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On a similar note: Jan Lundberg
I believe there was a post about the piece from the WSJ, but here it is with a little commentary by Jan Lundberg:
http://tinyurl.com/bwdqvo
The Crash: Its Cause and Promise
by Jan Lundberg
06 April 2009
From the perspective of a critic of car culture, the Depression -- and the petrocollapse that primarily caused it -- is insufficient as yet. Just look at the huge U.S.-made motor vehicles terrorizing the roads with a single occupant to this day. But, keeping our cool, let us examine trends and how to influence them.
Someone else besides Culture Change has seen the financial meltdown and the Depression as resulting from the record high oil prices that led up to $147 per barrel last July. The Wall Street Journal last week confirmed our view. Its analysis is based only on what happens to housing prices and commutes when gasoline prices stay high.
We need not limit our analysis to gasoline or housing. Petroleum products all rose and gouged the economy hard. Direct and hidden subsidies were costing oil users much more than the nominal record prices. And today's prices are likely double or more than the posted prices.
"This is what petrocollapse looks like."
Prices had been swinging higher for a few years, enough to sap the economy of its accustomed cheap energy. It was after two months of financial collapse in late 2008 that I first began saying and publishing, "This is what petrocollapse looks like." However, with collapsed oil and gasoline prices, people could now forget some immediate stress: they now cared about money issues in general, rather that what has underpinned wealth all along: limited resources.
Yet, the oil-price/Depression connection has been missed by almost everyone, who thought that the mortgage bubble had caused a recession. But what enabled all that sprawling home and commercial building? Answer: cheap (subsidized) energy. What was the infrastructure involved? Answer: petroleum, through and through, that we also depend on perilously to feed ourselves.
As peaking oil extraction is marked by an inexorable supply-decrease afterward, the end of economic growth is automatic. And industrial society is not set up for a steady-state economy that works with the ecosystem sustainably. This picture gets worse, a view I base on my previous career as an oil-industry analyst (I was called The Oracle by Chevron's Vice Chairman before I quit industry in 1987):
- There's no substitute, on the whole, for petroleum and its ability to comprise so many "essential" products.
- Even if some alternative technologies or fuels could compare with cheap oil's super high net-energy ratio, which they never have, the most promising and benign of them are just electricity producers.
- As oil industry authorities such as Matthew Simmons have made clear, the energy crisis that is unfolding is a liquid-fuels crisis.
- At root, it's not an energy crisis but a culture crisis, as pointed out by M. King Hubbert who developed the peak oil concept.
- Petrocollapse will not only happen due to a "run on the energy bank" -- creating strife and disaster, as Rep. Roscoe Bartlett said as he quoted me in Congress in May of 2005, because:
- The oil industry is not set up for a reversal of growth. The common assumption even among peak oilists is that there will be a gradual decline in extraction and an intact, integrated oil industry to refine and distribute the myriad products to billions of people. This wrongful assumption has the potential to cause tragedy in itself.
Because of the potential for the worst outcomes from lack of preparing for petrocollapse now underway, the need for transitioning to a car-free society is urgent. And for the sake of the climate, the driver of the big bad American vehicle needs to be curbed. The car bubble may have burst, but there's no proactive policy or movement to follow through with intelligent planning.
Another reason to not only end car culture but to pull the plug on the global-warming economy is that there's a better way of living than competing for dispiriting jobs. Most jobs exist to enrich the greedy few who are blinded by their own propaganda regarding civilization and science. (For positive survival-options, take a tour of CultureChange.org and other websites such as The Farm's Ecovillage Training Center's.)
"Did the Oil Price Boom of 2008 Cause Crisis?"
Wall Street Journal
April 3, 2009
By Justin Lahart
Reeling from the housing bust and the banking crisis, it’s hard to think that the energy shock — the one that carried the average price of gasoline to a peak of $4.11 a gallon last July — was much more than a minor player in the economic downturn. But there’s the uncomfortable fact previous oil shocks, like the ones that came with the 1973 oil embargo, the 1979 Iranian revolution and the 1990 invasion of Kuwait, were also associated with recessions. And the 2001 recession, too, came on the heels of a run-up in oil prices.
