Sunday, May 25, 2008

A Call To Arms and Minds

I sure hope we pay attention to this short essay by Ben Stein, "Running Out of Fuel, But Not Out of Ideas".

I'll quote part of it:

imports supply nearly two-thirds of our daily needs, according to the United States Energy Information Administration. Most of this oil comes from countries that are either unstable (Nigeria) or whose leaders or people dislike us (Venezuela, Saudi Arabia).... If there were another oil embargo, we would be in real trouble. If Mexico fell into chaos, if Venezuela stopped sending us oil, there would be extreme hardship.

Beyond that, what if we are close to peak oil — that point at which we have pumped out more than half the oil on the planet? What if supply slips and demand continues to skyrocket, as they are already doing, and these trends continue indefinitely? What if the world has a bitter fight over its remaining oil? Even if this battle is fought with money and not guns, we are at a disadvantage with our pitiful currency and our budget and trade deficits.

In my humble view, we are now in a short-term oil bubble. It will pass and correct, as bubbles do. And speculators will make millions, whichever way it goes. But the long run is terrifying. If we are at or past peak oil, if oil states stop or even hesitate to send us the juice, if Canada decides not to fill our needs, we are in overwhelming trouble....

He suggests we provide incentives to the oil companies. Most of us may not agree that oil companies need "incentives" other than profit. Profits are incentives. They need not be windfall profits to be effective incentives. Still, the profit margins of the oil companies are not relevant to the amount of, and finite nature of, the supply of the oil they sell. They don't make it, they just go and get it. When it runs out they can't make any more - and it will run out regardless of what they charge us for it.

He doesn't view global warming as a crisis on a par with running out of gasoline, but whether we go green or risk disaster from global warming we will still stop using fossil fuels. That is the nature of a finite supply - it will not remain abundant.

I agree with Mr. Stein that we are in a temporary oil bubble - there has not been a slow-down in production world-wide, all trade routes are open, and while demand continues to rapidly rise as China and India industrialize, it isn't rising faster than predicted. There is a record price in oil but no record shortage to go along with it. But the price of oil today, high or low, is not the point.

Mankind - and this may include our great-grandchildren in the near future - is going to stop using fossil fuels like it or not. I don't know if the needle on the gauge of the world's gas tank is closer to F, at the half-tank mark, or closer to E. That low-fuel light might be blinking, I don't know. We could argue about how much is left in the tank all day long. What should concern us is there are no filling stations with more gas for us ahead. Not "no gas next 100 miles." No gas for forever.

The Oil Age will end. The solution, hopefully, is to develop alternative energy. Mr Stein cites Glenn Beck, warning "we need a new moon-shot mentality here."

Sort of. I think we need to treat it as a national crisis to a larger degree. We need to plan for what to do in case of emergency, and we need a long-term plan to ensure our standards of living do not fall. We need to think in terms of the Cold War, yes, but not just the moon-shot - this effort will need to be much greater than that. The moon shot was only part of the Cold War. Think of the entire effort. We face our own tsunami, typhoon, hurricane, earthquake, whatever you want to call it - and this is not dismissive of the tragedy of events like the current tragedies in Burma and China. A worldwide and persistent fuel crisis has the potential to cost more lives, to reduce standards of living even lower, than any earthquake or flood or storm. Unlike a storm or earthquake, though, this threat might be and should be preventable.

And if not, then we prepare for it and carry on as a republic and a civil society - but we must face this crisis with more courage and more wisdom than we have used so far.

7 comments:

pluto said...

Since you've brought up one of my personal hot buttons I'm going to give you far more of my knowledge and opinions than you deserve. Sorry.

I've followed Ben on this for some time and I both agree and disagree with him. Yes, the $130+ per barrel prices are not sustainable in anything more than the short run. But that's not the whole picture.

Russia, Mexico, and Venezuela are all producing less oil than before and are predicting that they will produce even less oil very soon. This is mostly because all three countries have nationalized their oil resources and put political hacks in control who treated the oil as a cash cow that would never run out. Well it is.

