Health Security and Sustainability in an Era of Growing Energy Scarcity

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Health Security and Sustainability in an Era of
Growing Energy Scarcity

• Melissa Ahern, MBA, Ph.D.
• Associate Professor
• Department of Pharmacotherapy
• Washington State University
• Spokane, Washington

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Goals of Presentation

• Discuss the enormous energy challenges we face
  domestically and on the globe
• Discuss how we as health providers can be
  responsive to these challenges

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Geophysics of Oil Production

• Energy sources must produce more energy than they
  consume.
• Deeper oil requires more energy
• Flow rates slow, water cuts rise, proportion of
  sour-heavy oil increases
• Production declines
• Eventually, more than one unit of energy in, only
  one unit of energy out
• Field shuts down (sink)

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Megaprojects (Source www.theoildrum.com)
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Peak Export ProblemSource www.theoildrum.com
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Growing Consensus

• Peak conventional oil has occurred
• Peak exported oil will constrain supplies even
  further
• Non-conventional oil is more expensive, with
  slower flow rates (tar sands, off-shore oil)
• Recession has lowered the price of oil, reducing
  production of more expensive oil

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US-48
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The Growing Gapbetween Discovery and Consumption
Drilling more does not help
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Demand and SupplyUpside and Downside Price Risk

• High oil prices stifle economic growth
• Low oil prices drive out production of
  higher-cost oil
• Because conventional low-cost oil has peaked,
  needed increases in oil production cannot take
  place
• Marginal cost of nonconventional oil
• 60 to 80

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New IEA Report Fading Oil Production Threatens
Supply (November 2008)

• Depletion rates for worlds 800 giant fields
  5.1
• Depletion rates for worlds past-peak giant
  fields 6.7
• Decline rates without additional oil
  infrastructure investment 9
• Problem Recession is severely limiting such
  investment

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Declining Global Oil Supply

• 5 million new barrels per day needed just to make
  up for the decline of existing fields
• Global conventional oil production is likely to
  decline from 74 million barrels per day to 60
  million barrels per day by 2015

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Inelastic oil demand

• Demand in U.S. highly inelastic
• 80-95 of all global transportation
• Petrochemicals and industrial lubricants
• Pharmaceuticals
• Food production and distribution
• Oil and gas for fertilizers, agrichemicals,
  tilling, cultivation and transport
• Manufacturing

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Example Energy and Food

• We use 10 units of process energy for every unit
  of food energy delivered into the kitchen
• Global food security is down to its lowest levels
  per capita in 30 years

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(No Transcript)
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Scale of Problem is Enormous
First Oil Well
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Energy Return on Energy Invested
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Energy Basics

• Energy Capacity to do work
• Global economy 100 dependent on energy
• 1st Law of thermodynamics Capital, labor and
  technology cannot create energy.
• 2nd law of thermodynamics Energy is wasted at
  every step of the economic process
• Net energy principle Energy resources must
  produce more energy than they consume.
• 735 joules of energy required to lift 15 kg of
  oil 5 meters out of the ground, just to overcome
  gravity.

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Disconnect between Energy Laws and Economic
Theory and Practice

• Oil is priced at the cost of production rather
  than at the value of the BTU
• This price implicitly represents an assumption of
  infinite natural resources
• Not consistent with laws of thermodynamics
• The BTU in one barrel of oil is equal to
  approximately 25,000 hours of human labor
• A barrel is currently priced at 40 about the
  price of 4 hours of human labor (at minimum wage)

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The Economy and Oil

• Finance system is a Ponzi scheme unless the real
  economy is growing
• Flaw in our economic system is treating a finite
  resource whose production is controlled by the
  laws of physics as if it were a normal commodity
  capable of responding to ordinary market
  pressures
• More expensive energy slowed economy

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Per Capita U.S. Energy Consumption
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The Economy and Oil Source CIBC World Markets,
Jeff Rubin, October 31, 2008
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Recent Oil Price Spike

• Over 500 oil price increase between 2002 and
  2008
• More than twice the spikes in the 1970s
• Those spikes produced two of deepest recessions
  in post-war period
• US income transfer to Saudi Arabia
• Recessionary effect because money moved from
  zero-savings economy (US) to 50 savings economy
  (Saudi Arabia)

