Act Now (by CoB Monday) to Support Energy!

If you care about making sure we're not dependent on foreign countries for our energy – and that we don’t continue to hamstring our economy, jobs and revenue stream – American Solutions has a very timely call to action that will take you less than 1 minute. But you need to act now. The deadline for comments is tomorrow.

The Department of Interior, which decides when and where we drill for oil and gas, has been holding a "notice and comment" period. This is when they solicit input from the public as to whether we should drill or not.

This is one way that the anti-energy interest groups have been able to successfully block any common sense development for decades.

The deadline for submissions is Monday, and we need your help to overwhelm the Interior Department with comments in favor of drilling.

Please take 1 minute to submit your comments right now at YourEnergyOpinion.com.

If you don't have time to write anything, don't worry. We've already taken care of it for you. Just fill in the personal information section, and click “submit.” But feel free to modify the message, or add your own comments at the end. (My standard text and personal comments are pasted in below.)

Once you submit your comment, please forward YourEnergyOpinion.com to anyone else that you think would be willing to help out.

This is an opportunity that we must seize.

Global Warming Boondoggle Moving Forward?

I am told that the House Energy and Commerce Committee (chaired by Henry Waxman) is busily trying to get momentum to pass Waxman-Markey global warming legislation (still in draft form) through the committee (possibly even bypassing their own normal subcommittee process). This is obviously a tremendously important issue to all Americans, but especially here in New Mexico, a state that relies heavily on the 23,000 jobs created in the oil and gas industries (not to mention other natural resource intensive industries).

Paul Chesser, a colleague of mine in the State Policy Network movement has blogged about the Waxman-Markey bill over at American Spectator. The basic point Chesser makes is that Waxman-Markey would cost billions of dollars in energy taxes and lost economic growth with virtually no impact on the supposed problem of global warming.

Hopefully -- for both America's economic future and his own political future -- Obama realizes that fewer Americans are buying into global warming and abandons these misguided and economically-destructive efforts immediately.

Selling Carbon (and other Sin) Taxes

Carbon Taxes, like any pollution or sin tax, are an attempt to capture the externalities associated with a transcation that are not captured in the price. Put more briefly, carbon taxes make customers who buy products which cause global warming pay for the environmental damage caused by their use of these products. The goal behind these taxes is to lessen consumption of these products and reimburse society for the harm done. The significant danger behind such levies is that they become a cash cow, which gives society an interest in setting the tax low enough that the behavior goes on. This is called codepenency in the recovery community - and it is not good. The way out of such codependent relationships is to designate all funds collected from carbon taxes (and other sin taxes) toward government spending designed to reduce or eliminate the undesireable behavior. That way, when the behavior is eliminated, the program to counteract the behavior is eliminated too.

For tobacco taxes, instead of using these funds as a cash cow, it would be better to fund smoking cessation and heart disease, cancer and COPD (formerly emphysema) treatment and research, as well as programs to help tobacco farmers find an alternate crop (such as fish farming). If taxes are not high enough to adequately fund all the consequences, the tax would be raised. If all programs are well funded and there is money left over, the taxes would be decreased.

Alcohol taxes would fund both addiction prevention and treatment and the criminal justice systems, since alcohol is the most likely gateway drug to other substances and because it is also responsible for the vast majority of violent and property crimes. If marijuana and other drugs were made legal, they could be taxed as well - although other drugs such as meth, heroin and crack cocaine would still be considered dangerous and use considered grounds for mandatory inpatient treatment (rather than incarceration). If taxes on alcohol and drugs are too low to fund needed treatment and incarceration activities, they would be raised. While most people who imbibe do not cause negative consequences to society, a minority of users who are alcoholic or addicted consume most of the alcohol and drugs sold, so these consumers would pay most of the taxes and use most of the required services. Of course, taxes should not be so high that black market sources of supply are encouraged.

Carbon taxes hold the most promise for identifying offsetting spending programs. The way to sell these taxes is to link already popular spending programs to the tax, rather than to the general fund. Gas taxes should become a carbon tax and be allocated for both advanced transportation research as well as road building and mass transit, including Amtrack. Reforestation would also be funded by carbon taxes. All hydro-electric projects performed by the Corps of Engineers should be funded by Carbon Taxes, as well as new nuclear power plants and the Office of Fusion Energy. Indeed, carbon taxes should be increased enough to accelerate this research beyond the current timetable, since Helium-3 Fusion reactors are both absolutely save and emissions free. Once the technology is fully developed, it will be commercially viable on its own and will eliminate the need for almost all mechanical emissions of carbon gasses for power, industry and transportation. Putting the pork barrel lobby behind the carbon tax cannot but help hurry the day where this is possible.

Instead of Green Goofiness, Celebrate Human Achievement this Saturday

You may not be aware (if you have anything better to do than sit in your living room with the lights out), but Albuquerque is one of hundreds of cities that has signed up to "celebrate" earth hour this Saturday night. According to the Earth Hour website, the idea is to turn off the lights for one hour at 8:30pm. The goal is to "take action" against global warming.