In a paper presented at the Brookings Panel on Economic Activity Thursday, University of Calif.-San Diego economist James Hamilton crunched some numbers on how consumer spending responds to rising energy prices and came to a surprising result: Nearly all of last year’s economic downturn could be attributed to the oil price shock.
As he writes on his blog, that’s a conclusion that he doesn’t quite believe in himself. We’d like to think that, say, the seizing up of the credit markets this fall had something to with the economy falling off the table in the fourth quarter.
But then again, maybe what happened to oil prices had something to do with credit markets seizing up. The housing bubble saw people of lesser means traveling further afield to buy homes. That gave them long commutes that they were able to afford when gas was $2 a gallon, but maybe they couldn’t at $3. Housing in the exurbs got hit hardest, and one reason why is that high gasoline prices made it hard for people to lived in them to keep up with their mortgage payments, and hard for them to sell their homes without taking a steep loss. In some meaningful way, that has to have contributed to mortgage problems.
A more controversial argument on energy’s role in the credit crunch could go like this. Housing prices kept on climbing, but the Federal Reserve – laboring on the idea that it couldn’t identify bubbles and that even if it could, it shouldn’t pop them — didn’t do anything about them. But then rising oil prices started adding to inflationary pressures, so the Fed kept pushing rates higher, left them high even as housing prices collapsed, and was to slow to lower them when the credit crisis got rolling.
In commenting on the Wall Street Journal story, journalist Paul Nellen wrote, "It was quite clear from the very beginning that the oil price shock in 2008 and the financial collapse last year have been strongly connected. No one talks about it because this finding could cause major anxieties and even political unrest for the dark future to come." He credits the earliest prediction of today's crash and debt crisis to 2005 by Colin Campbell, the geologist who founded the Association for the Study of Peak Oil and Gas. Unfortunately, Campbell has been characterizing peak oil as "the beginning of the second half of the age of oil." I disagree, as we come from opposite ends of the oil industry. He was disappointed at Culture Change's 2002 project Committee Against Oil Exploration, as he still thought like an oil man. But in 2005 he published my essay "End-Time for the USA upon Oil Collapse - A scenario for a sustainable future."
What can be good about the crash? People are getting closer together, doing more gardening, spending more time with one another due to less work, and -- crucially -- the environment gets a break. For example, the usual timber saies in the Pacific Northwest are not getting many bids, due to the construction downturn. Downsides include revenue loss for new schools. But why should there be new schools? We are going to have to limit population size and abandon endless growth. We can thus save the remnant of ancient forest essential to everyone's survival and continued evolution.
Collapse is not a comfortable feeling. In Pittsburgh on April 4th an emergency call to police left three officers dead: After an argument between a son and mother over a dog's urinating in the house, the mother threatened to kick out the son. To back this up, she had the cops come and invited them in. Her son blew them away, and she stated he had been stockpiling guns and ammunition "because he believed that as a result of economic collapse, the police were no longer able to protect society."
Michael Moore's movie Bowling for Columbine showed how gun happy so many U.S. citizens are. For their survival though dwindling resources and ecosystem crash as well, a community convergence would make more sense than individual arms maximization. And the lethal weapons known as cars need to be minimized now, for so many reasons. One more reason: don't let the pollution-industry corporados laugh all the way to their banks! -
Re: On a similar note: Jan Lundberg
generally agree with this post, but i am still not willing to drink the man made global warming kool-aide yet. i do believe that oil, mineral, and agriculture are moving to unsustainable extraction levels.
is there any data on global temperature from 2008? From a midwestern mind set things seemed a bit cooler. I believe solar output may have more to do with climate change than man made co2. but i have an open mind. I know you can show me two charts that correlate co2 and temp. but the earth has had other cooling and warming trends long before our use of fossil fuels. correlation does not necessary imply causation.
