This week’s crude-oil price spike got me thinking a bit more about a future that will, by and large, be without oil. I’ve thought about this subject for a long time, as I’m sure many folks have, and the thought used to scare me. Even five years ago it looked like impending oil shortages would fundamentally disrupt our way of life. Oil is not only used to drive vehicles, it’s used to produce virtually every consumer product you own. But now, synthesis of long-chain hydrocarbons from gas and vegetable sources is coming out of the lab and onto the workbench. And the alternatives to oil-fueled vehicles exist and are viable, if expensive.
Nevertheless, the oil shortage will not be painless, there will be losers, lots of losers, and there will likely be violent international conflict. But, as I am reminded by a great Op-Ed contribution to the NYTimes by Dr. Stephen Sass (Cornell), there will be winners too. You see, scarcity drives innovation. And innovation drives progress. Without scarcity, progress must come from combined political action. With it, the much more powerful forces of economics take the lead. But, a key difference between the two is that political action is a meditative process that presumably seeks the best route for all members of the polity. Economic change is largely a blind process that seeks only to maximize benefit to the entrepreneur, which is not necessarily in the best interests of everyone else.
History’s Lessons
Sass’ article examines two historical resource shortages to suggest that resource scarcity has helped us in the past, in a big way. First he discusses how a tin shortage helped jump-start the Iron Age. Short on tin to make bronze weaponry, metalsmiths realized that iron could be separated from its ores by smelting (subjecting ores to high heat from charcoal, in this case). This one innovation, spurred by scarcity, turned ore from a metal more valuable than gold to one cheap enough to outfit entire armies.
Next, Sass, points out that pre-Victorian England, largely denuded of trees to produce iron and wood for ships, was forced to turn to coal for smelting. Coal is not desirable for smelting in its raw form because sulphur in the coal diffuses into iron to create a brittle alloy. Forced by a severe shortage of charcoal to innovate, Abraham Darby invented a process whereby the sulfur was slowly burned out of the coal and coke was formed as a by-product. This coke could then be used to fire smelters, and iron became so cheap that it was used to make pots and stoves for common folk.
The new demand for coal then had its own effect. Near-surface coal seams were quickly exploited in the early 18th century, forcing miners to dig deeper and deeper. As they went down, their mines began to fill with brines from deep aquifers more quickly than they could be pumped with traditional techniques. The steam engine was developed to pump out deep mine shafts. Fed by coal, it made more coal available than England would need for centuries. The steam engine went on, of course, to have its own illustrious career. It became the industrial power plant and the internal combustion engine, and it drove the industrial revolution.
Economically-Driven Energy Independence
Will the end of cheap, readily avaiable oil bring about the next “industrial revolution?” Or, will it instead lead to an economic-driven search for cheap fuel that ultimately destroys our environment and health? Consider this scenario:
Forced by high prices and security interests, the US switches most of its fuel production over to synthetic gasoline produced via steam-cracking of coal. Cheap, readily available, and domestic coal also fuels the next generation of power plants. Acknowledging the enormous costs of creating a new syngas infrastructure, the government decides to relax restrictions on emissions from power plants and gas plants. The result is that air quality in the US declines and global warming is accelerated as other countries follow their lead.
It was too expensive to prepare for the shortage of oil, so companies just pumped until they couldn’t and then switched to producing gas from other sources. As a result, vegetable fuels were not pursued aggresively, and a hydrogen infrastructure was never developed. Nuclear still remained out of reach of most publicly-funded companies because of high risk and regulatory hurdles. And, never acknowledging the science of global warming, administrations plunged blindly forward arguing that Alaska would become a bigger tourist attraction.
Unequal to the Task
That scenario is neither fantastic nor unlikely. It is a scenario driven by pure, unadulterated economics. In the past, before humans had the ability to dramatically affect anything beyond their local environment, letting economics drive revolutions was fine. But our system today, thank goodness, is not so laissez-faire. We must walk a careful path beyond oil scarcity into the next generation of fuel and energy production. If we don’t, then we will lose much more than we would gain by postponing the reckoning day like we are right now.
Humans as a group seem incapable of grasping the effects of their individual actions. Governments, who we charge with such lofty thinking, seem unequal to the task as well. After all, governments were created for defense, for power, for security, heck for a lot of reasons. But they’re still managed by humans as fallible as the rest. Here in the US, our is particularly incapable of looking beyond the next election. But beyond it is where the trouble is growing.
We need to recognize that energy is the base upon which our civilization rests. Some would fancy themselves independent via their solar panels, or wood-burning furnaces. But those same folks consume. Everything from their food to their vehicles required more energy to produce and ship than entire nations once expended in a year. Our need for energy has grown to fantastic levels, and it shows no sign of slowing. Each year air traffic increases, driver miles increase, consumption increases, more new homes are built, and more electronics are sold. We are a Fossil Age society consuming as if it were well into the next energy paradigm.