This is one of the silliest ideas ever. Why stop with lights? How about turning off the heat, refrigerators, and not driving? Will the City turn off street lights and traffic lights? Will hospitals turn off their lights and machines? The fact is that electricity and energy usage in general makes our lives better and turning out the lights for an hour every year isn't going to change that.

Thankfully, I'm not the only one pointing this out. In fact, our friends at the Competitive Enterprise Institute have created "Human Achievement Hour" to be celebrated at the same time during which we are encouraged to "salute the people who keep the lights on and produce the energy that helps make human achievement possible."

So, if you'd rather sit in the dark this Saturday, no one will stop you, but I'll be either out with friends enjoying the fruits of capitalism or I'll be watching the NCAA Tournament on my High Definition television.

A Quick and Easy Global Warming Solution

Barack Obama has been talking about billions of stimulus dollars towards alternative energy. This may be way than necessary. Watch this video on a nearly forgotten technology from a half century ago. All we need to do is bring this old technology up to 21st century standards and we can shut down our coal fired power plants.

Price Gougers Wanted

The Bush years are looking more and more like the Nixon years: a dishonest executive, a military quagmire, paranoia, upset hippies, ballooning size of government, and now...gas lines – at least if you live in the mountains of Western North Carolina. Last night on the way to the organic grocery store I counted 12 closed gas stations and one that was open.

What gas that is available is going for close to $4/gallon, and people are angry. Some complain of “price gouging.”

I complain too: we don’t have enough price gouging!

The Colonial Pipeline, which supplies my area, is fed by refineries hit by hurricanes Gustav and Ike. Trucking in gasoline from other sources is expensive because we are uphill. Prices should be high in order to encourage conservation, and pay people to truck more gas uphill.

But NOOOOO! North Carolina has laws against “price gouging.” So instead of temporary $6 gasoline, we have no gasoline at most stations. When a station does open, people line up and fill their tanks to the top. The market is stockpiling after the production shortfall.

Price gouging should be legal. Let the prices rise high enough and people will start delivering gas in plastic tanks in the back of their pickup trucks, if that’s what it takes. With high prices and assurance that gas will be available, people will buy just what they need until the shortage ends. If price gouging was legal, wholesalers would have stockpiled before hurricane season in order to make a windfall.

Stupid politicians.

Maybe the Peak Oil disaster mongers are right. Maybe Peak Oil will destroy the economy and end civilization – if our politicians are too economically ignorant to allow prices to rise in times of shortage.

Want Offshore Drilling and Lower Gas Prices: Comment Here!

The US Minerals Management Service recently announced that it intends to prepare a new Five Year Leasing Plan for the Outer Continental Shelf. This is a vital first step in initiating more exploration and production on OCS lands that MMS estimates could hold 86 billion barrels of oil and 420 trillion cubic feet of natural gas.

MMS has opened the process for taking public comments. I’m writing to you, in hope that you will take a few minutes form your hectic day to write a brief note or letter to MMS, underscoring your support for leasing these lands and producing more of the oil and gas that are the foundation for our economy, living standards and opportunities.

Already, a number of environmental pressure groups have mobilized their extensive financial and networking resources, to deluge MMS with comments OPPOSING any plan that opens up more OCS acreage for leasing and drilling. I’ve heard that comments to MMS are currently running at approximately 15 to 1 AGAINST opening new OCS areas – and thus in favor of continuing the unconscionable Energy War on Poor Families.

To make it easier for you to write a letter to MMS, I’ve attached a sample letter (click on the link below) that provides some facts and ideas you can use, and that you can tailor to your own taste. Also attached are a couple of background papers by MMS and the National Ocean Industries Association (NOIA) that provide useful information about the OCS program and the laws and technologies that enable us to extract even more energy, from even deeper waters, with even greater care for the environmental values we all cherish.

You can send a detailed letter like this. But even a brief letter supporting a full analysis and expanded leasing program will help greatly.

All comment letters must REACH MMS by SEPTEMBER 15, when the comment period closes.

Letters can be snail-mailed to the addresses on the sample MMS letter – or they can be submitted by going to the MMS website (http://www.mms.gov/5-year/5-YearProgramComments.htm) and using either of the following links:

via the web: Public Commenting System

via e-mail: 5YearRFIComments@mms.gov

Comments on 5-Year OCS Oil & Gas Leasing Program for 2010-2015

Ms. Renee Orr
5-Year Program Manager
Minerals Management Service (MS-4010)
Room 3120
381 Elden Street
Herndon, VA 20170

Mr. James F. Bennett
Chief, Branch of Environmental Assessment
Minerals Management Service (MS-4042)
381 Elden Street
Herndon, VA 20170

Dear Ms. Orr and Mr. Bennett:

I am writing to express my strong support for MMS plans to initiate a new five year leasing program, and for expanded leasing on the Outer Continental Shelf (OCS) during the 2010-2015 five-year period. I urge you to fully consider and carefully analyze all planning areas of the OCS, leaving none off the table, as you prepare the draft proposed program and environmental impact statement.

