Strategic petroleum reserves: The world's last 'swing producer' tries to save the economy

World governments have collectively poured trillions of dollars of stimulative spending into the world economy since the crash of 2008. And, they've shoveled trillions more into failed financial institutions. In addition, several of the world's central banks have lowered short-term interest rates so low that the next move would have to be negative. Still, the world economy remains weak despite unprecedented measures to stimulate growth.

And so, global leaders are now implementing another stimulative measure that they hope will prevent the economy from teetering over into recession once again: lowering oil prices through the coordinated release of 60 million barrels of oil into the market from government-run strategic petroleum reserves. The move seemed to have the desired effect as oil prices fell more than 5 percent after the announcement.

The question is: Why did global leaders wait until now? The Libyan conflict had already caused the loss of more than 1 million barrels of oil per day by the end of February. As a result, oil prices soared above $120 per barrel for Brent Crude. Yet, countries holding emergency stocks did nothing at the time. But now, with government budgets across Europe and in the United States moving toward austerity and with the U.S. Federal Reserve ending its second round of so-called quantitative easing--a bond buying binge designed to bring down long-term interest rates--world leaders have one last card to play. They have a vast supply of petroleum that will now be used to bring oil prices down and thus allow consumers of oil products to pocket the savings and spend that savings on other things in the economy.

Two questions come to mind: Will it work? Will it have any side effects? Let's take the first question. Undoubtedly, it will work. It already has worked at bringing down the price of crude. Price is a function of supply and demand. We have just increased the supply substantially. But, since the release is only scheduled to take place over the next month, the follow-on question is: What next? If the economy doesn't stabilize, will the powers-that-be try another release? While this current release is relatively small, continued releases could begin to erode the emergency protection function of strategic petroleum reserves. And, further releases would only highlight the tightness of the crude market and might actually embolden speculators to push up the price. It is a tricky game to shape expectations in markets through which hundreds of billions of dollars flow each month.

Now for the second question: Will the release have any side effects? What we actually need to be doing is discouraging wasteful energy use. Manipulating the price downward actually encourages consumption. And, that's exactly what we see in such countries as Saudi Arabia and Venezuela where gasoline is heavily subsidized. (A recent survey showed prices in Saudi Arabia at 61 cents per gallon, and prices in Venezuela at 8 cents per gallon.) This is precisely the wrong incentive in an era of tightening supplies. This intervention also discourages exploration by adding yet another destabilizing element to the energy markets. It's hard enough for oil and gas companies to determine which prospects will be profitable without having to contend with the possibility that prices will unexpectedly be knocked down through government action.

The truth is that oil prices have long been manipulated for specific policy objectives. For most of the 20th century the United States was the world's preeminent oil power and the world's swing producer. And, Texas was the place in the world with the most excess capacity to produce oil. (A swing producer can quickly increase or decrease production in order to bring prices up or down as desired.) Before 1970 the Texas Railroad Commission, which regulates oil and gas production in the state, managed world oil prices by deciding what percentage of a well's maximum output could be produced. (Since that year, wells in Texas have been allowed to run at 100 percent of capacity.)

Later as the United States became an oil importer, Saudi Arabia built up considerable excess capacity and became the world's swing producer. The trouble is that today no one--not even the Saudis--has enough spare capacity to act in that role and moderate oil prices. We know this because the Saudis have not been able to do much to offset the loss of oil production in Libya earlier this year. Instead, the Saudi oil ministry kept insisting that the world was well-supplied even as prices for Brent crude rose above $120 a barrel.

Now, the world's strategic petroleum reserves have temporarily taken on a role formerly filled by the Texas Railroad Commission and Saudi Arabia. But with no real production capacity, the world's holders of such reserves are merely draining away their rainy day fund of fuel in what is likely to turn out to be a futile effort to manipulate the oil markets and save the economy from another steep decline.

The high price of oil isn't, of course, the only thing troubling the economy. If all the heroic financial measures that have been tried to date are not creating the desired self-reinforcing recovery in the world economy, then the attempt by governments to lower world oil prices must be seen as nothing more than a Hail Mary pass with little chance of success.