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Recent Oil Spike vs. Past Spikes Source CIBC
World Markets, Jeff Rubin, October 31, 2008
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Oil Price Sensitivity of Economies

• Impact of price spike on American economy
• One-two punch from record fuel bills and end of
  tax rebates saw consumer spending down Q3 of 2008
  at 3.1, which was the largest decline in 25
  years
• Plunging motor vehicle sales accounted for the
  largest single component of reduced Q3 spending.
• Japanese and European economies highly vulnerable
  to oil price spikes
• Japan and Europe (not including Russia) import
  almost all oil

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Debt Makes Everything HarderSource The Crash
Course, www.chrismartensen.com
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Solutions??
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What to do?

• Re-localize economies to use less energy
• Construct markets to use less energy
• Move to electric mass transit to substitute away
  from liquid fuels
• Conserve
• Eliminate waste

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Energy and Health Care

• U.S. spends 16 of GDP on health care vs. 10 in
  other industrialized nations, with worse outcomes
• White middle-aged Americans far less healthy than
  their peers in England (JAMA 2006)

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Health Care Buildings

• 11 commercial energy consumption
• energy intensity second highest (BTU/sq ft)
• High energy and material costs for manufacture
  and transportation of goods
• Transportation costs for accessing care and
  delivering care

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Petrochemicals and Medicine

• Analgesics, antihistamines, antibiotics,
  antibacterials, cough syrups, lubricants, creams,
  ointments, salves, gels, heart valves,
  radiological dyes and films, intravenous tubing,
  syringes, oxygen masks

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Tiered current system

• Tiers
• Top tier Ferrari
• Bottom tier Jalopy
• Need Honda
• Honda model will emphasize public health
  (prevention and health promotion) over treatment
  medicine
• Public health currently under-funded, while
  private health system is over-funded

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Economic Impacts of Recession on Health Care

• Long-term slow-down
• Impacts on health care
• Lower Medicare and Medicaid reimbursements
• Lower incomes, high unemployment, significantly
  more uninsured
• Older physicians may not retire, students may not
  be able to get medical school loans
• Physician payment changes
• Technological investments shelved

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Decisions

• Who will get what kinds of services?
• How can we spend diminished funds most
  cost-effectively to improve health?
• How can we aggressively cut waste?

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Health Care System Waste

• US spends 40 more on health care than other
  industrialized countries, with worse outcomes.
• Dartmouth studies Up to one-third of Medicare
  costs do not benefit patients.

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Health Care System Waste

• Only 1 out of 25 being spent on prevention,
  resulting in higher health care costs
• 400 billion health care costs each year
  associated with chronic illness from
  overweight/obesity

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Pharmaceutical Waste?

• Brand-name vs. generics
• No evidence that pricier brand-name drugs perform
  differently than generics (JAMA 2008)
• Polypharmacy (more than three regular
  medications)
• Interactions of the drugs render medications more
  dangerous than they are on their own
• 20 of U.S. elderly have more than 5 prescription
  medications (JAMA 2002)

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Expected Policy Changes

• More regulation, more oversight
• Government-based health care plan will compete
  with private insurance
• Identify and pull out hidden costs, remove
  profits, and use savings to improve access
• Growing push for cost control
• Search for best providers those that have good
  outcomes and low costs

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New approach Teams Treating Problems

• Example joint replacement
• Hospital and physicians will work together on
  cost containment and outcomes
• Streamlining and standardizing care
• Team will provide aspects of total care
  cost-efficiently
• New reimbursement will be lump sum for team,
  divided up between hospital team and physicians
• Less reimbursement for physician, but team will
  do more aspects of care.

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Other Solutions

• Move care closer to home, e.g., neighborhood
  polyclinics
• Outpatient care, diagnostic care, social
  services, emergency services, out-of-hours
  primary care
• Telemedicine, telepharmacy
• Telecommuting

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Public Health Challenges

• Food
• Water
• Shelter
• Health Maintenance
• Preventive Care