Energy is the foundation of modern society and the living standards we enjoy. It is the key to actually securing the rights and opportunities guaranteed by our Constitution. Abundant, reliable, affordable energy is essential for jobs, food, heating and transportation. Reducing the soaring cost of energy is especially important for America’s small businesses, minorities and poorest families.

Right now, the United States is spending almost $700 billion a year to import foreign oil and gas – because we have made the vast majority of our lands and resources off limits to drilling. As T. Boone Pickens constantly reminds us in his ads, this is rapidly becoming the largest transfer of wealth from one nation to another in the history of mankind. It can not, must not, and need not continue.

On top of that, as Investor’s Business Daily notes, “America is nearly helpless in the face of a resurgent Russia intent on reclaiming its czarist empire, an Iran hellbent on acquiring nuclear weapons, a China making common cause with dictators to acquire energy, and a menacing Venezuela aligning with Russia and Cuba to control sea lanes in the Caribbean, where 64 percent of all US-bound tanker traffic passes.”

The oil and natural gas beneath the 1.76 billion acres of the OCS are vitally needed resources that belong to all Americans. Nearly one-third of US domestic production already comes from the OCS, and the Minerals Management Service has conservatively estimated that undiscovered, technically recoverable resources could total 86 billion barrels of oil and 420 trillion cubic feet of natural gas.

The long record of OCS operations demonstrates that this energy can be produced without harming the marine environment – thanks to new rules, technologies, and commitments by government and industry alike to environmental safeguards. In fact, there has not been a major spill from an OCS production platform in nearly 30 years, and MMS data show that only 101,995 barrels of oil were spilled during all operations on the OCS between 1980 and 2007, out of 11,855,000,000 barrels produced.

MMS is required by law to prepare a schedule of OCS lease sales that “best meet national energy needs for the 5-year period.” To achieve this goal, the agency must develop a schedule that has maximum flexibility, and include as much acreage as possible, so that it can respond to our nation’s changing and growing energy needs, population and economic growth, and economic and national security.

Growing US and world demands for oil and gas are not being met with adequately expanding supplies. As a result, gasoline and other energy prices have more than doubled in recent years – and far too many families have had to make painful choices between heating, eating, medical care, transportation, and rent or mortgage payments. Many have little money left over at the end of the month for vacations, college or retirement. This is both intolerable and unnecessary.

A major reason for this situation is that our own government has closed numerous areas to leasing – and denied us access to energy resources that belong to the American people. In fact, for decades now, Congress has imposed “temporary” moratoria that prohibit oil and gas leasing, drilling and production on 85 percent of the Outer Continental Shelf off Alaska and the Lower 48 States.

Over the past year, however, people have begun to realize that government has become the cause of, rather than the solution to, high prices and other energy problems. By margins of 2:1 and even 3:1, they are now demanding that these moratoria be lifted, and drilling resumed on the OCS.

President Bush recently reversed the Executive Branch prohibitions on leasing and drilling, and Americans are demanding that Congress now lift its prohibitions. I am optimistic that Congress will ultimately listen to the will of the people and act responsibly, to end the needless moratoria.

Alaska Governor Sarah Palin has already removed restrictions on drilling for 30 billion barrels of oil in the Chukchi Sea and all the natural gas in the Beaufort Sea off Alaska’s shores. She has already finished the environmental impact studies, so that shipments to the Lower 48 can start in as little as a year or two – if MMS and Congress do their jobs.

I therefore believe MMS has a responsibility to take a long-term view, assume the moratoria will end, and include in its analyses and plans all the Outer Continental Shelf lands and resources that We the People of the United States own off our shores: in the Atlantic, Pacific, Gulf of Mexico and Alaska. The new MMS plan will be in effect until 2015 – and I ask simply that MMS devise its plan accordingly, to reflect continually changing global conditions and steadily rising energy demands.

That means including all areas, off all our coasts in the new Outer Continental Shelf leasing plan.

Thank you for providing this opportunity to comment, and for making the 2010-2015 OCS plan a truly comprehensive plan that does exactly that.

Sincerely,

Lets Drill Our Way to Lower Taxes

My former colleague at the National Taxpayers Union, Andrew Moylan, had an excellent op-ed in the Wall Street Journal recently which discussed yet another often-overlooked reason to open new areas to domestic drilling: a gusher of tax revenues.

As has been made abundantly clear in New Mexico during this special session, this state relies heavily on oil and gas revenues for tax revenues. We're not alone. The federal government also collects billions of dollars annually from oil and gas and, as Moylan points out:

The potential federal revenue from Arctic National Wildlife Refuge (ANWR) oil development is $191 billion over 30 years -- roughly $18.36 per barrel, based on projections of recoverable reserves. Applying that formula to the 107 billion-plus barrels of recoverable oil that federal agencies estimate is in ANWR, the nearby National Petroleum Reserve and offshore tells us that sensible drilling could yield nearly $2 trillion in overall revenue over 30 years, or an average of about $65.5 billion per year.

