The "we" refers to North America. The "it" refers to liquified natural gas (LNG) ports. And, the "they" refers to LNG tankers from exporting countries. Unfortunately, the answer to the question is "probably not," at least not in the numbers we would like them to come, according the energy investment banker Matt Simmons and resource economist Douglas Reynolds, both of whom attended the recent Association for the Study of Peak Oil & Gas - USA conference in Boston.
Surprisingly, governments, industry and the public continue to behave as if they were members of a cargo cult confident that enough LNG ships will arrive to avert a disaster. Unfortunately, the facts don't support their optimism. Exactly one new LNG port has been completed in North America since the 1970s. That makes only five total. Some 17 are in the planning and approval stages; but perhaps more telling is the fact that at least 11 others have been cancelled. The completion dates for those that survive cancellation are in many cases years away. Given the rising demand for natural gas and the obvious plateauing of supply in North America, how can it be that more ports aren't being built (not just planned) and quickly?
Matt Simmons thinks he has part of the answer. Simmons, who has freed himself from the day-to-day chores of running his eponymous investment bank, said he spends most of his time poring over energy data and news. During an impromptu question and answer session between presentations at the Boston conference, he laid out the problem with LNG imports.
He explained that the exploration arms of oil and gas companies are not spending money on the needed appraisal wells in countries with large natural gas reserves such as Qatar. This is in part because such wells have become very costly as prices for everything related to drilling and exploration have gone through the roof. The result is that financing--which can reach into the hundreds of millions for a single LNG port--has been hard to line up. Investors want to know that there will be a reliable supply for decades for their LNG port. Simmons believes there simply isn't enough information to assure many potential investors.
In a separate conversation, Douglas Reynolds said that part of the problem is that national oil and gas companies which control huge gas reserves in places such as Iran, Qatar, and Saudi Arabia are really arms of their respective governments. These companies are risk-averse and tend to spend minimally on exploration while transferring much of their current profits to their governments for social and military spending. Unlike investor-owned oil and gas companies which want to get resources out of the ground as quickly as possible in order to maximize profits, national companies have little incentive to produce more than they need to in order to generate the profits required to fund government spending.
Add to that the fact that most of the natural gas available for export via LNG tanker is found in the Middle East, an area not particularly known for its stability. And, even though the world's largest gas reserves are found in Russia, this should provide little comfort to those living in North America. The Russians recently decided to scrap a project that would have sent LNG to the United States in favor of sending the gas through pipelines to Europe.
The increasing competition for natural gas worldwide may leave North Americans without reliable LNG supplies. Indonesia announced earlier this year that as of 2010, it would keep more of its own gas for domestic use and decrease the amount going to Japan. That means that Japan will be bidding on the remaining available export supplies of LNG after that date. This development also highlights the possibility that projections of what will be available for export in the next decade may not meet expectations since countries which currently export will use more of their own gas.
Beyond this there are questions about the adequacy of world supplies. The conventional wisdom among those who see a peak in oil production within the next decade or so is that a world peak in natural gas production could come sometime around 2030. The data is so elusive that no one is making very precise predictions.
Two worrisome developments, however, imply an earlier peak, perhaps much earlier. First, 80 percent of Russia's production comes from three giant fields, all of which are in decline, Simmons explained. Second, according to Reynolds, a peak in natural gas worldwide may be caused as much by political factors as geological ones. The low exploration budgets of the national oil and gas companies and their reluctance to produce all out will inevitably shift any peak forward. This path, however, would mean a smoother production arc for world natural gas and slower declines on the downside as gas production which had been held back by the national companies is finally brought to market.
Meanwhile, in North America Simmons said that a single cold winter could create an immediate crisis not only for home heating and industrial feedstocks, but also for electricity which is increasingly generated by natural gas fired plants.
But, perhaps even more disturbing, Reynolds believes that natural gas production declines in North America which have been gentle so far will ramp up to perhaps 5 percent annually starting in 2007 or 2008 and create a natural gas cliff. That in itself could cause a crisis even without a cold winter. But a combination of the two would be truly devastating.
Unfortunately for residents of North America, LNG imports will have little cushioning effect if a natural gas cliff arrives this coming winter or within the next several years. For that reason it is truly puzzling that no one in government is talking about the one option left: a massive conservation effort to buy us some time. The only thing that can explain such obliviousness is that cargo cult thinking continues to overpower all the warnings that are now in plain view.
Tuesday, October 31, 2006
Sunday, October 22, 2006
Mr. Market, manic-depressive: Is there a cure?
Benjamin Graham, the father of value investing, loved to relate the story of Mr. Market, a partner in a going concern. On some days he would arrive jubilant, ready to take the entire business off the hands of his fellow partners at a rather exorbitant price. Other days he would arrive depressed beyond belief, ready to sell them his portion of the company for a pittance. Graham advised his clients to pay little heed to Mr. Market and form their own opinions based on the facts. Only then should they decide whether Mr. Market's offer was worth taking.
Of course, Graham was concerned with the way stock market investors behave, and he observed that most of them behave very much like Mr. Market. For Graham Mr. Market's roller-coaster mood swings were an opportunity, not a problem.
