Easter Island Earth

Examine this picture closely. It is the scariest picture you will see in a long time. It is from the International Energy Agency’s World Energy Outlook 2010. The IEA is the energy policy research agency of the Organisation for Economic Cooperation and Development (OECD), which represents the interests of the major developed market economies. Apparently.

So what’s so scary about this picture? The growing light blue wedge representing “Crude oil: fields yet to be found” is real cause for concern. Eliminate that growing wedge, and we do not have much more than five years before overall supply starts to decline.

The IEA argues that this is not a problem because any shortfall in supply will crank up prices, making it feasible to spend more on extraction – in effect squeezing more out of depleted fields. The problem with this prediction is that over the last three years while oil prices have hit new records and subsequently stayed well above the long-term historical inflation-corrected average of about US$30 per barrel, the IEA has downgraded their estimates of future supply with every annual Outlook. Another argument is that “unconventional” oil like tar sands will fill the gap but there again, the IEA’s forward estimates do not cover the shortfall.

How big a deal is that growing blue wedge? Oil fields have historically taken over 30 years to move from discovery to production and while this can theoretically be sped up significantly, the light grey wedge in the graph representing known oil fields that are not yet in production represents a massive investment in opening up new capacity. Even if the IEA’s phantom “yet to be discovered” oil fields actually exist explaining exactly how these will be brought on line almost instantaneously over a period of such massive activity in bringing known new oil fields on-line requires an extremely active imagination.

The factor missing so far from the picture is growth in demand, which has stalled over the last two years because of a worldwide economic crisis. Add in a return to growth and we will very soon hit the point were supply cannot keep up with demand. The market for oil largely exhibits inelastic demand – price changes have a limited effect on demand, because many uses either have no alternative, or require a change to a new technology to switch to an alternative. We can cut luxuries like overseas holidays and an unnecessary drive on the weekend, but farmers can’t switch to harvesting by hand on a large farm, nor can those who live in areas without public transport leave the car at home and take the bus or train to work.

In the long run, if prices remain high, the market will start to favour alternatives like public transport and renewable energy. The big risk with waiting for that market signal is worldwide economic collapse if the supply crisis happens rapidly, for the same reason that the demand is inelastic: we cannot switch instantly to alternatives that do not exist, even if the price signal favours them. Did the rapid rise of the oil price to $147 in July 2008 instantly convert every petrol engined car to electric, with all the problems of batteries solved? Clearly not, but that rapid price spike – terminated by a global financial crisis – is an indicator of what to expect.

How could we have allowed such a threat to develop? Did we have any basis to predict such a problem? Did we learn anything from 2008?

Incredibly, we have known that we would run into exactly this scenario since Shell Oil geophysicist M. King Hubbert in 1956 predicted the peak in USA and worldwide oil output as occurring respectively in 1970 and 2000. Historical records of US oil production show that his prediction for the USA was astonishingly accurate; that should have set off alarm bells in corridors of power around the world. Instead, a growing number of industry insiders have split with the official industry and government line, creating a worldwide network of peak oil researchers, and “official” organisations like the IEA have vigorously denied there’s a problem.

Why would anyone deny such a problem? The motive of the industry is clear, and is the same as their reason for undermining the political consensus on climate change. The rational response – call it Plan A – to both peak oil and climate change is a gradual transition over decades from fossil fuels. Such a slow transition would result in a gradual diminution of fossil fuels sales and profits. On the other hand an abrupt transition arising from depletion of fossil fuels results in a massive profits windfall for the industry, when shortage of supply runs into inelastic demand. As the industry well knows, a massive price increase can stimulate development of alternatives, as happened in the 1970s, but those alternatives take time to develop, and the industry has worked hard at avoiding massive price rises for this reason. As former Saudi Oil Minister Sheikh Yamani put it in 1973: “The stone age didn’t end because we ran out of stones.” The fact that the industry has not tried to pull prices back from current high levels by increasing supply is a further warning sign that we are fast approaching a major crisis of supply.