Additional domestic oil and gas drilling is already a "win, win." As Moylan concludes, "More supply, lower gas prices, greater energy security, and lower taxes. What are we waiting for?"

Jeanne Dixon, Russia v. Georgia, China, the CIA and Global Warming

There is a book by Jeannie Dixon where she predicted a Chinese migration into Russia. Given the current demographic reality, with the bulk of the Chinese population concentrated on their coast, this seems nutty.

Given the possibility of global warming and the current conflict between Russia and Georgia, her premonition deserves a second look.

It is hoped that the CIA is looking into what would happen if sea levels rose and the price of gasoline began to rise again. Global warming may be off the table at EPA, it should not be at CIA. Both energy prices and rising sea levels may drive the majority of the Chinese population away from the coast and the Chinese military west in search of oil, which is conveniently located in Siberia. Global warming and changing weather patterns could water the Gobi, or at least force the kind of technological development which makes drinking water more available in the Russian Steppe.

Due to the value of the resources contested in any Sino-Russian conflict, nuclear weapons won't be used - at least not strategic ones. This makes analysis of Russian v. Chinese conventional capabilities over the coming years essential. As we learned in Korea, China has the advantage of numbers, even after the one-child policy has been in effect for a generation. As those pampered pets need gas for their cars they may go west to get it. Picking on the Georgians, or even pushing back against Georgean militants, is one thing. Fighting a surging China, whether in war or in illegal immigration, is another (as we know with our southern border).

Backyard Nukes?

This is one scary link.

Nukes, for power or as weapons, changed everything, as I see it. If civil society allows them, I'm not at all sure we have a civil society. Justifying them goes to loopy places.

(HT Tyler Cowen)

-RC

Is Transit Really Green?

The conventional wisdom is that projects like the RailRunner and Mayor Marty's proposed trolley are inherently "green" because they get people out of their cars. While this is usually the case if a bus or train is full and automobiles contain only one passenger, this is not how the equation usually works.

In fact, Brad Templeton does an excellent analysis of various transit systems and compares them with automobiles of different sizes and occupancies and finds that construction of new transit systems and even the use of buses is not necessarily green, especially when compared with small cars and cars containing multiple passengers.

As he points out:

A full bus or trainload of people is more efficient than private cars, sometimes quite a bit more so. But transit systems never consist of nothing but full vehicles. They run most of their day with light loads. The above calculations came from figures citing the average city bus holding 9 passengers, and the average train (light or heavy) holds 22. If that seems low, remember that every packed train at rush hour tends to mean a near empty train returning down the track.

After all, how often do you see empty or out of service buses driving around town? The Rail Runner certainly isn't always full.

Templeton isn't the only one who is skeptical of the relative "green-ness" of transit. Randal O'Toole over at the Cato Institute argues in a recent research paper that rail transit doesn't save energy or reduce greenhouse gas emissions.

Before we embark on massive new transit projects, we should carefully analyze whether or not these projects are really good for the environment.

Enivornmentalism Turns Against Itself *UPDATED*

After Dr. Foldvary's article (Ethanol subsidies starve poor kids) and seeing a report on Comcast News about the rising cost of "organic" and "environmentally friendly" food -- and headlines like "Era of cheap food ends as prices surge" (h/t Drudge) -- I'm beginning to wonder whether the environmentalist movement doesn't need to be a lot more centralized and coordinated.

If environmentalist causes drive up the cost of food, and that keeps people from buying "environmentally friendly" foods, then . . . . What was that about "a house divided against itself"?

Speaking of the unexpected results of environmentalism, did you see this from NPR last Fall?:

Rice fields are a major source of methane — one of the so-called greenhouse gases linked to global warming. But switching to other crops is unthinkable in Asia, where rice is the primary source of calories for many people. So scientists in Thailand are trying to find rice cultivation techniques that produce less methane.

And speaking of government subsidies (in the name of environmentalism) getting in the way of "environmentally friendly" causes, see Peter Robinson's interview with T.J. Rodgers (in five parts: One, Two, Three, Four, Five).

The centralized power of the US government evidently isn't enough to coordinate the environmentalist movement. And it would be no use appealing th the UN.

(But why use a government body at all?)

-MT

UPDATE:
Looks like it's a busy week on the ethanol/food/environmentalism front. See the following four pieces on NRO today:

Hungry Like the Ethanol Wolf [Editorial]
A New Environmentalism -Victor Davis Hanson
Global Food Riots -Deroy Murdock
Saving the world is cheaper than free -David Freddoso

And see the following recent headlines on Drudge:
Americans hoard food as industry seeks regs -Patrice Hill, Washington Times
Load Up the Pantry -Brett Arends, Wall Street Journal
Two major US retailers ration rice amid global food crisis -AFP
Run on rice makes its way to U.S. -Jerry Hirsch and Tiffany Hsu, Los Angeles Times

Calculating the Cost of a Carbon Tax

Over at Holistic Politics, I have updated my chapter on cheap and pleasant ways to fight global warming.

