How to Escape the Oil Trap

From the Aug. 29 - Sept. 5, 2005 issue of Newsweek, an article by Fareed Zakaria:
If I could change one thing about American foreign policy, what would it be? The answer is easy, but it's not something most of us think of as foreign policy. I would adopt a serious national program geared toward energy efficiency and independence. Reducing our dependence on oil would be the single greatest multiplier of American power in the world. I leave it to economists to sort out what expensive oil does to America's growth and inflation prospects. What is less often noticed is how crippling this situation is for American foreign policy. "Everything we're trying to do in the world is made much more difficult in the current environment of rising oil prices," says Michael Mandelbaum, author of "The Ideas That Conquered the World."
More growing awareness.  More public discourse.  More recognition that peak oil really is the problem.

But will we see progress or a whole bunch of navel gazing?  All it takes, with supply and demand balanced on the knife's edge as they are, is one belligerent autocrat, one large-scale terrorist attack and we're at the famous Goldman-Sachs $105/bbl (~$4.50/gal, if not more) superspike.  I personally hope that day never comes...but, knowing what we know, I'm not nearly pollyanna enough to think that it won't happen.
Technorati Tags: ,

"Reducing our dependence on oil would be the single greatest multiplier of American power in the world."

Notice he doesn't say "reducing our dependence on foreign oil." Good for him. I hope the absence of that word doesn't go unnoticed.

I would like to think that we won't ever see $4.50/gal, but right now the only thing I see that will dampen demand is further increases in prices.  

Various people in the media are talking about it - better than being ignored, I suppose, but until the President and the Congress get serious about this and take actions that are credible, I just see further price increases in the future.

Good on Fareed.

Note that TOMORROW MORNING on Air America Radio, guest is NYT Sunday Magazine writer Peter Maass on Saudi Oil, has it peaked?

The Morning Sedition program 6-9 AM EST.

The steadily rising price of oil is a primary mover of these types of articles. If the prices were to go down into the $30-40 range, I would suspect articles like this would not be written or published as often. Let's hope the steady (Oil) Drum beat continues and this starts to penetrate the mass conciousness.

The main thing that this community can provide is knowledge, data, insight, thoughtful and positive ways of coping with PO. I have started a list of what I think the PO community is for (rather than just against SUVs and Suburbia) on my blog. I would love to hear some others.

Insist on complete transparancy of the world's oil reserves and production on a well by well basis.
Make national energy independence a national economic and security goal
Create an energy efficiency ethic in society that abhors wasteful behaviors
Raise fuel economy standards for passenger cars and trucks - encourage adoption of hybrids, electric plug-ins and other more sustainable automobile designs
Re-institute the 55 mpg speed limit for maximum efficiency
Decrease traffic through better design, congestion pricing, more telecommuting, staggered start hours, off-peak commuting incentives carpooling, etc.
Invest in building and maintaining mass transit systems to connect as many communities as possible.
Invest in the national passenger and freight rail infrastructure
Revise building codes for maxiumum energy efficiency
Encourage walking, biking, line skating and all forms of self propelled transportation through clearly marked lanes and public awareness campaigns.
Encourage local food production, urban green gardens, farmer markets.
Generate as much local power as possible from solar, wind, biomass, hydro/tidal and other sustainable forms of energy

...or just vote out of office every politician who has voted to stop energy development. If democrats tried to solve high milk prices like they "try" to solve high gas prices, they would slaughter half the cows to punish the greedy dairy farmers.
One thing that I have been thinking about lately: Peak oil means that we will have to change our behavior, those "Legion of Doom" people think that this will be bad for everybody. But their arguments all assume that our current behavior of consume-discard-consume-discard which leads to huge exploitation of our resources is correct in the first place. I think a strong argument can be made that peak oil will balance our behavior so that we live more sustainable lifestyles, in which case, it could be regarded as a good thing. I know people living on a sailboat in the Bahamas, they use 1 gallon of diesel per month only after draining their batteries which are charged from wind and solar. They're not anymore worse off than I am, but their behavior is different and they are living a much more sustainable lifestyle than I am.

A good example of being "scared of change" is the focus of all of the hydrogen and fuel cell research sponsored by the DOE. It's all geared towards making hydrogen fueled cars that have the same performance as today's cars so that people don't have to change their behavior when driving them. In fact, the DOE is so scared of change that they're willing to scrap all fuel cell research by 2015 if the targets aren't achieved.

Embrace is inevitable and necessary.