For society as a whole, however, the manic-depressive nature of markets can have serious and even potentially dangerous consequences. Wild price swings make it difficult for people, companies and governments to plan. It is just such behavior which has characterized the energy markets in recent years. And, there are reasons to believe that we should expect more of the same.
First, queuing theory (essentially, the theory of how lines form) tells us that when a system approaches 100 percent of its capacity, the length of the line to access that system can become highly chaotic, changing from very short to very long in rapid succession. In our case the line is filled by those trying to buy energy, particularly natural gas, oil and coal. (I am indebted to Kenneth Deffeyes for pointing out the relationship between queuing theory and energy prices in his book, Beyond Oil.)
In North America the natural gas system has been operating near capacity for several years. Only warm weather has prevented a serious crisis. For all intents and purposes, North American natural gas supplies have peaked and have been on a long plateau. When Hurricane Katrina hit in 2005, the line of those eager to nail down natural gas deliveries for the coming winter became very long, very quickly. But that line dissipated just as quickly when the winter turned out to be one of the warmest in history. As a result the price of natural gas first rose to almost $15 per thousand cubic feet and then dropped below $5 before rebounding.
Meanwhile, in the oil markets turmoil in the Middle East and fears of hurricanes in the Gulf of Mexico took prices to near $80 a barrel last summer. The price hikes were not merely the result of fear, but also the result of very little spare capacity for producing oil around the world. When those fears subsided, the number of people in line to buy oil suddenly dropped as did the price. This is exactly what queuing theory would predict in an oil market running near capacity. Whether the capacity problem is permanent because we've hit world peak oil production or merely temporary is unknown. But the result for now is wildly swinging oil prices.
Coal has not been immune, either. The coal infrastructure has been operating near capacity. This is despite the fact that everyone acknowledges that coal reserves remain immense. The current infrastructure appeared to be stretched to its limits until recently when coal prices for several major coal grades dove 20 to 50 percent inside of 18 months. In one case a 23 percent decline occurred in a mere two weeks. But, these declines come after the doubling and tripling of prices in the last three years.
A second and widely trumpeted cause of volatility in energy markets is speculation. There is some truth to this as the spectacular losses of one hedge fund in the natural gas market recently illustrated. The fund's accumulation of an enormous position in natural gas undoubtedly helped push prices up. When the market turned down, the fund manager was forced to liquidate that position at fire sale prices. This pushed natural gas prices to extreme lows.
Oil and to a lesser extent coal are subject to the same pressures from large speculators. But, the huge effect of these speculators is only made possible by tight markets. Large speculators can suddenly add considerable length to an already long line of regular energy buyers crowding the market, and those speculators can disappear just as quickly when the market turns down.
There is a third reason as well for the current tightness and volatility of the energy markets. Energy users typically have no quick and easy substitutes for the fuels they need to perform such activities as the extraction of resources; the manufacture and transport of goods; the production of electricity; or the heating of homes. Economists use the term inelastic demand to describe this situation.
All of this might not matter if no harm resulted. But high price volatility in the natural gas, oil and coal markets makes it difficult for alternatives to gain a foothold. First, those seeking to bring alternative energy to market may find buyers for those alternatives reluctant to commit. One month it may seem as if the price of fossil-fuel energy will only escalate for the foreseeable future. The next month severe price declines can make buyers think twice about those alternatives. (Wise planners sometimes regard volatility itself as a risk. But they must believe that the volatility will persist.)
Second, consistently high prices for energy can induce conservation as businesses and consumers perceive that investments in efficiency will be returned quickly in the form of energy savings. But, volatile prices make it difficult to count on quick paybacks for such investments. Consequently, these investments may be put on hold until the picture becomes clearer.
Third, volatility confuses policymakers. High energy prices can summon the necessary public support for needed conservation and efficiency measures and for investments in alternative fuels and public transportation, for example. But politicians can end up looking like fools (even when they've been wise) if prices dip precipitously before election day.
Given the serious questions about our energy future, now may be a good time to address the manic depressive moods of Mr. Market. A floor on natural gas, oil and coal prices would create the kind of stability in the energy markets that would encourage conservation, efficiency and alternative energy development. The floor could be accomplished through sliding taxes that rise as the price of the energy resource falls below an agreed floor. Conversely, those taxes would fall and then disappear as the price rises and eventually breaches the floor price.
The floor could be set well below current prices and still be effective. This is because many alternative energy sources would remain competitive even if the price of oil were $40 a barrel or the price of natural gas were pegged at $5.50 or $6 per thousand cubic feet. With floor prices in place, those working on conservation and efficiency measures; alternative energy; or the expansion of public transportation could be assured that they won't be severely penalized or wiped out during energy's next big swoon.
A floor price offers a clear signal to the market that could help us make steady progress toward a more secure and sustainable energy future. Failing to do something like it will only leave Mr. Market untreated. And, as with real people who go untreated, ignoring the effects of Mr. Market's manic-depression will have serious consequences for our energy future--not only for those in his immediate vicinity such as speculators, utilities, and oil and gas companies, but also for society as a whole.