Energy isn’t an issue that should be discussed in closed-door meetings with industry executives. The oil industry will not be energy leaders of the future. They are the moneyed interests seeking to slow progress because they will be the losers in the new energy future. They do not even deserve a seat at the table of the debate, because they have nothing to offer. We need to discuss the way forward, not the way to maintain the status quo.
An Energy Executive’s Vision
As a consolation prize, though, those companies will get rich. Very, very rich. Their profits are already a significant portion of the federal budget (nearing $100 billion or so just this last year). Their executives live the moneyed life, and so will their children and their children’s grandchildren, even if the tax on inheritance is kept in place. Those few are the ones that Dick Cheney invited to the table, probably because he’s one of them.
The influence of special interests in politics is a direct response to the power of politics over economic markets. As soon as companies become large and stand to lose by the action of government policy, they sprout a political wing and begin trying to change that policy. That tendency, if allowed to blossom even further in the energy debate will become a cancer that prevents us from reaching that next industrial revolution. The energy sources of the future that will change our world in unimaginable ways will be delayed, perhaps catastrophically so.
In the meantime, even countries willing to make that transition will reap what we’ve sowed. The backlash will be political, economic, and bloody. Americans will die through increased terrorism and armed conflict. Our children already face a future less predictable and more uncertain that did we. Their children will face one that may be downright dangerous, and altogether bleak. Here I’m not just talking about the effects of global warming. The high price of oil will drive conflict of its own accord, rising seas and an increase in weather-related disasters will only exacerbate the situation. That is the future we face if we are unable to think ourselves out of our current situation.
Another Way Forward
The other course would be to impose taxes on gasoline and carbon emissions. Those taxes would go directly into funding alternative energy sources including wind, residential and commercial solar, and nuclear. The government can and should mandate that all cars be made E85-ready within five years, the modifications are very slight. Beyond that, other portable energy sources such as hydrogen (or methanol, or whatever else) should be developed to the point that they are ready to deploy. Energy taxes imposed today will cost money, yes, but not nearly as much as the energy industry lobby would have us believe. Most importantly, increased energy taxes will allow us to transition relatively smoothly into our energy future.
The decrease in gasoline consumption in this country will ease oil demand. Eventually, starved of oil revenues, true democratic reform can visit the Middle East. And a decrease in CO2 emissions will ease climate warming pressures, and give us a chance to perhaps even reverse the warming trend over the next few centuries.
But what may be even more important to humanity are the benefits that lay beyond the Fossil Age. The energy sources of the future will be cleaner, and probably even cheaper, if history is any guide. What will that enable us to do? Where will that take us? That is the course I want to take. I choose the unknown benefits of an oil-free future over the unknown terrors of an oil-dependant one. We’ve given the energy executives their booty, now its time to take back our future.
There’s various fallacies I think you’re making here that I could point out, although I also agree with a lot of what you’re saying, and your final goal (although as we’ve discussed before, not your method of taxation). I’ll content myself, however, with only pointing out one thing:
The currently high oil prices are entirely artificial, and there is no actual upcoming oil shortage (at least in the near future) that isn’t also artificial. I’m saying this for a couple of reasons:
1. Just as we haven’t built any new nuclear plants in 30 years, so we haven’t built any new oil refineries, and for quite similar reasons: overly paranoid environmental concerns and a huge NIMBY mentality. This is a major reason fuel prices are so high, and also why Katrina spiked the prices so badly last year.
2. Just as we haven’t built any new refineries in the recent past, so too we haven’t expanded our drilling into any of the new oil fields we’ve discovered over the past 30 years: ANWR, the Deep Sea Continental Shelf most noticeably. I will point out that ANWR estimates are that it could supply 20% of America’s oil for at least several decades, and also that every single oil field in history has exceeded the expectations of how much oil it would yield. Some reports of the Continental Shelf place it as potentially the biggest oilfield in the world. We don’t know cause we haven’t drilled there.
Do I think we should be drilling in these places? I’ve got a complicated answer to that which isn’t an outright yes: as I mentioned, I am for many of the benefits you are, although I have slightly different approaches on how I think we should obtain them. However, I mantain no illusions about high oil prices or any problems with oil supply being anything other than artificial.
Ian,
By fallacies, do you mean logical fallacies? Or do you just mean misconceptions you think I’ve expressed? Either way, enlighten me!
Regardless of whether or not the high oil prices are artificial, that does not affect the fact that oil is a scarce resource. The subject of whether or not global oil production has peaked is a complicated one and I’m definitely not able to address it in detail (yet, Peak Oil is on my bookshelf). Suffice to say oil production begins or will begin a permanent decline last November, or next November, or perhaps a decade from now.
