The cost of a barrel of oil relative to workers’ wages

Posted on Thursday, September 11th, 2008 at 3:46 pm by JTE

[Thanks to eagle-eyes of a friendly reader, numbers below regarding the equivalent number of years of labor have been corrected. --JTE (4/30/09)]

So yesterday I noted Rob Hopkins’ trivia that a liter of oil (if I guess correctly the volume of the bottle he holds in the video) contains the same amount of energy as a human expends in about five weeks of work. That really shocked me, so I’ve emailed him and asked for his source. He got his numbers from this PDF. It says, more specifically (on p. 8), that a kilogram of petroleum contains the equivalent in energy to about 24 working days, or 200 hours, of human physical labor.

That got me thinking: if you were going to hire people to do the work that you get from burning oil, how much would the human-labor equivalent of a barrel of oil cost?

Barrel of oil = between 125 and 154 kg. To keep these calculations “conservative,” I’ll go with 125.
x 200 = 25,000 equivalent hours of human labor
= 5,000 625 work weeks (assuming 40 hours per week)
= 104 13 work years (assuming 4 weeks off each year for vacation and holidays)

How much does human labor cost these days? Here are a few examples from the manufacturing sector for the year 2006 from the Bureau of Labor Statistics (table 2), all converted to US dollars. The oil price is from the Energy Information Administration, Annual Energy Outlook 2008 (table 12).

Country Average hourly wage in manufacturing “Wage” equivalent of a barrel of oil
Norway $46.31 $1,157,750
USA $29.60 $740,000
S. Korea $16.87 $421,750
USA (current Federal minimum wage) $6.55 $163,750
Brazil $5.90 $147,500
Philippines $1.36 $34,000
———— —— —————-
Barrel of Oil (in 2006)   $59

Even at the “horror” of $200 per barrel, that does kind of put our energy addiction in perspective. These numbers are so insane, I do have to wonder if something is just plain off, but assuming the source numbers are even vaguely in the right ballpark, the take-home message remains: this slide down the back of the oil peak is going to be pretty interesting.

One further thought: it might make more sense to compare the usable energy in the oil than the total energy. Following that logic (if so it be), and the fact that (according to this site) the ideal efficiency of a diesel engine (my proxy for the efficiency of oil in general) is 56%, then let’s apply a conservative conversion factor of 40% to the kilogram of oil. Accordingly, this brings down the equivalency of a barrel of oil to 10,000 hours of human labor (or nearly 42 5.2 work years), and in terms of equivalent wages, that barrel of oil works out to:

Country Average hourly wage in manufacturing “Wage” equivalent of a barrel of oil
Norway $46.31 $463,100
USA $29.60 $296,000
S. Korea $16.87 $168,700
USA (current Federal minimum wage) $6.55 $65,500
Brazil $5.90 $59,000
Philippines $1.36 $13,600

As Rob’s source notes for the United Kingdom, the use of fossil fuels increases UK physical productivity by a multiple of something like 70 to 100 versus an economy that relied only on muscle power. “Cheap” doesn’t begin to describe the deal we’ve been getting for oil. Well, obviously not cheap in the long run, seeing as the worst costs of using oil are coming to us in the future. I guess you could say this has been one whammy of a “buy now, pay later” scheme. That bill is going to come due. How well will you be prepared?

[Image courtesy of woodleywonderworks]


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