What is not clear is why a research arm of the OECD should deny the problem. They are supposed to be working for governments who ultimately represent us. One claim I have heard is that governments fear spiking panic in the markets; Plan A, begun a decade or two back, would not be a recipe for panic. The Plan B we are rapidly heading for, a war-like economy of rationing and massive government interventions to prevent chaos – certainly does have the potential to cause panic. The only explanations I can see for the failure of governments to act are corruption by fossil fuel interests, and a fear of moving out of the political comfort zone of addressing the electoral cycle, and nothing longer-term than that.

Haven’t we heard this sort of prediction of doom before, going back to Malthus’s rather obvious observation in 1798 that exponential growth in demand has to hit limits of finite supply? The biggest factor in putting off a Malthusian day of reckoning is the mechanisation of agriculture, which relies heavily on oil. Take oil out of the picture, and I am awaiting a rational explanation as to how we could feed a human population of nearly 7-billion, set to peak at over 9-billion in 2050.

On a slightly different subject, the first European explorers to arrive at Easter Island were astonished to find large stone statues and no trace of a civilisation that could have made them and no trace of the large trees necessary to build infrastructure to create and move such statues. One theory of what happened is that the islanders harvested all their trees, leaving them incapable of not only building more statues, but building ocean-going craft that would have allowed them to escape their fate, once their unsustainable consumption caused their food supply to collapse. Consequently population of the island plummeted, amid a decline into cannibalism.

What relevance does Easter Island have to peak oil? Building renewable energy infrastructure takes energy. Until such time as renewables have reached critical mass, we will need fossil fuels to build that new technology. Wait too long, and we will not have the energy reserves to accomplish this task. The IEA’s 2010 projection suggests we do not have much time.

Will peak oil save us from climate change? The growing wedge of “unconventional” oil is a big worry: converting fuels like tar sands into oil-equivalent fuels is highly energy-intensive and if this sector has to grow faster than the IEA projects, we will hasten rather than slow the onset of serious climactic effects. There is also plenty of coal which, again, can be converted to liquid fuels at a high cost in added emissions. Leaving conversion to renewable energies so late increases the pressures to maximise use of these extremely dirty forms of energy.

To those climate change deniers who take comfort in the fact that they will only be proved wrong after their lifetimes and who hate their grandchildren: this one will happen soon. A planet-wide Easter Island collapse will not be a great time to be alive, and we are fast running out of time to avert just such a catastrophe. A Plan B world will include not only the risk of massive agricultural and industrial collapse but the marginalization into suburban slums of everyone who cannot afford to live near public transport or urban centres.

We have very little time left to act; the closer we can get to pulling back from a Plan B scenario to a Plan A scenario the better.

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This article has also appeared at Online Opinion; there are comments there that may also be of interest.

Why the Right is Wrong

The Tea Party is not a new phenomenon. In Australia, we had Pauline Hanson’s One Nation party, and it was pretty much the same thing. A general angst was verbalised in populist right wing terms, and swept up a lot of people who didn’t really agree with the sort of extremism that goes with this sort of viewpoint  – and a good number who thought if you prefaced a racist view point with “I’m not a racist but” it was somehow OK.

This sort of rabid populism is usually founded on well-placed fears and concerns, but turns on soft targets: the most disadvantaged sectors of society who can’t fight back. In Australia, it’s asylum seekers. In Europe, it’s immigrants. In the US, it’s loopy theories about who Barack Obama really is.

None of this of course targets the real cause of whatever crisis justifies the underlying fears. In Australia, asylum seekers are a tiny fraction of migrants, and real illegal immigrants like backpackers working without permission are a much bigger factor in “stealing” jobs from low-paid workers. Globalisation, and Australia’s insistence on lifting trade barriers no other developed country lifts, is an even bigger factor. Australia for example has the least protected agriculture outside a country managed by the IMF. In the US, much of the current economic crisis was caused by aggressive deregulation of banking under previous popular presidents, including Regan and Clinton (the latter more a creature of the right than his backers admit).