Of course, Graham was concerned with the way stock market investors behave, and he observed that most of them behave very much like Mr. Market. For Graham Mr. Market's roller-coaster mood swings were an opportunity, not a problem.
For society as a whole, however, the manic-depressive nature of markets can have serious and even potentially dangerous consequences. Wild price swings make it difficult for people, companies and governments to plan. It is just such behavior which has characterized the energy markets in recent years. And, there are reasons to believe that we should expect more of the same.
First, queuing theory (essentially, the theory of how lines form) tells us that when a system approaches 100 percent of its capacity, the length of the line to access that system can become highly chaotic, changing from very short to very long in rapid succession. In our case the line is filled by those trying to buy energy, particularly natural gas, oil and coal. (I am indebted to Kenneth Deffeyes for pointing out the relationship between queuing theory and energy prices in his book, Beyond Oil.)
In North America the natural gas system has been operating near capacity for several years. Only warm weather has prevented a serious crisis. For all intents and purposes, North American natural gas supplies have peaked and have been on a long plateau. When Hurricane Katrina hit in 2005, the line of those eager to nail down natural gas deliveries for the coming winter became very long, very quickly. But that line dissipated just as quickly when the winter turned out to be one of the warmest in history. As a result the price of natural gas first rose to almost $15 per thousand cubic feet and then dropped below $5 before rebounding.
Meanwhile, in the oil markets turmoil in the Middle East and fears of hurricanes in the Gulf of Mexico took prices to near $80 a barrel last summer. The price hikes were not merely the result of fear, but also the result of very little spare capacity for producing oil around the world. When those fears subsided, the number of people in line to buy oil suddenly dropped as did the price. This is exactly what queuing theory would predict in an oil market running near capacity. Whether the capacity problem is permanent because we've hit world peak oil production or merely temporary is unknown. But the result for now is wildly swinging oil prices.
Coal has not been immune, either. The coal infrastructure has been operating near capacity. This is despite the fact that everyone acknowledges that coal reserves remain immense. The current infrastructure appeared to be stretched to its limits until recently when coal prices for several major coal grades dove 20 to 50 percent inside of 18 months. In one case a 23 percent decline occurred in a mere two weeks. But, these declines come after the doubling and tripling of prices in the last three years.
A second and widely trumpeted cause of volatility in energy markets is speculation. There is some truth to this as the spectacular losses of one hedge fund in the natural gas market recently illustrated. The fund's accumulation of an enormous position in natural gas undoubtedly helped push prices up. When the market turned down, the fund manager was forced to liquidate that position at fire sale prices. This pushed natural gas prices to extreme lows.
Oil and to a lesser extent coal are subject to the same pressures from large speculators. But, the huge effect of these speculators is only made possible by tight markets. Large speculators can suddenly add considerable length to an already long line of regular energy buyers crowding the market, and those speculators can disappear just as quickly when the market turns down.
There is a third reason as well for the current tightness and volatility of the energy markets. Energy users typically have no quick and easy substitutes for the fuels they need to perform such activities as the extraction of resources; the manufacture and transport of goods; the production of electricity; or the heating of homes. Economists use the term inelastic demand to describe this situation.
All of this might not matter if no harm resulted. But high price volatility in the natural gas, oil and coal markets makes it difficult for alternatives to gain a foothold. First, those seeking to bring alternative energy to market may find buyers for those alternatives reluctant to commit. One month it may seem as if the price of fossil-fuel energy will only escalate for the foreseeable future. The next month severe price declines can make buyers think twice about those alternatives. (Wise planners sometimes regard volatility itself as a risk. But they must believe that the volatility will persist.)
Second, consistently high prices for energy can induce conservation as businesses and consumers perceive that investments in efficiency will be returned quickly in the form of energy savings. But, volatile prices make it difficult to count on quick paybacks for such investments. Consequently, these investments may be put on hold until the picture becomes clearer.
Third, volatility confuses policymakers. High energy prices can summon the necessary public support for needed conservation and efficiency measures and for investments in alternative fuels and public transportation, for example. But politicians can end up looking like fools (even when they've been wise) if prices dip precipitously before election day.
Given the serious questions about our energy future, now may be a good time to address the manic depressive moods of Mr. Market. A floor on natural gas, oil and coal prices would create the kind of stability in the energy markets that would encourage conservation, efficiency and alternative energy development. The floor could be accomplished through sliding taxes that rise as the price of the energy resource falls below an agreed floor. Conversely, those taxes would fall and then disappear as the price rises and eventually breaches the floor price.
The floor could be set well below current prices and still be effective. This is because many alternative energy sources would remain competitive even if the price of oil were $40 a barrel or the price of natural gas were pegged at $5.50 or $6 per thousand cubic feet. With floor prices in place, those working on conservation and efficiency measures; alternative energy; or the expansion of public transportation could be assured that they won't be severely penalized or wiped out during energy's next big swoon.
A floor price offers a clear signal to the market that could help us make steady progress toward a more secure and sustainable energy future. Failing to do something like it will only leave Mr. Market untreated. And, as with real people who go untreated, ignoring the effects of Mr. Market's manic-depression will have serious consequences for our energy future--not only for those in his immediate vicinity such as speculators, utilities, and oil and gas companies, but also for society as a whole.