In particular, I have incorporated more recent tax and energy statistics for my calculations of what carbon tax rates are needed to replace either the income tax or FICA and the impact on energy prices. Assuming no immediate conservation, a $0.67/kg tax on fossil fuel carbon could replace the income tax. This translates roughly into a $2 hike in gasoline prices and a $0.106 hike in the cost of a kilowatt hour of electricity. In actual practice, we'd have to go with higher rates to offset the effects of conservation.

If people conserve too much, completely replacing the personal income tax with a carbon tax would be impossible without deep spending cuts. But there are other possible uses for a carbon tax: deficit reduction, cuts in other taxes or funding a Citizen's Dividend. To this end, I added some carbon tax calculators so you can design your own carbon tax.

Enjoy.

The Price of Gas, Again

Here come the regulators, once again. With regular gas topping $3 per gallon, the notion that "something must be done" about this "gouging" is in the headlines.

Last time this happened, it was due to Hurricane Katrina. That one was more easily explained away, as supply was temporarily curtailed due to Gulf ports being shut down.

This time, it's not so easy. For this time, it's more about FUTURE supply concerns, driven by geo-political risk. Review the "news" of the last month, and we begin to see why. Bush has said US forces will be in Iraq through 2008. And now the saber-rattling has intensified regarding the Iranian's desire for nuclear power and, potentially, weapons.

Radio pundit Bill O'Reilly likes to describe people as "pinheads." His call, of course, but I sometimes wonder where he gets the audacity. Yesterday, he correctly cited the commodities and futures markets as the "culprit" for higher gas prices. He called them "gamblers." Gas prices shouldn't be going up, he says, for current supply is bountiful.

Bill, I humbly submit, is confused. He doesn't seem to understand that "supply" and "demand" aren't simply calculated in freeze frames. Let's take a simpler example. When a big snow storm is predicted, say, a week out, grocery stores tend to "stock up" on ice-melting crystals. The snow may or may not hit, and customers may or may not buy the inventory, but all this is done IN ANTICIPATION of a storm. It is, to use O'Reilly's term, a "gamble" of sorts.

In a sense, that's what commodities traders are doing. They correctly see that geopolitical risks have increased in the oil-rich Middle East, and they have bid up the price of oil and gas. This mechanism, while not always correct, does tend to smooth out supply and demand, and in the long run is integral to the operation of the marketplace. It does so voluntarily, I might add, rather than through goverment force. Government is largely outside of the market, and intervening in the market almost always leads to unintended consequences, negative ones.

Demogoguing on the price of gas may win temporary points with the electorate, but it serves no one except the demogogue. Let's give peace in the marketplace a chance.

Environmentalists should view this all as a positive development. If such a basic stuff of life like gas is supplied in such a fickle way, consumers will start to demand more energy-efficient vehicles, or alternative means of power, like hydrogen-powered cars. Sometimes, change like this isn't pretty or orderly, but it does tend to work.

-Robert Capozzi

Problem Already Solved?

For my past few posts I have been tearing apart the many illogical statements made in http://www.lifeaftertheoilcrash.net, a site devoted to claiming that we are doomed because of the impending peaking of the oil supply.

My intent had been to follow these reviews with some posts on ways that we can deal with the oil peak without a collapse of industrial civilization, and I still might, but another physicist, Amory Lovins, appears to have beaten me to the punch. See the February issue of Discover. Or see the free posting on their site.

According to the article, the problem is already solved. The article only lists some of the solutions, but others are hinted at, and Dr. Lovins has a bunch of books out. I have some reading to do.

Here is the interesting part: many of the ideas I had intended to post are not in this article. This doesn't mean my ideas are original, of course; it only means that there are so many potential ideas that we can pick and choose.

So much for doom.

Life After the Oil Crash 4

Continuing my review of lifeaftertheoilcrash.net from December 11.

Unlike the old eco schools which pushed conservation, efficiency, and/or alternative energy, Mr. Savinar manages to cast a pall of doom over every possible alternative.

Consider Canadian tar sands: he points out that the energy return on investment is a mere 1.5 to 1. That is, for every 1.5 unit of energy extracted, 1 unit is consumed. This is certainly bad for the environment, and not as good for the economy as conventional oil, but it does not spell the end of industrial civilization. (And I will discuss ways around this problem in a future entry.) He then cites forecasts of a mere 2.2 million barrels/day for 2015 or 4 million barrels/day by 2020. However, I see no indication in these forecasts that the forecasters are taking into account the dramatic drop in conventional oil that Mr. Savinar forecasts. If conventional oil drops suddenly and prices rise dramatically, there will be a black gold rush into Canada to increase oil production from tar sands.