This kind of emotional populist politics is very easy of course. You find your victims, you point them at someone powerless and let rip with sound bites. It’s tough stuff to combat. When I saw Obama trying to explain that “Yes we can” means “Yes we can but not instantly” it was painful to watch – yet he was right. The damage of decades of economically loopy policies cannot be undone overnight.

Worse still, now the Republicans have a hold on Congress and are running scared of their own extremist right – those that aren’t in that category themselves – they will have the momentum to stop other critical reforms, like cutting dependence on fossil fuels. Visit this site every now and then and check the trend of the oil price in the sidebar if you want comfort in delusion. I just wonder when the right wing think tanks like the Heartland Institute and miscellaneous fossil fuel interests that fund them and some of the uglier right wing politics are going to find that running off a cliff isn’t the best choice, even if it’s your cliff.

But meanwhile politics of the populist right protects the real villains from exposure – and makes innocent victims suffer.

Peak Oil and Climate Change

Peak oil is increasingly on people's minds as they refuel, watch air travel costs escalate, and wonder why no one warned them it would happen. Possibly, just possibly, this is the wake-up call that will liberate us from shorty-term politics, and focus everyone on long-term solutions.

But should this have been such a surprise?


For starters, let's look at where the oil price is. As I write this, it's already gone off this chart (source: WikiPedia; sorry about the caption with the error in the start year: that was how it was on WikiPedia) to over $140 a barrel. Some of course are saying this is just a bubble, that speculators are driving the price up. This seems unlikely since the last time we had these conditions in a bad way (instability in the Middle East encouraging speculators), around the end of 1979, the price spiked to $39, about $100 in today's money, and we've already exceeded that level by 40%.

There are two new factors since 1979: new demand from developing economies, especially China, and the threat of a decline in production as we hit peak oil. With BP chief executive Tony Hayward declaring an end to the era of cheap energy, we have to sit up and take notice. No energy company would talk up the long-term price if they weren't sure, because doing so increases the push for alternatives.

So what is peak oil theory? In 1956, Shell oil geoscientist M. King Hubbert made the observation that since oil extraction lagged discovery by a specific period of years, oil production in the USA would peak somewhere around 1971. This picture (source: WikiPedia) illustrates his model (blue line) and reality (black dots). He was ridiculed in 1956; by the mid-1970s, we should have been basing future planning on his model.

What about the worldwide peak? That's more difficult. In the USA, once cheap sources of oil were depleted, there was the option to move to the rest of the world. Once oil extraction has gone worldwide, we don't have another planet to move to, so depletion of cheaper resources leads to a switch to more expensive resources.The picture therefore in recent times (source: WikiPedia) is blurred, with predictions ranging roughly around 2008-2016, but some putting the peak way out into the future.

Wherever the exact peak, we've had warning of this for decades. Aside from the very obvious risks or relying heavily on one commodity, the source of which may not always be politically stable, the threat of a sudden price spike as we are experiencing today is nothing new. So why aren't we throwing out politicians who have failed to work on long-term solutions? In some parts of the world, notably Europe and Japan, there are alternatives to cars, trucks and planes in the form of high-speed intercity rail and good urban public transport networks. Countries like the USA and Australia, on the other hand, are terribly positioned for expensive oil. Many of their cities have developed unplanned urban sprawl, and their inter-city rail networks are decrepit.

For further thoughts on what Australian politicians deserve, see my views at the Australian ABC's QandA web site.

But back to the main topic.

What, you may ask, are some of these more expensive forms of oil extraction? Some are obvious, like deep sea wells. Others include tar sands and oil shale. Pushing these to the limit some claim is available starts to touch on an aspect of practicality: net energy. Some of the more extreme claims of available oil do not take into account that the energy cost of processing some of the less viable forms of oil exceeds the energy you could extract.

