Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

27 April 2011

“Daddy! Mommy! I Want More Oil!”

[For brief comment on the future of nuclear power after Fukushima, click here. For comment on shale gas, click here.]

If nothing about my generation of Americans, the Baby Boomers, has disgusted you yet, read on. We are now entering a phase of American history in which their children and grandchildren are beginning to sound like spoiled brats, and we Boomers like the clueless parents who spoiled them.

As you may have noticed, oil and gasoline prices are going up. They’re going up in China, causing truckers to stage a rare public protest. They’re going up here at home. They’re going up everywhere.

The reason is as simple as Economics 1A. We humans now have a global marketplace, more for oil perhaps than for any other commodity. We produce it globally, distribute it globally, and consume it globally. And in that global market supply has peaked irrevocably and demand is exploding worldwide.

To use the well-known jargon, we passed Peak Oil at least a year ago. None other than the world’s biggest and best oil company (Exxon-Mobil) made the announcement, not by words but by deeds. It bought XTO Energy, a gas “fracking” company, because it couldn’t replace the energy in its declining oil supplies with anything else fast enough, except for fracked natural gas. It did so even though its managers knew it would lose money, at least initially, because natural gas now costs a lot less than oil on an energy-equivalent basis.

As for the demand side, the growth is obvious. Europe and we Americans are the laggards in growth, with recent annualized growth rates of 0.3 percent and 1.8 percent, respectively. But together we account for about 10% of global population. The rest of the world is growing at least twice as fast, with places like India and China growing between 8% and 10% annually―over three times as fast.

And, in case you hadn’t noticed, economic growth is based on oil, worldwide. It takes oil to make the fertilizers that underlie the so-called “green revolution.” It takes oil to produce, transport and run the tractors and farm combines that plow the fields, seed the crops, spread the fertilizers, make and spread the weed killers and pesticides, harvest the crops, and thresh and grind the grains that result. It takes oil to bring the crops to market (mostly in big cities) and to get consumers to markets to buy them. That’s why oil-consumption growth rates closely track economic growth rates, except in most-developed societies, like ours, that are now (rightly) concerned with conservation and in relative economic decline.

So the supply of oil is dwindling. Demand for oil is growing globally like gangbusters. Both supply and demand for oil are highly inelastic. So basic college economics tells us that prices will rise rapidly and ineluctably for the foreseeable future.

All this was predictable. Decades ago we knew, or we should have known, that oil takes millions of years for geological forces to produce. So the supply in our Earth’s crust is limited, especially near the surface and on land, where we can get to it easily. The shortage is a function of basic geology and geography, of which we self-centered Americans are the most ignorant folk on the planet.

In fact, the shortage was not only predictable. It was predicted. Jimmy Carter foresaw it, turned the thermostat in the White House down, and wore sweaters. We Boomers laughed at him as we stuck the gas hoses in our long-finned Edsels and filled them up.

Of course no one could predict precisely when the crunch would come. Now it has come, and everyone who can face reality and do arithmetic should have seen it coming.

It was here before the Crash of 2008. But that economic collapse postponed it for a few years by killing the global economy and, with it, demand for oil. Now that rapid economic growth is back, mostly in portions of the globe outside of Boomerland, so is the oil “crisis.” But it’s not really a “crisis” at all. It’s a well-understood, wholly predictable and predicted phenomenon.

The world’s smarter people already know this and have been preparing for some time. Denmark, for example, is the world’s leader in windmills. Fly over its territory and you can see them from the air, in every conceivable location. France became the world leader in nuclear energy, making over 75% of its electricity from the atom and using it to run a modern system of electrified rapid transit, including marvelous high-speed intercity trains. Even China, which came late to the development party, is exploiting every substitute for oil it can find: windmills, solar cells, nuclear power plants, and dirty coal-fired plants.

But we Americans are “Number One”―the self-proclaimed world leaders in everything from free markets to military force. The whole world wants to know what we are doing, or so it seems to us.

Like spoiled brats, we are crying to our clueless politicians. “Daddy! Mommy! We want more oil!” (I put the male parent first not for reasons of gender discrimination, but because daddies are more likely to over-promise first, most, and always. It’s that macho thing.)

We direct this cry to the most clueless and incompetent members of our society, politicians. For forty years they saw or should have seen this “crisis” coming but did nothing about it. So now we, like spoiled brats turning to clueless parents, expect them to solve overnight what they couldn’t or wouldn’t solve for two generations.

And like the serial failures that they are, they come up with still more non-solutions. The first is offshore oil.