Sunday, October 15, 2006
Confessions of a Tourist in an Energy-Challenged Age
Tourism is perhaps best described as a theatrical production in which the tourists become the audience, the destination becomes the set, and the natives become the actors. In general, the tourist goes to a destination to witness the enactment of another culture, either domestic or foreign.
The performance can take place under different conditions. When only a few tourists (i.e., audience members) are present, the natives may find those tourists to be an oddity and generally go about their business as if there were no audience. At most, the locals attend to the visitors as they would any visitor.
When the number of tourists increases, certain natives find it profitable to cater to the desires of tourists. These natives, in effect, become the ushers of the theater and become aligned with the tourists. When the number of tourists overwhelms a particular locale, the performance suffers. This happens when, for instance, those sitting next to the tourists in restaurants are other tourists. The other restaurant guests are no longer part of the performance, but part of the audience. In such cases, the actual performers are reduced in number to those working in restaurants, shops and hotels, i.e., places where tourists spend most of their time.
Two developments result from this last scenario. First, the natives still living in the tourist destination begin to shape themselves to satisfy the fantasies of the tourists and neglect their own culture. What tourists want and expect becomes paramount (and highly profitable). Second, this process can breed both conscious and unconscious resentment that occasionally comes to the surface as rudeness or remains hidden as offstage contempt for the tourist audience. The natives resent being reduced to a servant class whose job is to provide a caricature of their culture consistent with the fantasies of the tourists.
On a recent trip to Italy I experienced all three environments. In a working class suburb of Milan, my sister and I went looking for some food to bring back to our hotel. We eventually found some shops behind a block of flats that we could see from the highway. No other tourists were in evidence and neither the proprietor nor his employees spoke any English. For the first time we were thrust into a situation that was authentic Italy. Our Berlitz Italian allowed us to buy what we needed and get directions to a nearby bakery as well. But in this small shopping district there were no special concessions to tourists. In some ways this brief encounter was the most satisfying of our trip. We were having to deal with Italians on their terms.
While in Rome we found that Romans go about their daily lives despite the million or so tourists who visit every year. Except for the occasional McDonald's, there are very few accommodations designed exclusively for foreign tourists. Still one would expect this great cosmopolitan city and seat of government to have an openness to foreigners. Accordingly, nearly every shopkeeper and concierge speaks English (and many speak French and German besides). And, yet Rome retains its essential character.
But Cinque Terra, a national park on the northwest coast containing five small cities, has become a virtual American colony. Most of our fellow hotel guests were Americans. Most of the dinner guests at the restaurants were Americans. The resentment of the locals was just under the surface. For us that resentment erupted in a spat with a waiter who piled the next course on our table only shortly after we had started eating our first one. The restaurant was exceptionally busy, and so it took considerable effort to get his attention again and make our complaint. After cutting us off, he proceeded to lecture us about our rude behavior. I couldn't help thinking that he was voicing the resentments of his fellow Italians about the tourist takeover of these five towns and the strangulation of their culture.
What could one now find in Cinque Terra other than more English-speaking tourists attempting to fulfill a fantasy about a romantic Italian vacation? The entire place was designed not to disrupt or challenge that fantasy in any way.
In fact, many American tourist destinations have perfected this kind of environment. At Disney World any actual local culture has been scrubbed away and replaced with fake, nonworking town environments and sanitized streetscapes. Perhaps the closest Italian equivalent would be the island of Capri (which was only described to me by those who took a day trip there). Capri has apparently become a free-fire zone for upscale retailers targeting cruise ship patrons. All traces of authentic Italian town life seem to have been eliminated.
People have always traveled for a variety reasons--to seek knowledge, to gain riches, to visit friends, to trade, and (lest we not forget) to conquer territory. But the particular variant of travel called tourism is a more recent phenomenon. At first only the rich engaged in tours. But with the advent of cheap, fossil-fueled transportation tourism has gradually become democratized, at least for the people of wealthy nations. Nearly everyone in those nations can and does travel as a tourist. And, for many well-off retirees, tourism has become a way of life.
But, as the petroleum age wanes, there is a question not only about whether the tourism industry as we now know it can survive, but whether it can be defended as an activity worthy of the vanishing fossil fuels we expend on it. There can be little doubt that tourism has helped to break down barriers between people of different cultures. It has made it harder for world leaders to demonize foreigners, at least for people who have met those foreigners. Tourism has--even if only a little--aided a worldwide dialogue about difference, tolerance and cooperation. To paint all tourism with one brush as merely a pleasant method of dining out (and wasting resources) is too simplistic.
Perhaps one way to think about the relative merits of any tourist venture in an energy-constrained age is to ask whether a planned trip is something other than escapism. Are we open to the possibility that our current fantasies about our destination might be overturned? Are we anxious to test our ideas and preconceptions against the reality we find? Can we learn anything that may help us bring about the deep and lasting changes we require to create a sustainable society?
As our energy challenges mount, tourism is likely to become one of the first casualties, making further lectures about its wastefulness unnecessary. Around that time all of us will find ourselves cast (whether we like it or not) in a drama of transformation unlike anything the modern age has known, a drama in which the very survival of our civilization may be at stake. In that drama none of us will be playing the part of a passive audience member anymore; we will be the actors and our performance will, of necessity, be the performance of a lifetime.