The "more expensive to extract" option that I find most fascinating though is the notion that it is now becoming possible to drill for oil in the Arctic. Could it be something to do with this I wonder? Look at NASA's temperature trend since 1880 (source: NASA GISS) – not that different to graphs published by others. It shows a distinct upwards trend.

Now, there are people out there claiming that climate change is a hoax. A fair number (though I will not argue all or even a majority) are funded by oil interests. Could those taking oil dollars please tell us how, if climate change is a hoax, it has suddenly become possible to drill for oil in the Arctic?

For the more visual, I also talk about this at YouTube; go there to rate the video or post a comment on it (or if lazy, just view it here).

If biofuels are the answer, what is the question?

One of the biggest problems with both climate change and the growing threat of peak oil is that it's all too easy to fall into the trap of subsidizing special interests, rather than actually tackling the real issues.

Either we accept that these problems are real (singly or collectively) and we focus on solutions, or we don't. In either case spending good money on non-solutions is idiotic. If there is a real problem, we need to solve it. If there isn't, why are we wasting valuable resources on unnecessary research, industries that don't stand up to competition and that, in any case, wouldn't solve the problem if it were real?

My own position is that there is far too little cause for doubt on climate change to mess around: we should stop navel contemplation and get on with solving the problem.

I am a little less certain on peak oil. Hubbert's original theory worked well for a single market, the US (he accurately predicted the US peak as 1970-5975). When US oil discovery peaked, it made sense for oil companies to switch their focus to other parts of the world, rather than pursue diminishing returns (oil that was harder to find, harder to extract, or both). The same equation does not apply worldwide: oil companies can't start exploring another planet for oil. So more expensive exploration and extraction in combination are very likely to push the peak well out beyond Hubbert's calculation.

However: the key issue is that we are starting to deplete the cheaper resources, coincidentally with massive growth in new economies (especially China but also India), so prices have only one way to go, and that is up. Add that to climate change, and there is a powerful argument to look for alternatives to fossil fuels.

Biofuels are at best a small part of the solution because there isn't unlimited agricultural land available to turn over to fuel production. At worst, they exacerbate the problem, as in countries like Malaysia and Indonesia where massive amounts of greenhouse gases are emitted through deforestation for oil palm plantations.

Wikipedia has an informative article on the world leader in ethanol, Brazil.

To put matters into perspective, world ethanol production in 2004 was 10,770-million gallons. In the same year, the US alone consumed nearly 14 times that amount of petrol (gasoline for American readers: over 3 billion barrels, about 140-billion US gallons).

Brazil is in a favourable position for growing a lot of sugarcane for fuel; it is unlikely that their production could be scaled up through enough other countries to make a meaningful dent in the problem, even if so doing would not displace food crops, or result in other environmental disasters.

The US could significantly increase available agricultural area for biofuel crops with a total cessation of feeding food, grown on land that could produce human food or energy crops, to farm animals. Not only would this be a more efficient form production, but the cows would have less fat, reducing the human obesity problem. However, it is only in comparatively wealthy countries that this kind of land exists for conversion. In poorer countries, cows eat grass. And not many countries are in the position of Brazil, with a significant fraction of farmland available for sugar cane.

In any case, oil, coal and biofuels are an incredibly inefficient way of storing solar energy. A plant stores between 3 and 6% of the incident solar energy, compared with solar cells, which are supposedly inefficient because they 'only' covert 15-20% to electricity (do a search on "solar cell efficiency": there are some far better efficiencies in research labs). Add in all the other losses from converting plants to a usable form of fuel and the losses from burning them to create the form of energy we actually want (motion, electricity, etc.) and they turn out to be incredibly inefficient. In the case of fossil fuels, the stupendous inefficiency of their production is masked by the fact that we waited hundreds of millions of years before bothering to use them.

If we can find an efficient way of storing electricity, we will solve the entire energy problem with the exception of the real hard case, air travel.