The highest estimate of all the offshore oil we know we possess, all together, amounts to less than 3% of global reserves. (For a more conservative estimate of US total reserves, including onshore reserves, look at this map.) When compared to 5% to 10% global growth rates, what does that mean? If we could take all that offshore oil out of the ground and make it available to refineries immediately―today!―it would mean a temporary slowdown in rising prices for a few months, at most a year. Then we’d be right back where we are today.

But of course we can’t do that. We can’t make any offshore oil available for refining immediately, except that which we’re already drilling. Drilling wells and building pipelines or tanker infrastructure takes years, up to a decade in rough climates like Alaska’s. And of course we can’t get all the oil because getting the last few bits requires multiple wells, pressurization, “fracking,” water-and-mud flooding and other increasingly expensive, toxic, and environmentally damaging technology.

That’s reality. Offshore drilling is not a cure for rising oil prices. It’s not even a reliable brake on rising prices. It’s just something that incompetent parents tell kids who’re screaming “Daddy! Mommy! I want more oil!” when they haven’t got anything sensible to say.

Dipping into nation’s Strategic Petroleum Reserve would be even worse. It would be committing national economic suicide.

The Reserve has a ninety-day supply of oil for our nation. That’s three months. It’s intended to stave off immediate national economic catastrophe in the event of some truly unforeseeable oil crisis like a revolution in Saudi Arabia, or a nuclear war in the Middle East that makes the oil radioactive. Each of those eventualities is looking a lot more likely now than even a year ago. But don’t count on loving parents to avoid suggesting insanity when they hear those plaintive cries, “Daddy! Mommy! I want more oil!”

Oil is running out, inexorably and globally. Geological forces aren’t going to make any more, at least not within the foreseeable future. With global economic growth just reaching its truly exponential phase, price increases are going to continue and likely accelerate as far out as we can see. And, at the end of the day, we need to save some oil to synthesize fertilizers, plastics, and medicines, unless we want to spend the time and enormous energy to synthesize them atom by atom, starting with methane.

Those are facts. Unlike spoiled brats and their clueless parents, adults face them. They don’t deny them.

So we need to find substitutes for oil, and we need to find and use them fast. The best and cleanest candidates are obvious and have been for some time. They are: nuclear, wind, solar, and hydroelectric power, with smaller amounts of geothermal and tidal power. There are also biofuels like ethanol, algae by-products and other biotech ferments. But these are in their infancy, and some of them create economic problems by displacing crops for food.

There is also coal, the dirtiest fuel known to the human race, and the one most likely to turn our blue-and-green earth into a smoggy brown purgatory. Most of the developing world overuses coal, and some of us want to follow its sorry lead. But the consequences would be disastrous. No one who has seen the grandeur of the Milky Way at night or sensed the fresh smell of spring would ever want to live in a world powered mainly by coal.

When parents hear their kids crying “Daddy! Mommy! I want more [X]!”, their first response is to make up stories to assuage the mental pain. It doesn’t matter whether the stories have any basis in reality.

That’s where we are now. But parents who continue on that tack end up ruining their children’s lives and their own. The hard choices and hard work lie ahead.

Will we Boomers continue to lie to our children and ignore their future, while they continue to live in our houses and face increasingly bleak prospects of energy scarcity, economic insecurity, pollution and global warming? Or will we strive to find good substitutes for oil and make them work? The answers will affect mostly us, for the rest of the world already has been far quicker than we to face reality.

P.S. The Future of Nuclear Power after Fukushima

Readers of this blog know that I am a strong supporter of nuclear power (1, 2, and 3) and a vehement opponent of coal (1, 2 and 3). The reason is not that I favor twentieth-century solutions over eighteenth-century ones, although I generally do. The reason is that I would far rather live right next to a nuclear power plant, taking the small risk that I might have to leave my home forever, than to live day-to-day with asthma, dirty skies, mercury pollution and acid rain, let alone the numerous consequences of global warming.

The nuclear disaster in Fukushima raised the ante for supporters of nuclear power like me. I am preparing an essay addressing the issues raised by that disaster. But, as a preview here, I’ll make two points.

First, Fukushima proved conclusively what we should have learned from Chernobyl: active safety is not enough. Every one of Fukushima’s six reactors and six spent-fuel cooling ponds required (and still requires!) continuous, ongoing, active cooling with circulated water in order to avoid meltdown (or now, further meltdown).