Gasoline prices may be higher than necessary because of oil refineries, but this does not affect the globally high crude oil price. The recent spike of a few dollars per barrel is due to a temporary glitch, for sure, but that doesn’t change the strong dynamic of demand increasing more quickly than supply is able to produce new oil. As China and India (primarily) continue to develop, that demand will continue to surge and the price of oil will only continue to increase. There is no effective international oil cartel: Russia and Venezuela are pumping as fast as they possibly can. So are Nigeria, Sudan, Libya, Mexico, and whoever else can manage to find some. Supplies won’t increase exponentially, but demand will. And when those two curves cross, we are going to see truly high prices.
ANWR is a complicated issue for many reasons, as you acknowledge. Yet even if it is tapped, and production manages to reach that optimistic figure you mention, it will only delay the inevitable. In fact, tapping ANWR is a small version of my main point: economics will demand that the cheapest option will not necessarily be the best option for the planet and her residents (humans certainly included). If tapping ANWR were done as part of an energy policy that truly acknowledged the difficulties facing us and moved the country towards a fossil-fuel-free future, then I would support it. I’d rather damage a few wildlife habitats if it means freeing us from the grip of dictatorial sultans. But, if that drilling comes without any real reform, then we will just come back to the Arabs begging for the oil that the Chinese, Indians, and who-knows-else, are already pleading for.
There are sunnily optimistic estimates of unknown fuel “reserves” and there are overly-pessimistic ones. Reality will fall somewhere in between, and it will undoubtedly mean actual, real shortages in no more than a few decades.
Anthony,
You’re right, I did mean to say misconceptions.
Anyhow, first let me expand and refine my initial point a bit more. It is true that crude oil is for human intents and purposes a finite resource. However, I would like to point out a few things. Versions of Peak Oil have been coming out every couple years since the 1950s at least. They have all been incredibly wrong in their estimate of the remaining oil in the world. Just a few numbers I can easily cite will show that we have quite a few decades increasing oil production left to extract. I mentioned the rich oil fields of ANWR and the Continental shelf, both of which are huge amounts of oil we haven’t even begun to tap because of environmental opposition (which exists regardless of how environmentally friendly we can get the technology –drilling has similar stigmas as Nuclear).
Other things I can immediatly think of include oil shale, which requires technology to extract that is only just now starting to get cheap enough to be worthwhile. It’s a technology that’s evolving fast though, so it could cheapen pretty quickly. Did you know that if you include oil shale as a source of oil, the U.S. has more oil, just in oil shale, than the Middle East? The oil sands of Canada are similarly coming online and starting to produce copious amounts of oil, and we have barely started to dig into them.
Another place with large amounts of oil that has barely been tapped, and barely even been explored is Russia. Russia has so much land, so much wilderness, that it doesn’t have the infrastructure or the population to effectively exploit it’s oil wealth, which is all in the middle, mostly towards the east where there’s more space. New technologies such as satellite imagery with earth modeling are starting to allow researchers to predict where the fields are however, which should help Russia develop it’s fields for quite a while into the future.
As you mention, demand is increasing faster than supply at this point, causing prices to go up. My point right here, or I suppose my two points is that
1. Regulations have effectively stopped the U.S. from doing any new drilling, despite the fact that we’re the best at it and have huge deposits we haven’t touched. If we were drilling in any of these new locations near us, supply would be exceeding demand.
2. There is enough already discovered deposits not being exploited that the world will not run out of oil anytime soon, or even run into the peak anytime soon, unless that peak is being artificially induced by stopping new drilling.
Also, on the topic of alternate technologies, this is a perfect place to plug my favorite: http://www.changingworldtech.com/
Changing World Technologies is a waste processing company that literally turns any trash into diesel quality oil, water, and the dry, seperated minerals the waste was composed of, and they run on a percentage of the diesel they make.
I’ll address the other issues in my next comment
Okay, now to address your other comments. First of all, let me explain that I agree with you on many of the benefits of us moving off of oil as much as possible.
Hmm, okay. Looking through the article, I basically agree with what you’re saying most of the way though, although I find you’re couching it in a persuasive tone I’m not sure I agree with, for instance, while oil certainly plays a part in politics, I’m not sure it’s as overwhelming as you seem to ascribe it to be. Certainly humans are inventive enough to discover reasons to fight each other that have nothing to do with oil.
I suppose the only other point I think you have a misconception of (I’m not sure, you don’t directly express this, only indirectly) is that Hybrids are better for the environment than non-hybrid cars. They are in fact worse when you include manufacturing and disposal. I’m merely trying to point out here that sometimes the more efficient technologies aren’t the cleanest for the environment, in that, the simpler technologies often times win. Note that I don’t think we should stop examining these technologies! Eventually they will pay off.