Venezuela and Russia have easy access to greater deposits but, because of earlier piratical nationalist behavior, the oil companies are not willing to invest in those countries without guarantees that the Russians and the Venezualans are willing to make at this time.

Nigeria seems to be in a low-intensity civil war, that mostly goes unreported in the US, their output by 25%. Foreign oil experts are kidnapped or killed there on a regular basis. I am appalled that such news goes unreported in the US because Nigeria is our primary source of oil.

Existing North Sea operations are also running out. There is more oil out there but it is in ever-harder areas to reach and it will take time and lots of money to bring the new wells into operation.

Another major factor in the current price of oil is the falling US dollar. The dollar used to be the world's currency, but now has become so devalued that nobody wants it anymore. Oil prices haven't risen nearly as much if you price your oil in Euros or Yen.

So while Ben is correct that this is a short-term bubble that will pop by fall at the latest, there are a LOT of long-term trends, particularly the fall of the US dollar, that WILL drive oil prices higher over the coming years. I suspect in 2018 we will look wistfully back on our current oil prices and remember "the good old days."

George Bush knows all of the above and decided that the most logical thing to do is to beg his buddies, the Saudi royal family, to bail us out. They have refused him twice now and the second time was so stinging I doubt that he'll ask a third time. But the Bush administration seems to feel that it has now done everything it can and is content to sit back and do nothing. With leadership like that, I'm amazed that the burned-out remnants of the republic are still standing.

Your call to start researching alternative energy sources is a wise one but stands no chance of getting Congressional attention in the next year or so because the situation isn't obviously immediately life-threatening and Congress is far more interested in finding somebody to blame for the current situation than it is in finding ways to resolve the current situation.

We, the American people who are supposed to leader ourselves, have fallen into the seductive trap of assuming our government is doing something about this so we don't have to do anything more than gripe. What are we going to do when the full horror of the situation makes itself evident?

Fasteddiez said...

Pluto:

Also Cantarell is dying and Ghawar is dying. Methinks the Sauds are trying to keep the bad news from leaking out, but since the MSM is so moronic no worry. You can get some hints on CNBC, when top ranked Geologists or Oal Bidness experts are questioned. The sad fact is 85% of the land and sea rigs and associated infrastructure is growing more decrepit by the day and not modernizing fast enough to keep extracting the dwindling "Oal".

It is not all bad news, the Brazilians just discovered a huge find offshore, but it will be 5 years before it makes a difference. Canadian Tar sands are 1% of oil production now but, the process needs gazillions of units of water and natural gas to make it work, and is environmentally disastrous.

JD, I said I will not comment, I will modify to I will no longer comment on military things unless I spot a historical faux pas. I am so sick of the effects of politics, and the Murrican people, writ large on military institutions, not to mention Genruls in general.

JD. you ought to position yourself/career in a niche where Peak Oil can become rewarding. Pluto aren't you a Texan? I was one once....not native.

FDChief said...

As both you, Pluto and fasteddiez have pointed out, this is not so much a geologic or economic problem as a political one.

The simple physics of taking biomass and converting it, first to keratin and from there to petroleum (which requires a unique combination of ecology and geology as well as thousands of years) versus exploration, extraction, refining and consumption (which may take dozens of years at most) dictates that we are running through our supply of petrochemicals more quickly than natural processess can replace them. The Oil Era is ending. Q.E.D.

The problem is that the metrics we use to measure the distanc between now and "then" are multivariate. Consumption can be manipulated, as can both exploration and extraction technologies. So there's literally no way to stick a pin in the wall and say "We need to come up with an alternative by 21XX!"

And this, in turn, plays into the hands of the greedy, childish nature of American - and many other nations, I would add - politics.