Solar storms, EMP and the future of the grid

In late August 1859 the most severe solar storm ever witnessed began and lasted through the first few days of September. It produced vivid auroras in the night sky as far south as Cuba and was so bright campers in the Rocky Mountains got up in the middle of the night thinking daylight had arrived. During the storm telegraph operators felt as if some alien force had overtaken their equipment. Even disconnecting power to the wires failed to quiet their telegraphs. In some places the paper strip used to record the dots and dashes of Morse code caught fire because of the electrical surges coursing through the telegraph lines.

Today, the world we live in might be thought of as one big telegraph system composed of computer chips, telephone lines, fiber optics, cellphone towers, satellites, undersea cables and an electrical grid that supplies energy to the terrestrial parts of that system. An event as severe as the 1859 solar storm--called the Carrington Event after the respected British astronomer Richard Carrington who detected it as it developed--could cripple vast areas of the world, shutting down entire national grids not just for days, but possibly for months or years.

The simple fact is that most electrical systems and equipment including computers are not shielded to protect against such an event. One critical link, electrical transformers, would quickly be knocked out and would have to be replaced. Since few spare transformers are available, and it can take 12 months to build one, the world might have to wait years to fully recover--and that's assuming it would still be possible to produce new transformers which, after all, take electricity to manufacture. There is also the problem of what state modern civilization might be in if it faced months or years without electricity. Critical systems that pump and purify water and treat sewage, for example, would no longer function.

A fictional version of what all this might look like in our communities comes to us in a book by William Forstchen entitled One Second After. (For a brief nonfiction version of such an event, see this 2009 piece from New Scientist.) One Second After is set in the not-so-fictional town of Black Mountain, North Carolina where the author not-so-coincidently lives. It turns out to be a good choice of settings since Forstchen can give us an intimate portrait of a town and region he knows well while treating us to detailed but unobtrusive illustrations coming from his meticulous research into the effects of a total and prolonged blackout. To be clear, the cause of the blackout in the novel is the explosion of a nuclear weapon high above the Earth's surface over the continental United States, an explosion designed specifically to produce a crippling electromagnetic pulse (EMP). The effects of an EMP are in most ways similar to those that would result from another Carrington Event, and so the novel gives us a portrait of how such a disaster caused by either might unfold.

Perhaps the first thing a sensitive urbanite residing in the northern part of the United States will notice about One Second After is the number of guns produced by the novel's characters. But having lived in both the northern and southern parts of the United States, I can assure you that this would hardly raise an eyebrow south of the Mason-Dixon line where armory and home are very often one and the same. What is clear in the aftermath of the blackout is that order has broken down. Guns offer some protection and ultimately provide the force behind the small group of town leaders trying to guide Black Mountain through the worst disaster it will ever experience. The leaders succeed to a certain extent, but at a terrible cost as they are forced to put the mere survival of the community above all other values.

The story line of One Second After will probably not surprise you. The book is in the tradition of Alas Babylon, and as a reader, you will know right away where things in general are headed. So, the real questions are these: How will the main characters hold up under the strain? Will they retain their humanity? What kind of life will they be able to build for themselves?

The surprises in the novel for me were technological. As I followed the main character, John Matherson, through his traumatized community, I gradually discovered more and more things (beyond the obvious) that had been affected--things that I would never have imagined to be vulnerable or that I would never have even thought about. I will give you one example: commercial airliners. Surely, these would keep on flying since they run on liquid fuels, not electricity. Alas, the complex electronics in modern airliners freeze up after an EMP strike. And, that means that the thousands of them in the sky at the time would plummet to the ground or into the sea. There are no mechanical joysticks in such aircraft; everything is controlled by computers and electronics. As the story continues, the list of vulnerable gadgets and systems just keeps growing, and it is an awesome and disturbing one.