We have this no oil, no coal no nuke attitude here, but in reality shutting down these sources will leave poor people in this country and others cold and starving. I bitch about but can afford $4.00 gas. I will just have to save somewhere else (eat out less, get rid of cable, cell phone etc.) but someone is going to have to choose between 4.00 gas and a meal of beans, or 4.00 gas and meds.
from a liberaterian perspective, if we let prices move to reflect the true costs maybe the economy can take care of itself. Maybe if gas prices included the price of a few carrier groups in the gulf which are needed to ensure a stable suppy, people would make a different choice about where they live and what kind of car they drive. Same goes for other environmental issues, if the price of the product includes the clean up for manufacturing and disposal maybe we would buy less throw away junk.Comment
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Re: One for the Oil bugs
Rather than stand outside in the rain and wait for a bus, I prefer to drive; thank you. A future without cheap energy is no future that I would want to live in.
The answer is atomic power plus every kind of other power we can get our hands onto. Put so much power online that the cost of living drops.
This means running the eco-frauds out of the universities and out of government. It means building power plants everywhere, as soon as possible, regardless of planning delays and environmentalists. This means an activist pro-growth and pro-energy govn't, not what we see now in the Obama Administration.
This means drilling for oil everywhere and converting coal reserves into synthetic oil--- the way the Germans did in WWII. This means doing, not talking, DOING--- because doing without is no solution at all.Comment
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Re: On a similar note: Jan Lundberg
I second this opinion, especially the comment about letting the market take care of the problem. If the article is correct, and it's the spike in energy prices that caused recent recessions, then so be it. If oil prices remain high, the market, the economy, and humans will eventually adapt to those higher prices. It may not be immediate, it may be a little painful, but that's what motivates changes in behaviors and systems. Let the market work.Originally posted by charliebrown View Post"...the western financial system has already failed. The failure has just not yet been realized, while the system remains confident that it is still alive." JesseComment
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Re: One for the Oil bugs
Don't know much about this author, Jim Quinn. Anybody know if he's reliable or not? http://theburningplatform.com/econom...sult---200-oil
Boone is looking more attractive today?
If the attached website doesn't pop up try http://www.fiendbear.com/ as the article is posted on that site also.Comment
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Re: One for the Oil bugs
Count me in complete agreement with Starving Steve on this one.Originally posted by Starving Steve View Post
No reasonable, sensible, sustainable economic policy - including energy policy - is possible without an open revolt of the populace through the establishment of and election of a Third Party. The Repukelicans and Demonrats may seek votes from different special interest groups but they are both owned by the same group of Banksters who fund their re-election campaigns!Comment
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Re: One for the Oil bugs
Reading your tirade completely void in argument or thought leads me believe you will continue "starving". There is no reason to believe you could be educated so I'll end it here.
ecofraudComment
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Re: One for the Oil bugs
Basically what you are saying is just keep going and postpone the solution. But the more we delay the problem with energy the more risk we pose on ourselves in the future.Originally posted by Starving Steve View Post
I see it as 3 kind of approaches:
1. Keep going - means increase dependency on hydrocarbons with hope to switch cheaply to the new energy as it will become available somehow
2. Rush for the "green energy" by imposing high taxes and barriers to oil extraction
3. Balanced approach. Keep going with oil and investing in alt energy by government intervention. (what Europe is trying to do)
I think there is no best answer. It is all about future risk vs today's prosperity. Without government intervention it will definitely be 1). But when/if we will run out of the HC and have not gradually developed replacement we will get a hard hit.
But there is a trick part in 2) and 3): you might divert a lot of resources from oil industry in some ridiculous projects and still end up with 1).
My personal view is based on the fact that we still do not have the solution for energy replacement problem and it is not the question of money/investment. So I would vote for gradual and artificially sustaining HC cost above extraction cost and diverting this money to developing alt energies. This will give more time and attention for new technologies and replace some HC demand with solar/wind and etc and might smooth the transition once new solution will be found and matured.