Because without a hard terminus ad quem to "concentrate the mind wonderfully" as would the dangling noose we are, as a people, able to continue to whistle past this graveyard in an effort to deny the inevitable. Our politicians have learned the hard, Carteresque lesson that the American public doesn't really WANT to hear about sacrifice and change and the future. We want to continue to live in our delightful present, imagining that the party can be continued forever. The nasty end of the story can be fudged by a zillion details and variables and as such lends itself marvelously to those who wish to use our stupidity, greed and shortsightedness to cling to power.

As a strategy it will probably work in the short run, and the short run may be hundreds of years, long past the effective brainspan of the electoral cycle.

So. No worries, eh?

Nature has a natural selection effect on societies, too. I believe that if 51% of the American public is capable of swallowing the current GOP/libertarian nostrum of "market work; there's nothing wrong, don't listen to the kooks" then we have failed the Darwinian test and will go the way of the brontosaurus...

Andy said...

I'm not worried at all about oil. The simple reality is that cheap commodities mean there is no incentive to find or fund alternatives and cheap commodities increases demand. Take a look at what's happening with Iran and gasoline. The simple fact is that over the last 15 years we've gotten used to really cheap oil and all the benefits it gives us. $130 a barrel oil is not going to kill us - it's what will save us. The only thing that's gonna wean us from the Saudi teet is expensive oil. If the price stays that high and, more importantly, if the money people and investors believe it will stay high for a decade or more, then that is what will drive money into the necessary exploration and R&D for alternatives to oil and vast, but expensive to exploit, oil resources.

I grew up in Colorado and still remember the 80's - most of the state was economically depressed, unlike most of the rest of the country. The reason was oil. The late 1970's price spike poured tons of money into oil ventures that suddenly became profitable at those elevated prices. Many of these were in Colorado and a big one was shale oil. When the price collapsed, so did the Colorado economy and it wasn't just oil people who suffered.

Oil isn't going to go away anytime soon, but cheap oil probably is. At $130+ a barrel, a lot of options open up, both for additional oil-based resources and for alternatives. It doesn't scare me - I've been through this before. I hope the price stays high - the US needs some tough love.

Almost Drafted said...

Stein may be right about there being an oil market bubble -- even a blind squirrel finds an acorn now and again -- but I doubt it. What is the incentive for OPEC and the oil companies to reduce prices?

As JD said, they aren't making the stuff, they're just pumping it out of the ground and delivering it. If the cost of production/delivery hasn't changed significantly, then the price increases go right to the bottom line.

Further, Stein's "solution" to this problem is to drill everywhere and to gasify coal. We are running out of easy-to-pump oil, and we're also running out of Appalachian valleys in which to dump coal mine tailings. So I think Andy is absolutely right when he calls for tough love here.

The issues Stein raises are real, but what he proposes is kick-the-can until it's our children's or grandchildren's problem.

And let's consider the source. Stein is a former Nixon speechwriter and an evolution denier. I think I'll get my policy ideas from somewhere else.

Cheers,

JP

srv said...

Jeez. People have been talking about these issues for decades. Find someone other than come-latelys like Stein and Beck.

pluto said...

JP

There are two reason that oil is so high right now:
1. The stock market is looking shaky and the bond market is in near-meltdown. This is causing people to buy commodities, particularly gold and oil.

Once the worst of the panic is over people will want to sell their oil and we'll have a miniature oil glut for a few months.

2. We are hitting the beginning of the driving season and that typically drives up demand. This is particularly difficult for the industry because we don't have enough refining capacity to meet all of our needs during this time so we buy a lot of gasoline from other countries in addition to a lot of oil. This leads to a mini price boom every year at this time that typically ends around July 15th as producers get a handle on the seasonal needs.

This year is particularly interesting because a lot of Americans have heeded the call of their wallet and are staying home in record numbers, which makes the current high-priced bet on oil a bit shaky proposition.

In addition to the charges that you lay at Stein's door, he is also a perpetual optimist that things will always work out in the end. A strange thing to say about an ex-Nixon speechwriter...