You got it! Exactly right. There's nothing particularly sacred or right about our current way of doing things, and if high energy prices can help us do better, then I hope it comes quick because right now we're doing a lot of damage.
Ok, but that's what's got those "Legion of Doom" people all up-in-arms about TEOTWAWKI (the end of the world as we know it). They are aware that they themselves want change (it's hard to fathom the implications of peak oil and not want change). Most everybody wants some sort of change; a better lifestyle, more wealth, more friends, more free time, more of whatever it is that they enjoy. Somehow, the "Legion of Doom" people don't make the connection that everyone else probably wants some sort of change, just like they do.

So when your Republican co-worker makes an innuendo about how horrible abortion is, and how abortionists need to be at least stopped, if not punished, you could take that opportunity to help him or her realize how peak oil and the subsequent die-off will just about guarantee that those vile abortionists will be stopped. Explain to your curmudgenly co-worker why he or she should welcome the end of the oil age. After all, people aren't going to be wasting the precious time of medical care personnel on abortions. They are going to be too busy treating the many casualties due to various flus, malnutrition-related diseases, and the huge increase in stress-related problems, including drug overdoses, alchoholism, problems exacerbated by lack of preventive medical care, injuries due to crime and family violence, and so on.

Yes, people are also afraid of change, even if it's not necessarily that they are "comfortable with the world the way it is/was", they just don't want something, which is outside of their control, coming along and changing it. People generally like to choose major life decisions by themselves, at least after their parents are through making them for them. By this I mean the things which affect the quality of their lives for years to come - their education, their marraige partner, number of  children, career.

But if you ask almost anybody, there's at least one thing which they would like to change about the world, as long as the results are what they would like them to be. In one way or another, there has to be a way in which peak oil can bring about some of these changes.

Like your anarchist friends. Sure, after the fall of the police car, there's going to be the rise of the horse cop. Sure militaries will probably grab whatever fuel is left remaining and hold on to it for as long as it remains. But eventually, there's going to be more anarchy, somewhere. There's likely to still be hierarchy somewhere, too. For a long time. And of course, a hierarchy anywhere is likely to become a hierarchy everywhere, so we're back to where we are now. Still - the possibilities sure increase with the end of oil.

See, we should concentrate on the positive aspects of peak oil, in order to lead with a carrot, so to speak. (There's plenty of stick!) We should figure out more ways (than just the elimination of the abortion issue, and the fall of the state), in which the end of the oil age will solve many of their current problems. (Although, of course, bringing in a raft of new ones! :)

Help them feel more in control by helping them identify with the immense forces which are about to wrack our world with change like a real person; a strong, demanding, parent. A little brutal, but one who at least treats all his children equally.

By cheering up a co-worker, you're actually encouraging a fellow citizen in this time of war. And when you help others, you're actually helping yourself. For when we do our part and chip in, we get the satisfaction of knowing that we're at least making a contribution, no matter how small. After all, so many of our own are making the ultimate sacrifice over there in Iraq. Tens of thousands more have been injured. We can do our part.

It makes no sense to be thinking about our own little problems all the time. We should look for the silver linings in life, and encourage others to do the same. One silver lining in the crash of industrial civilization is that abortion and gay rights are not going to be such big issues any more, and finally the human family can move on to worrying about more important things, like food, shelter, and heat.


As demand or at least desire outruns supply we can rely on standard economic theory to bring these back into line.  See MaxSpeak, You Listen! for a great take on Levitt.  The question is how does this demand destruction come about?  Through economic dislocation, rationing by price (meaning the poor do without), recession, economic contraction?  Or by efficiency, a change in the way we organize ourselves.  Doing more with less.  Being smarter.  It amounts to a test of our society and our political system.  Are we capable of doing any sort of long range planning anymore?  What sort of responsibility do we have to one another?  The SEIA study points out that we need at least ten years if we are going to deal with this in a constructive way.  This has to do with how you handle demand destruction.  If you do it in a positive way, with gains in efficiency etc, it takes time for these advancements to diffuse through the economy.  Therefore you have to be proactive and start early.  If you go the other way, go with inertia you are left with demand destruction generated by a failing economy.  Either way you could say that the market has done its job and reached equilibrium, as Max points out.  But which of these two paths we take says a lot about our character.  I'm not sure I like what the answer is likely to be.
That MaxSpeak blog is a great take on Levitt, who is not an ... ahhh ... idiot, as I mistakenly labeled him, but merely a religious fool who believes in faith-based energy futures.

But your main point, on lead times, is the right way to go. This summary of the Hirsh Report is what people need to read.