Somebody can argue this will require global control since much of the revenue is diverted on creating some strange buildings in the desserts ;) I have no asnwer fo that :confused:
To KGW: I share your view. Capitalism (and probably humans at least as we are today) development depends on constant growing of resorces supply for lower cost.
btw, many people do not understand the bell curve of the peak oil. Left and right sides are not the same. This plot is expressed in HC volumes, but if you express it in net HC extraction you will see how steep the right side is comparing to the left.Comment
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Re: One for the Oil bugs
Thank you. A little levity to release the ghouls of depression that are sometimes generated by articles and posts on this site is needed now and then. BTW...great movie.Originally posted by GRG55 View Post
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Re: One for the Oil bugs
I was wondering if anybody but metalman or jk was going to figure it out.Originally posted by vanvaley1 View Post
I agree, it is a great movie.Comment
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Re: One for the Oil bugs
I figured it out right after you posted it (I think!). Blade Runner?Comment
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Re: One for the Oil bugs
How to Profit from Energy Illiteracy
By Chris Nelder | Wednesday, April 8th, 2009
Politics is a painfully slow and inadequate way to go about forming an energy strategy, but it seems to be the only way we have.
A new bill submitted by Rep Henry Waxman (D-CA) and Edward Markey (D-MA), the American Clean Energy and Security Act, would aim to reduce emissions of carbon dioxide and other greenhouse gases by 20% from 2005 levels by 2020 (vs. the 15% proposed by President Obama), and by 80% by 2050.
The new emission targets are particularly interesting in that it would bring federal law nearly into line with California's landmark Global Warming Solutions Act of 2006 (also known as AB 32) which would reduce greenhouse gas emissions to 1990 levels by 2020 (a 30% drop) and 80% by 2050.
The proposal includes some requirements to modernize the electrical grid, produce electric vehicles and improve energy efficiency, all of which are crucially important steps toward meeting our energy challenge.
But it is also based on a cap-and-trade market approach to emissions, which I fear could prove a disastrous boondoggle. There is ample evidence that such programs have been a failure in Europe and elsewhere as traders exploited loopholes, and the programs did not produce the expected reductions in emissions.
A simpler, fairer, and virtually exploitation-proof approach to emission controls is a carbon tax. Assigning a price to carbon emissions across the board and raising it gradually would give the market the information it needs to progressively choose cleaner primary energy sources, improve efficiency, and get us where we need to go.
The word "tax" is politically unsaleable, however, and so we carry on doing some of the right things for mostly the wrong reasons.
Instead of worrying about CO2 targets, we should be worrying about how to live within a shrinking budget of fossil fueled energy. As I have mentioned before, studies by professor Kjell Aleklett (Uppsala University) and professor David Rutledge (Caltech) have called into question whether we can even burn enough fossil fuel to reach the 450 ppm target on CO2, given their models of the peaking and depletion of oil, gas, and coal.
Still, there is something encouraging about seeing our ambitions to fight climate change starting to converge with what our energy goals need to be. Climate change, energy, national security, and our overall economic health are deeply intertwined issues, and they must be addressed together if we want real, sustainable solutions.
When 20 Years Is "Imminent"
My study suggests that we will have to live with 25% less energy by around 2025, and 50% less energy by 2050. Starting with peak oil (a flattened peak from 2005-2012), then peak natural gas (around 2010-2020), then peak coal (2020-2030) we are facing the imminent decline of 85% of US primary energy sources.
By the end of this century, most fossil fuels will be kaput, and we'll be relying exclusively on renewable energy (which currently supplies less than 2% of our primary energy), and whatever nuclear energy capacity we can maintain without fossil fuels.
Some may object to my characterization of a 20-year-off peak as "imminent," but in fact, it is.
According to Joseph Romm, the editor of Climate Progress, oil company Royal Dutch Shell claimed in 2001 that it takes 25 years for a primary energy source to reach a 1% share of the global market afterits commercial introduction. Based on the histories of solar and wind energy and the fossil fuels, that seems about right.