The same holds for oil shale in the U.S. We have lots of it, but it is expensive and environmentally damaging to extract. But if the drop in conventional oil threatens civilization, the economics of oil shale will change dramatically. Just because previous attempts to make money extracting oil from shale have failed, it doesn’t mean future attempts will fail. A more relevant question is: what is the net energy gained from oil shale harvesting? If negative, then the oil shale is indeed worthless. Somehow I doubt the pessimists. Given enough incentive, someone will figure out how to get net energy from oil shale unless another energy source surfaces first.

Mr. Savinar makes several tremendous errors, all of which stem from not understanding the role of price in the economy.

First, he looks at the huge increases needed for various alternative technologies to make a dent in overall energy production. For example, he cites David Goodstein who estimates that it would take 220,000 square kilometers of solar panels to replace our current fossil fuel use. Currently, we have a mere 10 square kilometers. This is certainly a huge factor, 22,000, but so what? Today, solar cells are several times more expensive than hooking into the conventional grid. Today’s solar cells are just for hobbyists and remote locations. Should the cost of electricity from fossil fuels double or more, then the economics completely changes. We will not be looking at 10%/year growth; we will be looking at over 100%/year.

This has happened in the past. Look at car production before the Model T came out. The idea of commoners owning automobiles was science fiction. Ditto for the idea of home computers in the 1960s. And unlike the 1960s for computers, we already know how to make solar cells that aren’t that far off from being competitive. Without any true breakthroughs in technology, solar cells become competitive should fossil fuels go up enough in price. And there are some interesting new technologies still in prototype stage.

Later, he “debunks” some of the more advanced technologies, sometimes correctly. Mixed in this debunking is some of the silliest logic yet. When he looks at “thermal depolymerization,” a technology for converting organic garbage into oil, he correctly notes that we cannot run civilization off of garbage. It takes energy to create garbage in the first place. Then he gets silly. He says it costs $80 to produce a barrel of oil using this technology. Meanwhile the Saudis pump oil for $2.50/barrel and the Iraqis for $1.00/barrel. A barrel of oil would have to sell for $1,600-$4000 to have a comparable rate of return for thermal depolymerization.

SO WHAT!! So garbage men won’t be driving around in Rolls Royces like rich Arabs do today. Most businesses function quite well on much lower rates of return. Should oil stabilize at $100/barrel, then this technology becomes quite profitable. Actually, less may do the trick since disposing of garbage is also an economic benefit.

This logic applies to all alternative technologies. Once they are as cheap as fossil oil, then investment will increase suddenly. What is a hobby today becomes tomorrow’s necessity.

Finally, Mr. Savinar uses some strange reasoning to claim that conservation and efficiency will make our problem worse. He cites Jevon’s Paradox which states that energy efficiency increases energy use. This paradox is true – when energy prices are held relatively constant. When computerized fuel injection made gasoline engines more efficient, many people bought more powerful cars. Others went from cars to SUVs. When computers went from room sized energy hogs to small home appliances, total energy used for powering computers went up, because more people compute. (This example comes from the other side of the Peak Oil debate, actually, from Huber and Mills’ The Bottomless Well.)

All this is true, if energy prices are stable. If oil production drops off steeply enough, then prices will go up unless alternatives fill in the demand. In this case, price will balance efficiency making oil consumption go down, regardless of efficiency. Increased efficiency serves to allow maintaining a quality lifestyle while oil consumption goes down.

Mr. Savinar gives a particularly contradictory example of Jevon’s Paradox. He describes a business owner who saves $500/month through energy conservation and efficiency. This money goes into the bank, where it gets reinvested, thereby boosting the economy, and thus energy use. There is a false assumption here: that dollars/BTU of energy must be constant. That savings could end up being invested in alternative energy or energy conservation. Earlier on the site Mr. Savinar complains about the capital cost of switching energy technologies.

Let us even suppose that energy extraction is a fixed fraction of the economy. Even if the economy grows, energy extraction could be stable or even go down. It depends on the price of the energy. If energy doubles in price and efficiency doubles then the economy could be exactly where it was in both real and dollar terms.

OK, I am tired of beating up on this site. There are other fallacious arguments, but this is too much like shooting fish in a barrel. What I have not fully covered is where Mr. Savinar is right. There is good information mixed in with the junk. I agree with him that biodiesel from vegetable oils and ethanol from corn are questionable replacements for gasoline. I think using hydrogen as a motor fuel is ludicrous given the current state of technology. Even if a cheap fuel cell is developed, we still have serious problems in distribution and replacement of infrastructure.

Many of the proposed replacements for fossil fuels floating around are questionable. Given this, it is forgivable for those who have limited faith in the market to panic. And I want to repeat that not all peak oil manifestos are as bad as this site. Richard Heinberg’s book, The Party's Over is much better, but even he is blinded by his ideology and makes some ridiculous predictions near the end.