The performance can take place under different conditions. When only a few tourists (i.e., audience members) are present, the natives may find those tourists to be an oddity and generally go about their business as if there were no audience. At most, the locals attend to the visitors as they would any visitor.
When the number of tourists increases, certain natives find it profitable to cater to the desires of tourists. These natives, in effect, become the ushers of the theater and become aligned with the tourists. When the number of tourists overwhelms a particular locale, the performance suffers. This happens when, for instance, those sitting next to the tourists in restaurants are other tourists. The other restaurant guests are no longer part of the performance, but part of the audience. In such cases, the actual performers are reduced in number to those working in restaurants, shops and hotels, i.e., places where tourists spend most of their time.
Two developments result from this last scenario. First, the natives still living in the tourist destination begin to shape themselves to satisfy the fantasies of the tourists and neglect their own culture. What tourists want and expect becomes paramount (and highly profitable). Second, this process can breed both conscious and unconscious resentment that occasionally comes to the surface as rudeness or remains hidden as offstage contempt for the tourist audience. The natives resent being reduced to a servant class whose job is to provide a caricature of their culture consistent with the fantasies of the tourists.
On a recent trip to Italy I experienced all three environments. In a working class suburb of Milan, my sister and I went looking for some food to bring back to our hotel. We eventually found some shops behind a block of flats that we could see from the highway. No other tourists were in evidence and neither the proprietor nor his employees spoke any English. For the first time we were thrust into a situation that was authentic Italy. Our Berlitz Italian allowed us to buy what we needed and get directions to a nearby bakery as well. But in this small shopping district there were no special concessions to tourists. In some ways this brief encounter was the most satisfying of our trip. We were having to deal with Italians on their terms.
While in Rome we found that Romans go about their daily lives despite the million or so tourists who visit every year. Except for the occasional McDonald's, there are very few accommodations designed exclusively for foreign tourists. Still one would expect this great cosmopolitan city and seat of government to have an openness to foreigners. Accordingly, nearly every shopkeeper and concierge speaks English (and many speak French and German besides). And, yet Rome retains its essential character.
But Cinque Terra, a national park on the northwest coast containing five small cities, has become a virtual American colony. Most of our fellow hotel guests were Americans. Most of the dinner guests at the restaurants were Americans. The resentment of the locals was just under the surface. For us that resentment erupted in a spat with a waiter who piled the next course on our table only shortly after we had started eating our first one. The restaurant was exceptionally busy, and so it took considerable effort to get his attention again and make our complaint. After cutting us off, he proceeded to lecture us about our rude behavior. I couldn't help thinking that he was voicing the resentments of his fellow Italians about the tourist takeover of these five towns and the strangulation of their culture.
What could one now find in Cinque Terra other than more English-speaking tourists attempting to fulfill a fantasy about a romantic Italian vacation? The entire place was designed not to disrupt or challenge that fantasy in any way.
In fact, many American tourist destinations have perfected this kind of environment. At Disney World any actual local culture has been scrubbed away and replaced with fake, nonworking town environments and sanitized streetscapes. Perhaps the closest Italian equivalent would be the island of Capri (which was only described to me by those who took a day trip there). Capri has apparently become a free-fire zone for upscale retailers targeting cruise ship patrons. All traces of authentic Italian town life seem to have been eliminated.
People have always traveled for a variety reasons--to seek knowledge, to gain riches, to visit friends, to trade, and (lest we not forget) to conquer territory. But the particular variant of travel called tourism is a more recent phenomenon. At first only the rich engaged in tours. But with the advent of cheap, fossil-fueled transportation tourism has gradually become democratized, at least for the people of wealthy nations. Nearly everyone in those nations can and does travel as a tourist. And, for many well-off retirees, tourism has become a way of life.
But, as the petroleum age wanes, there is a question not only about whether the tourism industry as we now know it can survive, but whether it can be defended as an activity worthy of the vanishing fossil fuels we expend on it. There can be little doubt that tourism has helped to break down barriers between people of different cultures. It has made it harder for world leaders to demonize foreigners, at least for people who have met those foreigners. Tourism has--even if only a little--aided a worldwide dialogue about difference, tolerance and cooperation. To paint all tourism with one brush as merely a pleasant method of dining out (and wasting resources) is too simplistic.
Perhaps one way to think about the relative merits of any tourist venture in an energy-constrained age is to ask whether a planned trip is something other than escapism. Are we open to the possibility that our current fantasies about our destination might be overturned? Are we anxious to test our ideas and preconceptions against the reality we find? Can we learn anything that may help us bring about the deep and lasting changes we require to create a sustainable society?
As our energy challenges mount, tourism is likely to become one of the first casualties, making further lectures about its wastefulness unnecessary. Around that time all of us will find ourselves cast (whether we like it or not) in a drama of transformation unlike anything the modern age has known, a drama in which the very survival of our civilization may be at stake. In that drama none of us will be playing the part of a passive audience member anymore; we will be the actors and our performance will, of necessity, be the performance of a lifetime.