Once an energy source reaches 1% penetration, we can start making some predictions. A fascinating paper I recently came across (C. Marchetti, "Primary Energy Substitution Models: On the Interaction between Energy and Society," 1977) used statistical analysis to make some startlingly accurate forecasts about oil, natural gas, coal, and nuclear energy 30 years into the future.
According to the model, once a given fuel source reaches 1% penetration its success over the next 30 years is essentially "baked in."
Significantly, Marchetti found that it generally takes 100 years for a given source of energy to achieve 50% market penetration. While he did not model renewables in his 1977 study, he did realize that solar and other nascent energy sources could not achieve a significant enough fraction to fill the gap of older fuels by 2050. His conclusion? "Go nuclear or bust."
We may rightly take issue with Marchetti's analysis on several points: It does not model renewables or efficiency, nor does it take into account any limits on resource reserves. But his paper was not an attempt to forecast the future of energy; it was simply a statistical model showing how energy sources are progressively exploited and substituted. As such, the implications are sobering for renewable energy and our future energy budget as a whole.
If it takes 25 years for a given primary energy source to reach 1%, and another 100 years to reach 50%, we should be forming our energy policy on at least 50-year time horizons.
We don't, I suspect, for several reasons.
Politics Always Trumps Science
First, 50 years is much too long a period for the political process to contemplate. Thousands of scientific papers have accurately projected the future of various energy sources, and made recommendations accordingly, but they don't survive the process of making policy when elected leaders have short terms in office and constituents who demand results in two years or less. In short, politics always trumps science, to our eternal detriment.
Consider the case of corn ethanol. Before federal subsidies arrived and produced the boom and bust of corn ethanol producers in 2006-2008, scientific research had concluded that with an EROI (energy return on investment, or "net energy") of perhaps 1.2, corn ethanol was an obvious non-starter.
There's no way a fuel production process that only returns a 20% net gain can be sustainable (research by Dr. Charles Hall et al. suggests that the EROI needs to be at least 3, if not 5 once all indirect costs are accounted for). Yet their research was ignored, and their pleas to Congress fell on deaf ears; politics trumped science. Only now, after the bust, are people starting to look at the EROI of fuels as an important consideration in policy formulation.
Second, we are simply too afraid of the conclusions to think about them. But this fear is almost never directly acknowledged; we prefer to express it in high-minded pronouncements on the wisdom of free markets, or denial couched in weak science, or faith in human ingenuity.
Third, we have a serious problem of energy illiteracy. A new report from the nonpartisan, nonprofit research group Public Agenda titled "The Energy Learning Curve" reports some stunningly discouraging data from its January 2009 survey of over 1000 American adults:- 39% of respondents couldn't name a single fossil fuel.
- 51% couldn't name an alternative energy source.
- 65% thought that most of our oil imports come from the Middle East.
- 56% believe that nuclear energy contributes to global warming, and 31% believe that solar energy contributes to global warming.
- 68% believe that "The main cause for increases in gas prices is speculators who drive up the price of oil."
- More than half don't know that less than 10% of the United States' energy comes from renewable sources. [If you rule out hydro and biomass, neither of which are likely to scale up, and restrict "renewable" to mean only solar, wind, and geothermal, it's less than 2%.]
- 17% are classified as "Climate Change Doubters." Nearly two-thirds of this group, and 44% of the entire sample, believe that drilling the Outer Continental Shelf and Alaska would eliminate our need for imported oil.
- 19% are classified as "Disengaged," meaning they don't know and don't care about energy much at all.
The media is little help either, regularly gushing about the trillions of barrels of oil in shales, or the latest "breakthroughs" in cold fusion or water-powered cars, without giving a moment's thought to the flow rates (that is, the only thing that matters) of unconventional oil, or retracting their previous stories when the latest breakthroughs turn out to be mistakes and canards.
Even most cleantech investors know little to nothing about peak oil, or any of the fossil fuels for that matter. Conversely, most oil and gas industry types are broadly ignorant about renewable energy and efficiency, and view it as a threat.