In future posts I will show why there is no need to panic. There are reasonable technologies already available, and simple government actions that could be used to smooth the transition.

Life After the Oil Crash 3

Continuing my review of lifeaftertheoilcrash.net from December 4.

Mr. Savinar then moves on to some serious fear-mongering. He cites something called the Olduvai Gorge theory, which purports to prove that industrial civilization is going to start on a downward cliff in 2012 and be down to 1930s per capital energy consumption by 2030. Going to the cited web site, I found a graph showing predicted world oil production. The author then equates this with a serious decline in electricity production.

Dumb!! Electricity is primarily from coal, not oil. Yes, some heavy fractions of oil are used for electricity, and some waste heat from refineries is used for electricity, but the major source is coal, and there is a lot of coal left in the ground. There is also quite a bit of potential for expanding nuclear capacity.

Easy political prediction: breeder reactors will be made legal and even subsidized should electricity become scarce. If you don’t like nuclear power, get cracking on affordable solar power, because the median voter will risk nuclear proliferation well before voting to go back to the stone age.

The author does have something resembling a point when he says that the use of natural gas to make electricity cannot go on. However, it doesn’t have to. As soon as natural gas goes up in price, there will be a call for building power plants using some other form of energy. Don’t panic over brain dead extrapolations.

Now for Mr. Savinar’s next argument:

"Big deal. If gas prices get high, I’ll just drive less. Why should I give a damn?"


Because petrochemicals are key components to much more than just the gas in your car. As geologist Dale Allen Pfeiffer points out in his article entitled, "Eating Fossil Fuels," approximately 10 calories of fossil fuels are required to produce every 1 calorie of food eaten in the US.

This argument has some merit, but Mr. Savinar exaggerates it tremendously. It is certainly true that a 10% drop in oil will likely need more than a 10% drop in automotive travel. Higher priority uses of petroleum like petrochemicals and agriculture will take precedence. However consider these arguments:

1. Pesticides are made from oil;

They don’t have to be. But they probably will be, since the amount of oil needed to produce pesticides is small compared to current use.

2. Commercial fertilizers are made from ammonia, which is made from natural gas, which will peak about 10 years after oil peaks;

They don’t have to be made from natural gas. A quick googling of “Haber Process” reveals that we need heat and hydrogen to make ammonia for fertilizer. We can get these from nuclear, solar, wind, coal, oil shale or biomass.

3. With … farming implements such as tractors and trailers are
constructed and powered using oil;

And these uses will get dibs on scarce oil if no substitute is available. But do not that the technology to convert coal or biomass into diesel fuel goes back to World War II.

4. [paraphrase] Food storage systems require fossil fuels. But most of the fuels are used in the form of electricity. We have a longer lead time before we run out of coal, and there are other alternatives.
5. [paraphrase] on average, food is transported almost 1500 miles before it gets to the consumer.

This is trivial to fix. Agriculture is currently optimized to minimize labor costs. Should energy costs go up, this will change dramatically. For example, where I went to high school in rural eastern Virginia, there used to be large tomato fields. These are all gone in favor of basic grains, because the canning industry centralized. This process is completely reversible. Similarly, because of pollution, the Chesapeake Bay is oyster yields have dropped dramatically. Rather than close the oyster shucking houses, oysters are hauled from the Gulf Coast to be shucked by these skilled laborers. Should fuel become more expensive than training oyster shuckers, this will change. No exotic technology is needed whatsoever.

Mr. Savinar then goes on to state how a number of other industries rely on fossil fuels. Here, he is extremely sloppy in differentiating which require portable liquid fuels and which require electricity. Some of these uses do require liquid fuels, but peak oil theory does not prove that these fuels will disappear in the near future, only that production will drop significantly. High priority uses will continue! Low priority uses of oil, such as using a giant SUV to carry a single commuter, will decline unless a reasonably priced alternative is found.

And yes, there are alternatives. I will get to them in future entries, but I still have more bad arguments to refute first. Stay tuned.

Life After the Oil Crash 2

Continuing my review of lifeaftertheoilcrash.net began November 26.

Let us suppose that the basic prediction of the peak oil theorists is correct. Let us suppose that we are near the peak of oil production. From now on out, conventional oil production is going on a downhill slide. Does this mean the end of industrial civilization? Should we panic? Should we have a crash program to send people back to the villages?

Such are the prescriptions of various peak oil theory promoters. Before you follow their advice, keep in mind the degree of economic ignorance some of these people have. lifeaftertheoilcrash.net is particularly bad. Consider these quotes:

"In this regard, the ramifications of Peak Oil for our civilization are similar to the ramifications of dehydration for the human body. The human body is 70 percent water. The body of a 200 pound man thus holds 140 pounds of water. Because water is so crucial to everything the human body does, the man doesn't need to lose all 140 pounds of water weight before collapsing due to dehydration. A loss of as little as 10-15 pounds of water may be enough to kill him."