Sunday, October 08, 2006
Signs, Portents and the Roman Way
Under the Tarquin kings the early Romans looked to a priestly class called augures who interpreted the flights and other habits of birds in order to foretell whether a course of action would succeed. We still have an echo of that in our current language when we say some event "augurs well" for us.
Later Romans living under the republic and the empire embraced astrology as the key to unlocking the future, according Michael Grant in his wonderful capsule of ancient Roman life, The World of Rome. Even highly cultivated Romans such as the emperor Tiberius believed in astrology. Astrology was and is based on the notion that there is a natural "sympathy" between what happens in the heavens and on the earth. It seemed obvious to the ancients that everything was connected and that one had only to read the signs--in this case, the stars and the planets--to see which way events were heading.
Accompanying this devotion to astrology was a belief in Fate. This wasn't complete determinism, for if one could learn ahead of time what Fate had in store, there were ways of mitigating or even averting misfortune.
Besides astrology and fate, natural events such as the comet which appeared after Julius Caesar's murder or the supposed birth of a monkey to a maid of the Emperor Claudius made profound impacts on the minds of the Roman people.
Today, we know better. We no longer look to the natural world to predict our future. While some people still subscribe to a morbid determinism, most--at least in wealthy, industrialized countries--believe that our own choices are central to the trajectory of our lives. The natural world is now something which seems largely explained by science and controlled by technology.
Having tuned out natural signals, most moderns look for signs of the future in the financial news and from political pundits and pollsters. The auguries of our day are those armed with sophisticated financial models or polling results.
But, within the last three decades or so scientists have come to the public to share the results of their own models in the form of Limits to Growth, the famous study of resource depletion and pollution, and in the form of various climate models. Unfortunately, the idea that the natural world could tell us something about our future has been so thoroughly undermined that these scientists have found it difficult to get a hearing.
As a result, only now has the problem of global warming become an everyday topic of conversation in some circles. But the idea of resource depletion is still treated with scorn, even in many environmental circles. And, the proposition that human consumption and population might have limits can be discussed in polite company only at one's peril.
We do not, however, need to return to the naive mindset of the ancient Romans in order to cast nature once again in a central role. We have methods of studying nature and testing theories far beyond anything the augures or astrologers could imagine. In addition, it might behoove us to contemplate the notion of fate in our own time. Nature still does not negotiate. It lays down limits which we are obliged to obey. We may temporarily evade them by, for instance, using huge quantities of finite fossil fuels. But in the end we cannot repeal those limits.
We might do well then to listen to what our modern-day augures, the climate and resource modelers, are telling us so that we, like the ancient Romans, might mitigate or avert a disastrous fate. The portents are all around us: the deformed frogs; the rapid extinctions; the evaporating lakes; the devastating hurricanes; the severe droughts; the deadly heat waves; the spike in certain cancers; and the rapid melting of the polar ice. The list goes on and on.
The natural world and the scientific one are warning us to change course without delay. With this much evidence, I'm betting a sensible Roman would have done just that long before now.
Later Romans living under the republic and the empire embraced astrology as the key to unlocking the future, according Michael Grant in his wonderful capsule of ancient Roman life, The World of Rome. Even highly cultivated Romans such as the emperor Tiberius believed in astrology. Astrology was and is based on the notion that there is a natural "sympathy" between what happens in the heavens and on the earth. It seemed obvious to the ancients that everything was connected and that one had only to read the signs--in this case, the stars and the planets--to see which way events were heading.
Accompanying this devotion to astrology was a belief in Fate. This wasn't complete determinism, for if one could learn ahead of time what Fate had in store, there were ways of mitigating or even averting misfortune.
Besides astrology and fate, natural events such as the comet which appeared after Julius Caesar's murder or the supposed birth of a monkey to a maid of the Emperor Claudius made profound impacts on the minds of the Roman people.
Today, we know better. We no longer look to the natural world to predict our future. While some people still subscribe to a morbid determinism, most--at least in wealthy, industrialized countries--believe that our own choices are central to the trajectory of our lives. The natural world is now something which seems largely explained by science and controlled by technology.
Having tuned out natural signals, most moderns look for signs of the future in the financial news and from political pundits and pollsters. The auguries of our day are those armed with sophisticated financial models or polling results.
But, within the last three decades or so scientists have come to the public to share the results of their own models in the form of Limits to Growth, the famous study of resource depletion and pollution, and in the form of various climate models. Unfortunately, the idea that the natural world could tell us something about our future has been so thoroughly undermined that these scientists have found it difficult to get a hearing.
As a result, only now has the problem of global warming become an everyday topic of conversation in some circles. But the idea of resource depletion is still treated with scorn, even in many environmental circles. And, the proposition that human consumption and population might have limits can be discussed in polite company only at one's peril.
We do not, however, need to return to the naive mindset of the ancient Romans in order to cast nature once again in a central role. We have methods of studying nature and testing theories far beyond anything the augures or astrologers could imagine. In addition, it might behoove us to contemplate the notion of fate in our own time. Nature still does not negotiate. It lays down limits which we are obliged to obey. We may temporarily evade them by, for instance, using huge quantities of finite fossil fuels. But in the end we cannot repeal those limits.