With all that is known about the potential for such a catastrophe, either through attack or through the normal, observable processes of the Sun, you would think that governments everywhere would be feverishly taking steps to harden critical systems. You would be wrong. Even in America where we have casually spent trillions of dollars on fruitless foreign wars in the last decade, the Congress cannot see its way to have the country embark on a program that might cost a couple hundred billion to guard against the known dangers of the Sun or even the unpredictable action of unfriendly nations (think: North Korea) that might use EMP to maximize the effect of their meager nuclear arsenals. In fact, the writer of the afterword to One Second After tells us: "A well-designed nuclear weapon detonated at a high altitude over Kansas could have damaging effects over virtually all of the continental United States."

My own view is that such an attack is an extremely remote possibility since it must still come from a nation-state and would easily be detected. This would ensure that the perpetrating country would be nothing but a cinder by the next day. Rather, I think the greater danger is the Sun, a body which is totally indifferent to notions of deterrence, but whose fury could be addressed through the hardening of our many vulnerable systems.

I do not think, however, that hardening the world's grid and electronic devices ought to be our top priority. We have the pressing problems of climate change, peak oil, soil depletion, water depletion, deforestation and myriad other critical problems to keep us busy. But, I find the topic of solar storms and EMP interesting because these phenomena offer a window into the tightly networked complex systems which bind the globe, the failure of which could quickly plunge humanity into another dark age starting with a horrifying dieoff of a large part of the population.

Tales of the grid breaking down in such a thoroughgoing way seem to be the one illustration of the vulnerability of our complex global systems that policymakers can at least understand. Last year, the U.S. House of Representatives passed a bipartisan bill that would have begun to address the U.S. grid's weaknesses. But, the Senate failed to act. The House was in part reacting to a 2008 National Academy of Sciences report. The House bill has been reintroduced, but prospects for its passage are uncertain.

The entire issue serves to illustrate what I believe to be the central intellectual challenge of our age: We live in complex systems, but we do not understand them. Just admitting this might help us find our way forward on so many problems that now plague us.

Shale Gas: Not a 'Game Changer' After All

My latest column on Scitizen entitled "Shale Gas: Not a 'Game Changer' After All" has now been posted. Here is the teaser:

Newly accessible natural gas from deep shale deposits around the world has been touted as a solution to everything from oil dependence to climate change. But our actual experience with shale gas extraction is telling another story. Read more.

Can humans really adapt to climate change?

When contemplating whether humans can successfully adapt to climate change, it is worth noting that at least twice in the last 1.2 million years our species was almost wiped out. Genetic research confirms that 1.2 million years ago the human population on Earth was around 18,500, perilously close to extinction. The reason for this low number is not directly known. Then about 150,000 years ago, it plummeted again down to just 2,000, probably due to climate change.

Humans are remarkably adaptable creatures as is evidenced by the fact that they live on every part of the globe, from the steamiest jungle to the coldest tundra. But this nearly universal range (on land) does not now mean that we have become immune to shocks that almost wiped us out twice in the time we have roamed the planet.

How can the world's most dominant and successful species be threatened now? Our numbers are far greater than ever before--close to 7 billion. Our technology allows us to appropriate the lion's share of the world's renewable and nonrenewable resources for our use. Won't we be able to use our prowess to meet any challenges that a changed climate can throw at us?

To answer that question it is worth it for a moment to step back and view not just the Earth, but our solar system. Earth, it seems, formed in what has been called the Goldilocks Zone where the temperature is just right to allow water to exist in liquid form on the planet's surface.

As it turns out, that's just one of the countless features of the environment to which we humans are adapted, features that make our planet unique within the solar system and signal that Earthlike conditions are probably very rare in the universe. So numerous and complex are those conditions that attempts to mimic them artificially for long periods have failed. Perhaps the most famous among these attempts was Biosphere 2, which yielded compelling data about just how difficult maintaining a sealed, habitable environment for humans could be. Alas, science fiction depictions of human adventures in outer space lasting indefinitely seem premature at best and probably unachievable. Moreover, experiments such as Biosphere 2 cast doubt on whether humans could successfully geoengineer Earth's climate to mitigate climate change.