This is a really bad analogy. A better analogy would be that of a 300 pound glutton who has to go from a 4000 calorie diet to a 2000 calorie diet. The result might be painful, but not life-threatening. Or we can consider water itself. Suppose your water supply was cut in half: would you die of thirst? No!! You would simply have to bathe less, wash your clothes less, use a water conserving flap in your toilet, and/or stop watering your lawn. If the problem persisted, you might install an "alternative water" system; i.e., a cistern fed by your gutters.

Or how about this quote:

"A shortfall between demand and supply as little as 10-15 percent is enough to wholly shatter an oil-dependent economy and reduce its citizenry to poverty."

Piffle! Even if supply has a hard limit, demand is a curve. At a high enough price, demand matches supply. And we know quite well that an industrial economy can survive a shortage of cheap oil. The Europeans have been living with expensive oil for years due to their fuel taxes. Nazi Germany survived an oil shortfall by converting coal into diesel fuel. South Africa did likewise.

Or how about:

"The effects of even a small drop in production can be devastating. For instance, during the 1970s oil shocks, shortfalls in production as small as 5% caused the price of oil to nearly quadruple. The same thing happened in California a few years ago with natural gas: a production drop of less than 5% caused prices to skyrocket by 400%. "

Semi bad examples. In both cases there were price freezes by the government. In the 1970s, owners of old wells in the U.S. could not raise their prices to the world level. There was no incentive to increase output. Taking inflation into account, oil prices were being forced down at the wellhead in the U.S. In California, consumer prices were held fixed, and utilities were not allowed to by futures contracts. This was an artificial situation. Had consumers experienced a price rise by far less than 400%, demand would have subsided.

I say these are semi bad examples. It is possible for the government to go on a witchhunt accusing oil companies of "price gouging" or "windfall profits." If these idiocies lead to price controls, then we will have a true energy crisis. Congress has the power to turn peak oil into a full-fledged disaster.

To be continued...

Life After the Oil Crash

About a year ago I was working a booth at an energy fair when I was approached by a young woman who informed me that the free market was not prepared to deal with the problem of "Peak Oil," and that drastic action was needed NOW! She claimed that she had worked at the Cato Institute in the past, and had been in favor of market economics until she learned of the impending crisis.

Since then, the phrase "Peak Oil" has been popping up repeatedly, and I suspect it will reach the popular consciousness as much as global warming is today.

For those who have read the message of the Peak Oil Cassandras, I have an urgent message for you: DON'T PANIC! Things are not as dire as they claim.

For those who haven't been exposed, I will summarize their basic argument here, and then analyze their conclusions in subsequent entries. Before I get into the analysis, let me state from the outset that they could be onto something. Oil production may well peak soon, and there may be some economic hardships ahead. What I will question is how much action is required today, and whether the decline in oil production will result in the end of industrial civilization (their contention).

The Peak Oil thesis runs like this: when an oil field is discovered, initial production is small at first. It takes a while to drill the wells to tap into the field. As holes are drilled production increases. Then, when roughly half of the recoverable oil is extracted, production starts to decline. Pressure drops off. Secondary and then tertiary recovery techniques are required. These things keep production going, but at a lower and lower amount. Over time, the output from a field looks like some type of bell curve.

Each field has its own bell curve. The discovery of new fields is also a bell curve -- one which are on well on the right hand side of. Add up the curves and you get another bell shaped curve, the curve of total oil production. As a result, we can expect a decline in oil production long before we run out of oil. The decline should begin when roughly half of the recoverable oil is used up.

This by itself is good news. It means we will get a reduction in supply and a rise in prices long before we run out of oil. This gives the market time to respond!

Now, the pessimistic view: the initial drop-off could be steep. Further, demand is rising. When production starts dropping it could drop pretty fast at first -- possibly faster than the market could comfortably adjust to.

To makes things more fun yet, this peak could happen at any moment. According to the Peak Oil theorists Saudi Arabia and some of the other OPEC members could be very close to their peaks. This is a far different view than the official view, which has had reserves increasing dramatically during the 1990s. But, these stated reserves were stated by governments which had an incentive to fib: OPEC quotas are based on reserves. If a country ups its stated reserves, it can pump more oil and still comply with the cartel agreement.

This puts me in a peculiar dilemma: do I believe the fearmongers? Or governments which have an incentive to lie? Neither has a good reputation in my book.

In my next entries, I will assume the fearmongers to be correct up to this point. It is the consequences of the oil peak and how we should respond where I will differ. I do not think we are looking at the end of industrial civilization, or that we have to get the population back down to 2 billion or we must experience a die-off. I do not think that cars will be owned only by the rich, or that we must go back to a village lifestyle. (We might anyway, if people find that desireable, but that's another story.)

Until then, I invite you to read www.lifeaftertheoilcrash.net. Then, keep an eye on this blog and I will point out the errors on this site, and why things are not as dire as stated. If you want more homework, read "The Party's Over" by Richard Heinberg. The book is much better than the site, but, being a book, it is longer and you have to buy it.