We might do well then to listen to what our modern-day augures, the climate and resource modelers, are telling us so that we, like the ancient Romans, might mitigate or avert a disastrous fate. The portents are all around us: the deformed frogs; the rapid extinctions; the evaporating lakes; the devastating hurricanes; the severe droughts; the deadly heat waves; the spike in certain cancers; and the rapid melting of the polar ice. The list goes on and on.
The natural world and the scientific one are warning us to change course without delay. With this much evidence, I'm betting a sensible Roman would have done just that long before now.
Sunday, October 01, 2006
The Infrastructure of the Future
As I watched the Italian countryside whisk by me from my train seat, the engineer announced that we were now traveling at 300 kph (186 mph). To most Americans such high-speed passenger trains might seem like marvelous new technology when, in fact, they have long been commonplace in Europe.
But, it is the view of the countryside that ought to interest those who are thinking about the infrastructure of the future. For here in the rolling landscape of this mountainous country, small farms carpet the hills with alternating olive groves, grape vines, lemon trees, vegetable gardens, grain fields and pasture populated with pigs, cattle and sheep.
The dictates of this landscape--too hilly for large-scale row crop farming--have combined with the Italian insistence on good, pure food to produce an agriculture that seems scaled to survive our energy-challenged future. For in such a future everything including food will have to be sourced closer to home. Physics and economics will make it so. The declining availability of liquid fuels is destined to drive up dramatically the cost of shipping food. And, that means that small, family-run farms may become a common sight again in places where they have been largely extinguished such as North America.
Even as the so-called "local food" movement gains momentum in the United States, the word "local" in front of "food" would, for most Italians, seem redundant. (The global food network is making some inroads, of course; but Italians are fighting back, for example, with "Italian Meat Only" signs in corner groceries and delicatessens.) Small farms are the backbone of this highly diversified agricultural system. One guide explained that in the United States there are perhaps a dozen varieties of wine grapes grown. In France, he claimed, there are about 45. In Italy, almost 300. The hills and valleys along the winding coast create a large number of microclimates making Italy friendly to many varieties not just of grapes, but of other fruits and vegetables as well.
Some will complain that the European agricultural subsidy system has allowed these "uneconomic" farms to remain. But in the years to come, these farms will probably return to being economically profitable as well as absolutely necessary. Europeans will be glad that they suffered through so many good meals and paid taxes to support the farms where the food was raised. For at that point others around the world may be scrambling to reorganize their agriculture along similar lines.
There are also many other aspects of Italian life that make the country seem better prepared than most for an energy-constrained future. Besides the high-speed trains which run on electricity, there are electric trams in the major cities; an extensive and heavily used bus system; a limited but useful subway in Rome; and, of course, a plethora of tiny automobiles, the most faddish of which is now the Smart Car. Then, there are the myriad motor scooters which swerve constantly through traffic, scooters which every Italian under age 45 knows how to ride. And, of course, there is that most underrated form of transportation which is in broad use in Italy, namely, walking.
No wonder then that the Italians are some of the most parsimonious users of energy in the world. Of course, their overall heating bills are much smaller than those who live in Denmark or Iceland. On the other hand, few Italians bother with air conditioning even in the hottest months of the year. Nor do they think that automatic clothes dryers are a necessity as any casual survey of city balconies will tell you.
As one awakens in Italy's smaller towns, it's not unusual to hear something which seems to have nearly disappeared from the American outdoors: the sound of sweeping. Surely some Italians, especially commercial establishments, could afford the petroleum-powered blowers which so dominate the American urban landscape. But, perhaps Italians just value their quiet. (I found Italy, even Rome, to be surprisingly quiet, much to my delight.)
The news on the energy front is not all good, of course. One might think that with all those mountains, Italy would be flush with hydroelectric power. Alas, much of its electricity, some 82 percent, is generated using fossil fuels including about 25 percent from oil. That's changing with a move away from oil and toward natural gas. Natural gas will, of course, eventually prove to have limits as well. But, Italy has a huge potential for solar and geothermal which the government is now trying to tap.
Perhaps more worrisome is the large workforce serving tourists, especially in the southern half of the country. Italy today receives the fifth largest number of tourists of any country and is considered by some to be the world's top tourism "brand". Unfortunately, declining energy availability and the resulting high energy prices will likely translate into less tourism, severely curtailing over time an industry that currently represents about 5 percent of the Italian economy.
Still, it should be no surprise that the Italian government continues to plan for perpetual growth. The most visible recent sign is the concern about a long-term labor shortage which the new center-left government wishes to address by encouraging immigration. In fact, one of our Italian guides remarked that there are now many jobs "which Italians won't do." But perhaps the real problem--if it can be called that--is the famously low Italian birthrate of about 1.3 children per woman--far below the replacement rate of about 2.1. If that rate remains unchanged, the number of ethnic Italians in Italy will decline greatly over the next century.
All this presupposes, of course, that the ever-expanding supplies of energy needed for continual growth will remain available not only to Italy, but to the world into which Italy sells its fashionable clothes, cars, wine and leather goods. In the short run, the Italian government will likely be right about the need for more labor. In the long run, however, the odds appear to be against them.