In the face of such ignorance, how much hope can we place in the political process to form sensible energy policy? Even if we did have hope, how much do we really think we can accomplish in the next 40 years, given the conclusions of Marchetti's model?
Forget "Energy Independence"
Right now, our spending on energy research and development, and developing new energy and efficiency measures is less than one-tenth of what sober analysts calculate we would need to spend to make a reasonable transition to the energy regime of the future.
We're also about 20 years too late to begin making that investment if we want the transition to be better than a chaotic, very bumpy ride marked by shortages and horrendous price swings.
An intelligent, sensible approach to our energy future would concentrate first on efficiency and conservation, but it's deemed politically unacceptable to ask Americans to make any sacrifices.
It would support continued drilling and careful stewardship of our remaining domestic oil and gas reserves, but that quickly runs afoul of the green and environmental lobbies that are now in control.
It would put rail and transit oriented development at the top of our infrastructure agenda, but those objectives were too long-range and not "shovel ready" enough to gain any serious traction in the recent federal stimulus package.
It would put a tax on all sources of carbon emissions, and would require the US to reduce its oil consumption each year by the same percentage that global oil production is declining; both suggestions would arouse righteous ire from free market advocates. The "Energy Learning Curve" report found that "Anything that increases the cost of driving is soundly rejected by the public."
It would forget about "energy independence" as a goal (if it were possible at all, it would be at least 70 years in the future) and start thinking instead about how to reconfigure our cities, suburbs, transportation, food supply, energy distribution, economics, and...well, everything...so that it becomes truly sustainable. It would reject the idea of growth completely and start thinking about how to manage the Great Contraction. But I'd wager there isn't a politician in America who would begin to try to sell that.
I don't know how to escape politics and still make policy. Despite my cautious optimism about the new direction the Obama team is taking on energy, their first moves will accomplish little to address the peak oil threat. It looks to me like the impending energy crisis is already a foregone conclusion.
What I do know is that those who do understand energy—who know where it comes from and what our future options really are—may not be able to rise above the din of ignorance to chart us a clear path forward, but they can profit from it. They know that oil under $50 and natural gas under $4 is such a ridiculous giveaway, it might as well be free. They know that renewable energy has a virtually endless upside potential, but that the right technologies to invest in will be ones with a high EROI, a short time to market, and the ability to scale quickly.
Until next time,
Chris
P.S. In addition to buying oil and gas on the cheap right now, I believe some of the best ways to bag quick profits from the coming energy crisis are in the renewable energy and smart grid sectors.Comment
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Re: One for the Oil bugs
From Nedler's article above, i guess i am "dumb public" that i'm not sold on climate change as a result of man's activity. however, i have been called worse, and can move forward. i actually believe in most of what the article says. I also think Vit's 3 options are a nice summary.
The other day there was a poll on itulip regarding a 3rd party well i think VIT's option 3 under the control of a 3rd party is the route to go. Lets institute a tax on oil,coal,gas then use this tax to start building wind, solar, geo-therm, biomass or any other renewable source that is viable. somewhat like the pickens plan but with nuke as the bridge. We can use more nuke to generate electricty and stop using gas, and coal for electrical production. gas can power vehicles and coal can be liquified.
Without the 3rd party, opening up the taxation genie in the current enviroment will end up costing us plenty and producing no results. Can you imagine Barney Frank pontificating to us about his great new envergy plan. Ohhh I dont know if I should be sick, or frightened out of wits, or both.
The housing market is bust a bubble enabled by the gvt, social security reported its surplus this year would probably be under 10B? and 2010 they will slide into deficit if the economy doesn't turn around, medi-care well we now about that, as mentioned corn based ethanol?? another great gvt plan.
The energy party needs leaders with courage to tell the truth, perserverance, statemenship, ability to sacrifice. Intellegence to see what is going to work and what is not. None of these qualities are possesed by either party now.Comment
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