Good post.
A lot of demand destruction can happen even without prices rising. The physical supply is important. Look at the US manufacturing. It is the only sector of economy that has really diminished its energy usage - enabling the rest to use much more. It is not only higher energy efficiency but diminishing investments. Industrial investments have a long life span - 20 - 30 years at least. They demand a lot of electricity. Where do you take more of that from 20 -30 years from now? More natural gas? No way. Coal? Maybe, but not without problems. Take steel making. The energy is all important here, not so much wages. The Chinese can increase their steel production because they have been able to increase their coal production by 7 - 10% a year - this means more electricity, more coke.

And Jevons had it right: increasing energy efficiency does not spell conservation. And rising energy costs don't spell increasing efficiency. Increasing efficiency spells investments - or scrapping capacity. In an energy crunch (and in an economic depression) all production capacity can no more be used and then the most energy consuming will be closed first. This will increase the average efficiency.

If the crisis is sudden a lot of energy will lost in started but abandoned investment and construction projects. Former Soviet Union is full of abandoned building sites. A lot of energy was used to produce those now crumbling concrete blocks. That's how it happens.

In the long run the efficiency starts decreasing because the existing capacity will be run longer, maintenance is neglected etc. This applies also to cars. People will not change to newer cars with more mpg. They just drive longer with the old ones with less maintenance. Look at Cuba. All this has happened in countries where there has been an energy crisis.

I understand that most people in the US has never seen or experienced a real energy crisis. The Europeans experienced it during the WWII. In Eastern Europe they experienced it some years ago (and in many countries it is not over). You have never seen people sitting on roadside with a small bottle and a sign: "Want to buy gas for motorcycle" or a tanker selling black market diesel on a parking lot. There are first hand empirical data on the effects of an oil crisis. We do know something about what will happen. The bad news is that it is not nice. The good news is that you adapt and survive.

And Jevons had it right: increasing energy efficiency does not spell conservation.
No, Jevons had half a loaf at most.  Greater efficiency can increase use of a good because more value can be created from it, but if there is only so much to go around that cannot happen.  What would happen instead is the price would be bid up higher (demand destruction would not take place until a higher price) and less-efficient users would leave the market.

The point you're missing is that some peak-oilers are claiming that the economy will collapse if oil supplies shrink.  Jevons showed that a more efficient economy can pay more for a scarce good and still keep going.  In short, I don't think that lesson means what you think it means.

People will not change to newer cars with more mpg. They just drive longer with the old ones with less maintenance. Look at Cuba.
Cuba couldn't get new cars.  We still make cars.  The situations are just a bit different (thank goodness; I'd hate to live in a place like Cuba, because I'd be in prison for trying to overthrow the government).
I don't want to be cynical about all this MSM attention peak oil is getting lately, but when prices start falling a bit after Labor Day weekend and until November when the heating oil demand kicks in, this story will get diddly-squat in terms of MSM coverage.

We are in a long-term crisis situation involving years, not days or months. That is the problem. Looks good now but this will fade... and come back and fade... and come back and fade... until finally ????

Also, not being cynical again, but where's the heads up lead time on conservation and new energy resources that gives us the time to adjust and prepare for an era of scarce oil? Where's the infrastructure (solar panels, trains, wind turbines, CAFE standards, etc.) that makes a difference here?

I don't want to be popular (at the moment), I'm looking for salvation.

So it oscillates, but oscillates upwards. As the other popular economist/blogger, Atrios, points out, the inelastic supply curve will lead to huge fluctuations. The market and finacial people will keep absolutely glued to this as they make money off of rates of change.
You're right that the attention is all driven by high current prices. It's the only way to capture the short attention spans of the media, public, and policymakers. Then it fades.

Less attention to the PO issue is bad, but there's a bigger danger: when prices fall back, the warnings will look false to many--even some in the PO community. That will breed more complacency and inaction until the real crisis hits.  

What's the heads up time for new technology? It depends. The DC-1 that revolutionized aircraft design and manufacture went from an unproven idea to a flying plane in 11 months during WWII. On the other hand, the British Navy knew that limes prevented scurvy (from memory) about 160 years before they actually gave sailors limes. Depends on your sense of urgency.

For conservation issues, expect lots of years. The US auto fleet is about 9 years old on average, and it takes a long time to replace those inefficient vehicles. Hirsch is probably right when he says 20 years lead time is needed--if we push.