But perhaps we can just use more mundane measures to adapt to climate change such as seawalls for threatened coastal areas; new strains of crops that withstand drought better; and improved water purification and desalination (to address water supply disruption). In fact, one adaptationist suggested that our increased wealth from global economic growth in the future would enable us to adapt to climate change much better than we could today. He forgot, however, to mention the immense damage to the economy that that same climate change might do, thus reducing the resources at our disposal to address climate change rather than enhancing them. The ability to understand the complex interactions and dependencies between the modern economy and the biosphere seems to elude some of the presumed experts in the economics of climate change.

There is one exceedingly critical problem with the adaptationists' arguments. The adaptationists' view depends heavily on the notion that climate change is linear, that is, that the slow and gradual changes we've seen in temperature to date will be the pattern for the future. First, they cannot know this with any certainty. Second, nonlinear changes are already showing up in the scientific observations. The rate of melting of Greenland's vast ice sheet has picked up enormously in the last decade. In addition, the rate of increase in carbon dioxide in the atmosphere has suddenly jumped in the same period from 1.5 ppm per year to 2.1 ppm per year. If climate change accelerates abruptly, then the notion that humans will be faced with adapting to gradual changes over time must be questioned.

Finally, the complex global human-built systems we have created to facilitate our way of life may not be robust in the face of climate change. Complex systems in nature have had hundreds of thousands and even millions of years of vetting. Our systems are relatively new, many only a few decades old. How they would perform in the face of dramatic shifts in climate is a huge question mark. It is well to remember that by definition there are many more things that can go wrong with complex systems than simple ones. In short, complex systems tend to be more fragile. Mounting problems with our food and water supply systems are now demonstrating this fact on a daily basis.

This leads me to two conclusions. First, it is best not to tinker with the complex system we call our climate. We still understand it poorly. Our foolish and dangerous interventions into the climate system through vast emissions of carbon dioxide as well as emissions of other greenhouse gases such as methane and nitrous oxide are likely to set us up for major disruptions. Second, the best approach when dealing with complex natural life support systems is to leave them alone. This implies the need for a rapid decline in emissions of greenhouse gases.

The idea that we can adapt successfully to climate change and therefore take few or no measures to prevent it is a dangerously arrogant notion that could once again put our species on a path to a radical reduction in numbers (and possibly even extinction). To say that this can't happen can only be put down to ignorance. It has happened before, and it can happen again.

Kurzweil: The Movie

In "Transcendent Man" it is a sadder than usual Ray Kurzweil who appears on the screen. The 2009 documentary film about Kurzweil, an acclaimed inventor and futurist, shows that the laws of entropy are at work on his body. He undergoes open heart surgery during the course of the film even as he continues to espouse the belief that technological developments over the next 30 years will make human immortality a reality.

To bridge the gap between now and then, the 63-year-old Kurzweil downs 200 pills a day consisting of various herbs, vitamins or other supplements to "reprogram" his body's biochemistry and improve his chances of reaching what he calls the "singularity," a time after which technological change will occur at a pace so fast that the only way we will be able to understand it is to merge with our machines. Humans will at that point become human-machine hybrids.

(It would not matter much what Kurzweil thinks were it not for his globetrotting speaking tours and widely read books that have influenced much of the world's elite who also seem similarly bereft of a suitable education in the relevant sciences. Moreover, his meta message seems to be that we should just sit back and let technological geniuses like him fix every problem including climate change and resource depletion.)

What Kurzweil misses is that humans became human-machine hybrids with the first stone spear tip, and that the results of our marriage with tools have been mixed. Not to worry, Kurzweil tells us in the film, "technology has been the only thing that's enabled us to overcome problems." There's not a hint of recognition that technological solutions have a habit of spawning new problems. There's not a hint of recognition that as we catapult into the digital and biotech ages, we are actually losing basic knowledge about how to interact with the Earth around us in ways not dependent on fragile, hypercomplex industrial systems.