Here’s the link:
http://thewatt.com/article-1070-nested-1-0.html
Finally, here’s another bit of info you might be interested in, this time to do with Ethanol fuel (disclaimer, this is off my own site, but links to a news report):
http://taoist.wordpress.com/2006/08/09/walmart-keeps-getting-cooler/
Ian,
Thank you very much for your comments. You’re certainly right about the “Peak Oil” phenomenon being somewhat of a broken record. Though there is one point that can’t be ignored in the general message of that book: bulk statistics, though they are motivated by and controlled through a number of factors can often tell a more meaningful story than examining individual phenomena such as whether large oilfields are just coming online or others might remain to be tapped. You see, just as those new sources are becoming avaialable, others (such as the Saudi and Iraqi oilfields) are starting to sour as overpumping reduces the quality of the product. So, the bulk statistics that Peak Oil examines can mask the details but reveal the trends. And I think that, though I’ve not gotten much further than the dust jacket, it is different than those other works because those were much more forecasting while Peak Oil works a bit closer to the present. Anyway, I’ll probably write more on that later.
It’s a good point you make about regulations reducing oil production regardless of the environmental viability of a method. Here in Michigan, for instance, slant drilling was examined to produce more oil and gas from beneath the Great Lakes. The danger of a leak or spill was next to nothing, but the very mention of oil drilling near our pristine inland waters scared off most everyone, including politicians.
Your points about oil shale and tar sands are well taken, they do certainly present what will become the most economical source of fuel in the near future. HOwever, they both come at enormous environmental costs. The damage being done in Alberta right now can be locally devastating to areas that until now had been virtually untouched. Oil shales tend to exist in thin layers and can require very damaging extraction procedures as well. When there exists a much better option: political change towards more environmentally and politically sustainable choices, we need to move in that direction. The costs will be somewhat higher to begin with but they will be greatly reduced in the long run.
Also, there is no dispute that Hybrids are better for the environment than non-hybrid cars. Sure, they have batteries that have to be disposed of properly. And yes, you shouldn’y scrap your existing vehicle necessarily to buy one. But I don’t buy the argument that Hybrids are more environmentally damaging to manufacture and dispose of.
Anyway, thanks again for your excellent comments and arguments. The energy debate is something that I am deeply interested in. Oh, one parting shot. Do you think that we would be involved in the Middle East at all if there weren’t oil there? Unless you believe in some conspiracy involving Jews and control of politics, I think most of us would find it about as interesting as we find the battles between Christians and Muslims in sub-Saharan Africa. Also, it is largely oil money that funds the regimes that support terrorism. And you can bet we wouldn’t be in Iraq right now if it didn’t have massive oil fields (not that I’m arguing that oil was the reason we invaded). Why did Japan invade the Phillipenes in WWII? Oil and energy are the very lifeblood of modern civilization, and deep down a whole lot of politics is motivated by it.
Anthony,
Oil certainly plays an important part in international politics, and your last paragraph certainly points out a couple of the more important examples. I’ll even agree with you on Iraq, if I take a historical perspective (meaning I don’t think oil had anything to do with why we currently invaded, but plenty to do with setting up the conditions for why we invaded). I was just saying that in using a persuasive tone I felt you were ascribing too much importance to oil. If there was no oil in the world I am sure people would still find something to fight over, unfortunately.
When I was discussing the various oil fields that exist in the world I was entirely ignoring the environmental costs. Environmental concerns are certainly something I take into consideration when I look at them as a fuel source. However, the point of my argument was simply that they exist.
As for hybrids, the issue is partially the batteries and the expensive and rare materiels in them, and partially the exotic materiels most hybrids use to stay light. These materiels are enviromentally costly to handle, both in production and in disposal. If you look at the link I pointed out, however, you’ll see what’s really at issue. The most enviromentally damaging vehicles are the luxury vehicles. Hybrids tend to be fairly high end vehicles, so the friendliness they’re saving on fuel and driving is not only offset by the “hybrid-ness” of them, but also by their luxuriousness. If hybridisation came as a single option in the lower end models you’d see hybrids do better on the chart. Especially if they weren’t combining the option with extra features such as composite bodies. As we become more efficient in processing and manufacturing this stuff that will change, of course. The last disclaimer I should point out about this study is that it assumed a lifetime of the car to whatever the specific average lifetime of that vehicle was. So if you’re a responsible driver and also keep your car well maintained and beat that average, for a hybrid you’re offsetting the production and disposal environmental costs.
–Ian
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*wonders how cold it\’s going to get today*