric ones and so remove oil as a fuel from train transport altogether.

Already, much of Europe has electrified its rail lines. Russia has already electrified the entire trans-Siberian route. A large fraction of cargo delivered by rail in the world is already propelled by electricity. This transition away from fossil fuels is already underway, and will gradually reduce and then eliminate the oil required for rail transportation.

The rail network could easily be expanded to come within 5 miles of 95% of the population.  In fact, in 1910 in the US, the rail network was approximately three times longer than today, and actually did come within 5 miles of 95% of the population. There was a rail line going to almost every little town, in 1910. If we revive and electrify the rail network which existed in 1910, then cargo could be delivered to almost every town or city in the US without using any oil.

Bear in mind that the United States has vastly greater wealth, infrastructure spending, and manufacturing capability than it did in 1910. As a result, the rail network of that era could be revived much more easily than it was built. Europe would have an easier time still, because of higher population density.

It’s worth mentioning briefly that trains could be powered by reciprocating steam engines (like old-fashioned steam locomotives) which could use almost anything as fuel. Apparently, modern reciprocating steam engines can be about 18% efficient which is double what the old locomotives achieved in the 19th century. There is even an association in the USA that wishes to start making steam trains and powering them with “bio-coal” (apparently some kind of charcoal made from trees). Personally, I’m not sure it’s a viable idea, but if you’re a nostalgia buff then you might want to look at the coalition for sustainable rail (


What about trucks? Long-haul trucking isn’t even necessary. In the United States, in 1910, most cargo was delivered by rail. The interstate highway system didn’t exist back then. In fact, long-haul trucking is fairly recent. As oil became cheaper, we gradually shifted from trains to trucks. When fuel becomes more expensive, we will gradually shift back the other way, from trucks to trains, thereby using less fuel.

If we revive the rail network from 1910, then long-distance trucking wouldn’t even be necessary. We could use short-haul battery-electric trucks to deliver goods the final few miles from the railway depot to the store. If it were necessary, we could also use trolley-trucks powered by electricity from overhead wires.


We do not face significant declines in long-distance transport of cargo, over any time period, at least not from energy shortages. We have vastly more fuel than is required, and vastly more options than are required. We could increase the quantity of cargo delivered, far into the future, regardless of when oil peaks and starts declining. We could easily offset any plausible rate of oil decline, using obvious and well-understood technologies.

These adjustments will be carried out automatically, as the result of basic market mechanisms. As prices for one thing become higher, shipping companies automatically switch to something else. When it becomes cheaper to electrify rail, then rail is gradually electrified. Shipping and transport companies already carry out these calculations and procedures routinely. They already order ships or trains based upon fuel prices going forward, and thereby gradually adjust to changing fuel availability and cost. This is already happening and will continue to happen. Also, municipalities will allow the re-activation of long-dormant rail lines if fuel prices are high enough to require it. No action on your part is required to make this happen.

Peak oilers and energy decline theorists reached a different conclusion. They believed that world trade would collapse around 2005. However, they made four incorrect assumptions, as follows: 1) peak oil was imminent; 2) oil is the only fuel which can power long-distance transportation; 3) ships and trains cannot be any more efficient than they are today; 4) the mode of transportation used must be the same as today. All four of those assumptions were clearly and obviously wrong. Peak oil has not occurred yet. Even after peak oil has occurred, we could increase the efficiency of ships, and so offset oil declines for at least 4 decades. Even after oil has been practically exhausted, we could switch fuels, from oil to any number of other fuels. Furthermore, we could change the mode of transportation from trucking to rail. As a result, we do not face any inevitable decline in long-distance transport of goods, regardless of when oil peaks, or how rapid the decline is.

Of course, world trade may decline slightly or gradually in the future, for a variety of reasons. For example, it may become uneconomic to ship extremely bulky and inexpensive products (like iron ore) over long distances, since those products are barely worth shipping long distances now (they can be mined almost anywhere), and would become uneconomic to ship long distances with even slight increases in shipping costs. Also, there are other factors such as wars, depressions, and disasters which could decrease world trade. Furthermore, there is wage convergence, whereby wages in the third world are gradually catching up with those of the first world, which may reduce the volume of trade in the future. However, there will never be any abrupt drop-off in world trade because of energy shortages. World trade will remain more extensive than it was in 1990, far into the future, unless some genuinely unexpected event (like war) changes that.

(Note: This article was edited on Sept 7, 2014)

1 comment:

  1. thank you Tom. That was wonderful to read as I like other people, bought into the peak oil theories. But should not countries be switching to more train travel and goods transportation sooner so as to make their oil stretch longer ?