Relying on continuous, active human intervention to avoid catastrophe for the centuries and millennia required for radioactive fission byproducts to decay into harmlessness is the height of human hubris and insanity. Modern designs can provide safety with passive systems alone, that is, with systems that do not require any human intervention (let alone continuous intervention for decades or centuries) to work as designed.

We must use such passive safety systems wherever they are available, both in new plant design and in retrofitting old plants. If old plants cannot be retrofitted at reasonable cost, or at all, we should abandon and decommission them safely. Doing so is part of the cost of a safe and rational nuclear power program.

The second point is that cost. New nuclear-plant designs with passive safety systems may be more expensive than existing designs, let alone extending the lifetimes of existing plants far beyond their design longevity (as was done in Fukushima and many like American plants). But Chernobyl and Fukushima now give the lie to such “economies.”

We should design nuclear power, above all, to be safe. If that makes it too expensive, then we should exploit safer alternatives like wind and solar power or biofuels. But if we humans massively exploit nuclear power―as I think we can and should―then we should do everything we can to make it safe, without the need for constant and ongoing human surveillance and attention. Chernobyl and Fukushima should be the last human nuclear disasters that could have been avoided with a little more foresight and for a little more money.

Shale or “Fracked” Gas: An Interim Solution?

Careful readers will have noted that Exxon Mobil is betting on shale or “fracked” gas as the next step in our nation’s energy supply. So is Chevron.

This evolution is natural for oil companies because it uses variations of their customary technology. You get natural gas, including shale gas, by precisely the same methods you use to get oil: drilling wells. The wells for shale gas are more numerous and tricky; but they’re simpler, for example, than drilling for oil in the deep sea or the frozen Arctic. So oil companies are happy and in their element in recovering shale gas by fracking.

But shale gas has two big problems. First, it offers only limited supply. The Marcellus Shale gas deposit, reputed to be the world’s largest, may have enough recoverable gas to supply the whole US for twenty years. It’s a big deposit, but twenty years is not much time. It’s already been nearly forty since Jimmy Carter wore those sweaters in the White House, warning us of limited supplies of oil.

In comparison, consider supplies of thorium, the fuel for Liquid Fluoride Thorium Reactors, a new (and much safer) form of nuclear power plant. We have enough thorium right here in the United States to power us at current rates for a millennium. That’s a long-term solution.

So shale gas is, at most, an interim solution, not a long-term one. Shale gas’ second problem is environmental damage. The last few months have produced the usual controversies (1 and 2) in Marcellus Shale drilling areas: environmental contamination, industry denials and play-downs, and citizen concern. The precise extent of the danger and damage are not clear yet, as all sides are engaged in the usual “spin.” But even at this early stage, it’s clear that shale gas drilling is neither costless nor riskless.

The Marcellus Shale covers parts of at least five states: New York, Pennsylvania, Ohio, Maryland, Virginia and West Virginia. If the costs and risks turn out to be larger than expected, why risk the water supplies and peace of mind of millions of people in the most heavily populated part of the nation for a mere twenty years or so of energy grace?

Shale gas does have several advantages. We know how to get it. Our existing natural-gas infrastructure provides a reasonable means of distributing it. And we can modify internal combustion engines in cars and trucks to use it as a fuel, albeit with significant decrease in driving range. So, as long as its environmental damage and risks are tolerable, it’s not a bad interim solution to declining oil supplies and ever-rising gasoline prices.

But the big drawback is supply. Like oil, shale gas is limited in supply. There won’t be any more. So when its availability inevitably starts to diminish, we will experience the same sort of inexorable price increases and shortages that threaten us now with oil. And that probably will happen within three decades at the outside, because using natural gas as a substitute for oil (which has a higher energy density) will vastly increase our present natural-gas “burn rate.”

So while I didn’t mean to slight fracked gas, its potential as an interim fuel, or the continuing environmental controversies it is likely to create, I see the whole thing as largely irrelevant from a long-term perspective.

Besides hydroelectric power (which also may wane with climate change), there are only four general technologies that could provide long-term solutions: nuclear, wind, solar, and renewable biofuels (which are essentially biochemical means of storing solar energy). Coal could be a medium-term solution but with unacceptably horrible environmental consequences; so I exclude it.

The basic point of this essay is that we can’t keep kicking the can down the road. Doing so is wasteful and economically and politically disruptive. Shale gas should give us about twenty years to make a reasonable transition to a longer-term energy solution. But in order to realize its potential in that regard, and to minimize shale gas’ foreseen and unforeseen environmental consequences (including climate change), we have to start the transition now.

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