The long-term solution is energy sources that do not require burning carbon or hydrocarbons. If we are serious about dealing with climate change and the threat of peak oil, we should be putting massive resources into solving this problem. In any case, it's stupid to put waste big money on non-solutions.

Peak Oil, Poverty, Moore's Law and Manure

Peak Oil

As oil and with it products we use to fuel our cars and trucks gets more expensive, there is growing anguish about the effects on the cost of living. China alone is adding millions of cars a year to the total, and peak oil theory says we should be hitting limits soon on production growth.

In reality, as prices go up, there will be options of exploiting kinds of oil previously too expensive: under the deep sea, in the arctic (conveniently being freed of ice; what's doing that, I wonder, if there's no climate change?), tar sands, shale oil… so production may not drop off as fast as predicted by peak oil theory. But should we want to squeeze every last drop of oil (and coal and gas) out of the ground?

Not only do we have climate change to worry about, but the economics of fossil fuel has a lot to do with the gap between rich and poor nations.

The Poverty Gap

In the twentieth century, the cost of communication increasingly split rich from poor. By communication, I mean movement of people, goods and information. Part of this was energy; another part telecommunications. The common thing was the distinction between countries with a comprehensive network of roads, rail, electricity and telephone connections, and those without.

Addressing this gap became increasingly hard, as the cost of new infrastructure has to compete with infrastructure created in an era of lower costs (e.g., coal was cheaper because demand was lower). It is this gap which for example makes fruit in a third world country absurdly cheap in tradable currency terms, while making a local phone call is ridiculously expensive. There's a kind of arbitrage, but one where the places where the price differences occur are too hard to connect, to correct the pricing anomaly (as would happen for example if the US$ to euro exchange rate was out of synch with the US$ to pound sterling exchange rate).

Somehow, despite all this, we have arguments from climate change inactivists that addressing poverty is an alternative to addressing climate change. Yet if you accept that poverty is largely structured into communication infrastructure (or lack thereof in poorer countries), new technologies that reduce the need for infrastructure can go a long way to closing the poverty gap.

An example is the cell phone. In many poor countries, cell phone roll-out has been many times faster than predicted, because of communication starvation. People in Nigeria didn't have phones not because they were poor, but because there was no infrastructure. Cell infrastructure is relatively cheap to put in: as long as you have electrical power, you can virtually parachute base stations in. By contrast, a nation-wide wired phone network needs wiring to the home, with extensive local wiring, even if trunk lines are wireless.

This example generalizes to other cases like electricity. If you can generate power locally without a grid, you can make energy accessible a lot faster in countries without infrastructure. Eliminate the cost of consumables, and you also eliminate another huge problem: rapid price increases as supply fails to keep up with demand. If you think this is bad for wealthier countries, what will doubling the fuel price to to someone who can barely afford a car?

Moore's Law

The nice thing about renewables is that technology changes reduce prices. It doesn't matter if coal supply runs low, oil runs out or gas slows to a trickle. The wind will still blow, the sun will still shine. Just as Moore's Law has pulled computer prices down dramatically over decades, photovoltaics and wind are getting cheaper. Eliminate the consumables and you have a real revolution in energy economics, far bigger than Henry Ford's revolution in personal transport.

This is an exciting time once we forget doom and gloom and think of what could actually be done.

Instead of living in terror at consequences of change, how about accepting that we are looking at a change as big as the move from horse and buggy to cars?

Think of it this way: the cost of renewable energy sources only depends on the technology, not consumables. Once we get this right, we can make energy cheaper with every new development. As long as we are stuck with fossil fuels, prices can only go up as demand overtakes supply.

Why are we so scared of this great new concept? Once we solve the energy storage problem (there are already good ideas like compressed air) poorer countries will benefit too. What's the downside? Unless you own a coal mine ... the horse industry lost big time when the Model-T appeared, but think of the advantages to society as a whole: personal mobility on a level never experienced before.