The ultimate expression of Kurzweil's vision is his desire to resurrect his beloved father from the grave using technology that will supposedly become available by the time the singularity arrives. It reminds me a bit of Jurrasic Park, the Michael Crichton novel depicting the resurrection of dinosaurs from DNA found in ancient preserved mosquito blood. It seems the premature death of Kurzweil's father continues to be a cause for genuine heartache for Kurzweil to this day. Who wouldn't want to bring back deceased loved ones so as to enjoy their company again?

Kurzweil's misguided lunacy is summarized by a neuroscientist interviewed late in the film. Kurzweil has misunderstood death as a technological problem with a potential technological solution when, in fact, it is a spiritual problem without any technological solution. Can human life be extended by technology? Of course. Can the quality of human life be improved in old age by technology? Of course. Can death be avoided altogether by technology? Of course not.

Still, Kurzweil insists on his website for his book The Singularity is Near: When Humans Transcend Biology that death will be overcome:

We will be able to assume different bodies and take on a range of personae at will. In practical terms, human aging and illness will be reversed; pollution will be stopped; world hunger and poverty will be solved. Nanotechnology will make it possible to create virtually any physical product using inexpensive information processes and will ultimately turn even death into a soluble problem.

The film makes a point of emphasizing Kurzweil's faith in the continued exponential growth in the power of information technologies. Whereas a competent ecologist rightly fears the results of exponential growth, Kurzweil embraces it as the solution to everything. And, he extrapolates the rapid change we've seen in IT to nearly every aspect of our society without any discussion of the physical speed limits that the environment and society place on such change. He predicts that solar power--which he regards as part of information technology--will expand so fast in the next 20 years that it will supply all of our energy needs. It's a nice thought.

But the physical constraints of extracting the minerals needed--rare elements are currently essential--are not considered. Nor is the needed ramp-up of manufacturing and installation capacity, assuming the necessary materials were even available. Not yet developed nanoengineered materials will supposedly make this possible. Naturally, there won't be any negative, unintended side effects.

Kurzweil's view really depends on the concept that we can "manage" the biosphere and even the universe through information technology, and that assumes that we can input all the knowledge necessary to do this "managing" into that technology. Never does it occur to him that some or most of that knowledge is still unknown and that perhaps most of it could never be digitized in a way that would give us complete mastery over the universe.

And that is in the end what Kurzweil is really about. His views are the logical extension of Enlightenment ideas that rational thought will ultimately lead to complete mastery of all physical processes and even the ability to transcend death. He predicts that we will send nanotechnology-based probes into the universe to harness its materials and to infuse it with "intelligence." He states flatly:

In the future everything will become intelligent. Nanobots will infuse all the matter around us with information. Rocks, trees, everything will become these intelligent computers. So at that point we are going to expand out into the universe...The universe will wake up. It will become intelligent, and that will multiply our intelligence trillions of trillions-fold.

(I've always thought that the universe was pretty intelligent without our help, and that it is we who must learn from it.) To accept Kurzweil's view, one must throw out much of what we know about biology, ecology and evolution. Perhaps he knows something about settled facts in those disciplines that the rest of us don't. More likely, he doesn't.

The "information" in information technology is information as we humans with our limited powers of perception define it. And our power to gather that information and categorize it usefully has limits as well. Naturally, Kurzweil assumes that the machines of tomorrow will do that for us and better. But he assumes that humans know what they are talking about when it comes to the workings of a vast universe. And, he assumes that we can never run out of the resources or energy to make his future happen.

Our history belies that. Everything we do has unforeseen, hidden and occasionally devastating consequences because of our puny understanding. Complex societies have disappeared before, and history tells us that they will again.

To imagine otherwise is to live in the same virtual reality that appears to inform Ray Kurzweil. To assume we humans have no limits is a dangerous mind game that the ancient Greeks long ago recognized as hubris. And, hubris, as everyone knows, is always followed by nemesis.