As for salvation: if there's a feasible solution to the PO problem that we can adopt in the next 10 years, it's a pretty well kept secret. I think mitigation of the damage is necessary and doable (to an unknown extent). We'll need to work to keep societies and economies functioning, and to minimize inequities. One key task, that takes very little oil, is to work on strategies that will offer people a vision of hope, and some sense of control. That's where we in the PO community can come in.

"As for salvation: if there's a feasible solution to the PO problem that we can adopt in the next 10 years, it's a pretty well kept secret. I think mitigation of the damage is necessary and doable (to an unknown extent). We'll need to work to keep societies and economies functioning, and to minimize inequities. One key task, that takes very little oil, is to work on strategies that will offer people a vision of hope, and some sense of control. That's where we in the PO community can come in."

This is to the point. Well said. It is not a good idea to panic and try to occupy Saudi-Arabia or start rioting or let poor people to freeze to death or something like that.

But everybody should forget that "doing more with less". In real situation we will do lesser with less. And we will be less smart, too. Because we will poorer and poor people cannot always afford to use the smartest solution. So it is important to try mitigate the effects and see that everabody can make it somehow.

But remember that we will quite probably see more physical supply shortages, too, as we are now seeing in Indonesia, China and elsewhere. Rapidly rising prices will not allocate the fuels smoothly and effectively. They create also supply disturbances. Distributors will have  financing problems. Stored oil is sold elsewhere for a higher price or kept waiting for still higher prices. Contracts made with lower prices are not kept. Fuel is hoarded etc. This will cause disruptions and spiking prices. In this situation some kind of rationing is needed to keep things going. This will cause more shortages. These shortages will usually be only temporary but they will affect the overall economy and decrease demand.  

"One key task, that takes very little oil, is to work on strategies that will offer people a vision of hope, and some sense of control. That's where we in the PO community can come in."
What, like some sort of priesthood?

What's this "vision of hope" based on? What's your sense of how to "control" the wild ride down the downslope of Hubbert's Peak?

OK, we cannot control the " the wild ride down the downslope of Hubbert's Peak" but we can control, at least somehow, the social consequences of it. We could give some hope that they will survive and don't need to panic or start shooting each other. People do live, and quite happily, in societies where oil and energy consumption is far lower than in the US.
where's the heads up lead time on conservation and new energy resources that gives us the time to adjust and prepare for an era of scarce oil?
You just put your finger on one of my big complaints about the Republican regime:  they deliberately fumbled the ball in 2001, and again with the energy bill this year.  Arguably, they've been throwing away our adjustment capacity since Reagan's first term.

A real energy bill would have re-instated the PNGV.  We didn't even get that.

To me the huge news in JDH's piece was that production of light sweet crude peaked four years back.  I haven't seen that fact given wide play anywhere in the peak oil community.


Hubbert really got it right. He forecasted that oil would peak in 2000. By oil he meant conventional oil, that is light sweet.

See, the oil statistics count now "all liquids". All of the growth now is really something else than what was "oil" in Hubberts time. Some of these "liquids" are not independent components: NGLs are completely dependent on natural gas production and will deplete with it. Refinery gains will decline with oil production. Offshore oil has different, far steeper depletion curve.

The markets really provided some "fixes" after the oil crisis of '70s and '80s: these new "liquids". Not bad but not enough. It is important to see that the crisis in the beginning of '70s was a real supply crisis. You can see it as you look at the world oil production curve. There was a great and permanent shift: the rapid growth slowed down and the curve got flatter. Most of the growth was this "new oil" that took longer and demanded bigger investments to come online. OPEC was destructively overproducing in the end of '60s. Low prices discouraged non-conventional oil development. The situation was clearly critical. If this was to go on the supply would have hit the ceiling, soon and hard. Extrapolating the trend 1960 - 1971 we see that the production would have been in 3 - 4 years time (about 1975) more than now! This was impossible, so something was done. So there was really a physical problem. OPEC did the only right thing.

The rest of the world did not. It managed to kept the economy growing by adding nuclear energy and natural gas. But growing economy needs more oil. Oil in the energy mix is now more difficult to replace than before. The diminished share of oil of the bigger energy consumption makes us more vulnerable, not less. If most people didn't get in thirty years what happened during the first oil crisis it is easy to understand that they have difficult to understand the peak oil now.

The most important thing is to even the field by reducing subsidies for fossil fuel-based electrical production.

Wind is the biggest part of the answer.  From 1997 to 2002, wind power quadrupled.  It's cost efficient now, it's cheaper than solar, it's safer than nuclear, and its MUCH cleaner than gas or coal.

Silent E