Now we have the next level: energy with radically lower constraints on supply and infrastructure. If you can do local microgeneration with efficient storage, you no longer need a grid. In rural Africa, for example, you could almost parachute in (where have we heard that before?) a solar or wind microgenerator.

Manure

Back in the nineteenth century, it's alleged that someone predicted that London would be metres deep in horse manure in a few decades. It's a nice story, even if it's improbable that it's true (I have yet to find a direct source for it, and there are several variants – the hallmarks of a myth or urban legend). It is certainly true that getting rid of horse manure in the streets of major cities was a growing headache – just as cutting carbon emissions is today.

So why, today, are we staring down the problem of curbing carbon emissions when there are far superior alternatives – alternatives that only need a little development to be viable?

The only alternative is to consume fossil fuels like there's no tomorrow, then it's back to the stone age. Why are we even debating this?

Exxon-Mobil to abandon climate change obfuscation

I stumbled on this, probably not meant to be in a publicly accessible place. I hope ExxonMobil will not be too outraged if it appeared early on my blog.

-----EMBARGOED UNTIL April 1st, 2008-----

SPRINGFIELD--(BUSINESS WIRE)--April 1, 2008--Speaking today at City Hall, Springfield, C M Burns, President Corporate Affairs of Exxon Mobil Corporation (NYSE:XOM), announced a major change in ExxonMobil's approach to climate change.

Burns was speaking as part of Springfield's new Business Leaders Who Pay To Speak Program.

He described the actions ExxonMobil has taken in the past to obfuscate climate change science as "consistent with maximizing the corporation's profits. The modest cost of piggybacking onto tobacco and ozone hole denial has been an excellent investment. Excellent..."

Reaffirming ExxonMobil's commitment to being a constructive and active participant in dialogues concerning proposals to reduce greenhouse gas emissions, Burns outlined the de facto change in policy. "This time, we actually mean it. We came to the sudden realization that pretending the science was wrong would not save us if everyone is burned to a crisp. Bad for profits. Very bad."

He highlighted ExxonMobil's actions to increase confusion about climate science. These included giving financial support to groups claiming to represent "sound science". "Sound science," he explained, "is that which increases ExxonMobil's profits, no matter how tenuous or where published." These same groups, he continued, were paid to portray peer reviewed science as "junk science", no matter how well-founded, if it was contrary to ExxonMobil's interests.

In describing ExxonMobil's work with partners, Burns reported that the company is now planning on entering a new phase of supporting climate science that is accurate and not influenced by short-term concerns for profit. To facilitate this change, a blind trust to disburse research funds is being set up, to be headed by fabled jazz saxophonist, B.G. Murphy. Said Burns, "No one could imagine Murphy as advocating causes dangerous to the common good."

Steepling his fingers for emphasis, Burns concluded, "We must care enough to treat the risks of global warming seriously. We need to manage the risks of companies distorting the science effectively if we are to maximize the economic and environmental benefits available to future generations."

Full text of the speech is available on the ExxonMobil website. Some text copyright L Simpson.

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NOTES TO EDITORS

* The Business Leaders Who Pay To Speak Program aims to encourage debate amongst senior business figures on issues where they are prepared to pay to be heard. The inaugural event took place in November 2007 and C Montgomery Burns was the second speaker in this Program. The first speaker was less gullible and merely bribed the press without bothering to show up.

* The International Energy Agency estimates that, by 2030, it is likely world energy demand will increase by 45 percent. This growth equates to about 100 million barrels of oil equivalent a day, which is in addition to the 240 million barrels oil equivalent a day currently consumed.

* No one with any sense actually believes that this amount of oil can continue to be extracted without running into limits, sometimes referred to as "peak oil".

CONTACT: ExxonMobil
Media Relations: Dallas (US) office, +1 972 444 1107
or
Leatherhead (UK) office, +44 1372 222261/74

SOURCE: Exxon Mobil Corporation