With oil prices remaining low and with production apparently more than sufficient to satisfy the demand, most people have jumped to the conclusion that all mineral resources are abundant and not a concern for the foreseeable future. Yet, the problem remains: mineral resources are not infinite. The solution to the conondrum may be in the "Seneca Effect." It is an insidious kind of effect that hides future risks behind an apparently safe and robust growth.
The story of the Club of Rome starts with the issue of natural resources. In the 1960s, it had become clear to the Club's founder, Aurelio Peccei, that the world's resources were finite and to ask the question of how that was to affect humankind. It was the origin of the first and the best-known report to the Club of Rome, "The Limits to Growth," published in 1972.
The 1972 report already provided answers to the question of depletion. It turned out that resource scarcity would limit the growth of the world's economy and, eventually, lead it to decline. This conclusion was often misunderstood as meaning that humankind would soon "run out" of oil, gas, or some other resource; but that was never stated in the report and it never was the point.
In 2014, the Club of Rome produced another report titled "Extracted" in English and "Der Geplunderte Planete" in German that reiterated the earlier conclusions. The author of the report, Ugo Bardi, a researcher at the University of Florence, Italy, concluded that the problem of mineral depletion was real and that it was progressively getting worse.
Yet, these conclusions are far from being generally accepted. Depletion, it seems, is still considered a non-problem, especially in the extractive industry. "If depletion is really a problem," industry representatives often say, "how come that we are still producing mineral commodities at the highest rates ever seen in history? Besides, we observe that our production costs are not significantly increased when we use lower grade ores."
So, is mineral depletion an existential threat to human civilization? Or is it just a marginal problem that can be fixed by some technological improvements? This is truly a fundamental question for the future of humankind. An answer is provided by the latest report to the Club of Rome that was published in 2017, "The Seneca Effect."Taking inspiration from something that the ancient Roman philosopher Seneca said, the author of the study, Ugo Bardi, examines the trajectory of an economic system subjected to the dual strain of mineral depletion and pollution. The result is the "Seneca Curve", a graphical depiction of Seneca's statement that "Increases are of sluggish growth, but the way to ruin is rapid." It is something well known in everyday life, but the study could confirm it using mathematical models. Here is the curve as calculated by simulations.
The "Seneca Effect" or the "Seneca Paradox" explains why mineral depletion is a problem but, at present, we are not feeling its effects. We haven't yet reached the summit of the curve and we are not seeing the cliff awaiting us. So far, the extractive industry has been able to mask the effects of depletion by means of economies of scale. That has been possible as long as production keeps increasing, which has been the case up to now for most mineral commodities. The problem is that this strategy cannot last forever: mineral resources are not infinite.
A good example of this effect can be found in the oil industry. At present, all fears of "running out" of oil seem to have been dispelled by the low market prices and by the still increasing production. Both factors give the impression of an abundance of cheap oil that could last for a long time - if not forever. But this is exactly the result of the shape of the Seneca Curve. As long as we don't reach the start of the cliff, we don't see it.
But ruin, as Seneca said, may be rapid. Consider the current climate situation and the urgent need of reducing carbon emissions. Consider the rapid switch to electric vehicles, often seen as a way to fighting climate change. Consider that in the US more than 60% of the market for crude oil product is for private vehicles. Then, you see that if people were to start replacing their old cars and trucks with electric ones (something that they should do by all means for the sake of our survival), the oil industry would lose a big bite of its market.
For the oil industry, losing a significant fraction of their market is not just a question of downsizing; it is their death knell. It is here that the "Seneca Effect" starts playing its role. The economies of scale which had allowed the industry to overcome the effects of depletion become diseconomies of scale, increasing costs and reducing profits. The industry becomes unable to attract new investments; it starts shrinking and eventually disappears: it is what Seneca said, "ruin is rapid".
The decline of the oil industry has already been ongoing in several regions of the world and the loss of efficiency due to scaling down is well documented (see, e.g. Hall et al. 2014). In recent times, the US industry has been able to start a new cycle of oil extraction with "Shale oil" (more properly, "tight oil") but that simply means to postpone the unavoidable and the Seneca Cliff of shale oil may be just around the corner.
Humankind is facing a difficult situation right now, with the twin threats of depletion and pollution working together to cause a decline that could be very rapid, as it is has been often the case for past civilization. The "Seneca Effect" makes the situation all the more insidious because at present we have only a few hints of the future decline but when we will see the cliff in front of us it may be too late to avoid it in full.
Yet, today we have powerful tools in the form of the science of complex systems. If we are willing to use them, these tools allow us to understand the future and to be prepared for it. If we understand the threats we face, they may be seen as opportunities. So, the impending ruin of the oil industry is not a threat but an opportunity to avoid, or at least mitigate, a future climate disaster.
Once we understand this point, the strategy becomes clear: do not fight the unavoidable; do not try to keep the oil industry alive at all costs; that's exactly what makes the Seneca Cliff steeper. Instead, favor the unavoidable change. it means helping the oil industry to disappear by favoring its replacement by something less polluting and more sustainable. Similar strategies are possible for many polluting industries still common today.
As always, the future is nothing but the choices we make and there is still time to make good choices. The Seneca cliff of the human civilization will happen only if we choose to make it happen.
