In histories of the past decade, one under-recognised landmark date is Aug 11, 2004. That was the day the International Energy Agency (IEA) revised up its estimates of oil consumption in several countries, including China and Saudi Arabia, and calculated that the Organization of the Petroleum Exporting Countries had a mere 600,000 barrels per day of spare capacity available to cover supply disruptions.

It had been clear for a while that China’s oil demand was booming, but the IEA’s announcement threw a spotlight on the scale of its growth. It was a signal that oil prices of about US$10 (S$12.50) a barrel, which had seemed normal only five years before, were probably gone forever.

It also marked a revival of interest in what one might call materialist interpretations of the world economy. Since the Internet boom of the 1990s, it had become popular to talk about the increasing dematerialisation of economic activity, as physical products and services were replaced by information stored and processed by computers. In the words of Mr Nicholas Negroponte of the Massachusetts Institute of Technology’s Media Lab: “The change from atoms to bits is irrevocable and unstoppable.”

Over the past decade, however, the economic damage done by high oil prices, the alarm over China’s restrictions on exports of rare earths, and the doubling of world steel production in 15 years have all shown that sometimes there is just no substitute for physical substance.

OVERCOMING SCARCITY WITH INGENUITY

The guru of modern thinking about the significance of materials is Professor Vaclav Smil of the University of Manitoba, described by Bill Gates as “my favourite author”. In his view, physical substances remain central to modern economies in spite of all the advances in information technology, and the apparent evidence of dematerialisation is often misleading.

In his latest book, Making The Modern World, he cites computer-aided design. The Boeing 747, designed in the 1960s, required 75,000 drawings with a total weight of 8 tonnes. Using computer-aided design (CAD) for the 767 in the 1990s did away with all that paper, and cut costs and design time.

However, as Prof Smil points out, the CAD system required computers, data storage, communications, screens and electricity to run. Given the complexity of the systems involved, it is far from obvious that the switch to CAD cut United States use of materials overall.

It is true that in computing power there has been spectacular dematerialisation. All the computers sold in the world in 2011 weighed 60 times as much as the total sold in 1981, but had 40 million times the memory.

But where microchips are not the dominant component of the total design, Prof Smil wrote, there has been no even remotely similar mass decline. In some sectors, technological progress has actually made products more “material”. The Ford Model T, one of the first automobiles, weighed 540kg; the F-150 pick-up, which is its most popular model today, weighs more than 2 tonnes.

Prof Smil’s conclusion is that while dematerialisation, in the sense of reduced material use for every dollar of gross domestic product, has been a trend for decades and can continue into the future, an absolute reduction in the world’s use of natural resources is highly unlikely. If growth continues, at some point those resources will run low.

While we do not know when we will hit the limits of materials usage, we know they are out there somewhere. Tensions such as the dispute over rare earths or rising commodity costs could have serious consequences for growth.

Prof Smil’s answer is that we need to think about rational futures of moderated energy and material use. As he admits, though, it is hard to see any political leaders being prepared to offer their citizens less and less in the future; particularly not in emerging economies where billions are hoping to come closer to developed world lifestyles.

The application of technology to physical problems can yield remarkable results. It was no coincidence that the most significant innovation of the past decade was the progress in horizontal drilling and hydraulic fracturing that unlocked previously inaccessible shale oil and gas reserves. While materials may be finite, human ingenuity is not.

Still, Prof Smil’s work is an essential reminder that we are not, in fact, creatures of pure light that can shrug off our physical constraints.

There are ways that atoms can help us that bits will never be able to replace. THE FINANCIAL TIMES

ABOUT THE AUTHOR:

Ed Crooks is The Financial Times’ United States industry and energy editor.