But Italians are exceedingly adaptable as their millennia-long habitation of the Italian peninsula demonstrates. And, two minor, but surprising developments make it clear that they remain as adaptable as ever. Not long ago the government passed a ban on smoking in public places including restaurants and bars as well as a helmet law for riders of motor scooters. To everyone's surprise, the Italians obeyed.
One Italian journalist noted that while his countrymen don't like rules, they do know what's in their own best interests. There's hope in that and in the fact that the Italian infrastructure may just be one of the best adapted for the energy-constrained future into which we are now heading.
But, it is the view of the countryside that ought to interest those who are thinking about the infrastructure of the future. For here in the rolling landscape of this mountainous country, small farms carpet the hills with alternating olive groves, grape vines, lemon trees, vegetable gardens, grain fields and pasture populated with pigs, cattle and sheep.
The dictates of this landscape--too hilly for large-scale row crop farming--have combined with the Italian insistence on good, pure food to produce an agriculture that seems scaled to survive our energy-challenged future. For in such a future everything including food will have to be sourced closer to home. Physics and economics will make it so. The declining availability of liquid fuels is destined to drive up dramatically the cost of shipping food. And, that means that small, family-run farms may become a common sight again in places where they have been largely extinguished such as North America.
Even as the so-called "local food" movement gains momentum in the United States, the word "local" in front of "food" would, for most Italians, seem redundant. (The global food network is making some inroads, of course; but Italians are fighting back, for example, with "Italian Meat Only" signs in corner groceries and delicatessens.) Small farms are the backbone of this highly diversified agricultural system. One guide explained that in the United States there are perhaps a dozen varieties of wine grapes grown. In France, he claimed, there are about 45. In Italy, almost 300. The hills and valleys along the winding coast create a large number of microclimates making Italy friendly to many varieties not just of grapes, but of other fruits and vegetables as well.
Some will complain that the European agricultural subsidy system has allowed these "uneconomic" farms to remain. But in the years to come, these farms will probably return to being economically profitable as well as absolutely necessary. Europeans will be glad that they suffered through so many good meals and paid taxes to support the farms where the food was raised. For at that point others around the world may be scrambling to reorganize their agriculture along similar lines.
There are also many other aspects of Italian life that make the country seem better prepared than most for an energy-constrained future. Besides the high-speed trains which run on electricity, there are electric trams in the major cities; an extensive and heavily used bus system; a limited but useful subway in Rome; and, of course, a plethora of tiny automobiles, the most faddish of which is now the Smart Car. Then, there are the myriad motor scooters which swerve constantly through traffic, scooters which every Italian under age 45 knows how to ride. And, of course, there is that most underrated form of transportation which is in broad use in Italy, namely, walking.
No wonder then that the Italians are some of the most parsimonious users of energy in the world. Of course, their overall heating bills are much smaller than those who live in Denmark or Iceland. On the other hand, few Italians bother with air conditioning even in the hottest months of the year. Nor do they think that automatic clothes dryers are a necessity as any casual survey of city balconies will tell you.
As one awakens in Italy's smaller towns, it's not unusual to hear something which seems to have nearly disappeared from the American outdoors: the sound of sweeping. Surely some Italians, especially commercial establishments, could afford the petroleum-powered blowers which so dominate the American urban landscape. But, perhaps Italians just value their quiet. (I found Italy, even Rome, to be surprisingly quiet, much to my delight.)
The news on the energy front is not all good, of course. One might think that with all those mountains, Italy would be flush with hydroelectric power. Alas, much of its electricity, some 82 percent, is generated using fossil fuels including about 25 percent from oil. That's changing with a move away from oil and toward natural gas. Natural gas will, of course, eventually prove to have limits as well. But, Italy has a huge potential for solar and geothermal which the government is now trying to tap.
Perhaps more worrisome is the large workforce serving tourists, especially in the southern half of the country. Italy today receives the fifth largest number of tourists of any country and is considered by some to be the world's top tourism "brand". Unfortunately, declining energy availability and the resulting high energy prices will likely translate into less tourism, severely curtailing over time an industry that currently represents about 5 percent of the Italian economy.
Still, it should be no surprise that the Italian government continues to plan for perpetual growth. The most visible recent sign is the concern about a long-term labor shortage which the new center-left government wishes to address by encouraging immigration. In fact, one of our Italian guides remarked that there are now many jobs "which Italians won't do." But perhaps the real problem--if it can be called that--is the famously low Italian birthrate of about 1.3 children per woman--far below the replacement rate of about 2.1. If that rate remains unchanged, the number of ethnic Italians in Italy will decline greatly over the next century.
All this presupposes, of course, that the ever-expanding supplies of energy needed for continual growth will remain available not only to Italy, but to the world into which Italy sells its fashionable clothes, cars, wine and leather goods. In the short run, the Italian government will likely be right about the need for more labor. In the long run, however, the odds appear to be against them.
But Italians are exceedingly adaptable as their millennia-long habitation of the Italian peninsula demonstrates. And, two minor, but surprising developments make it clear that they remain as adaptable as ever. Not long ago the government passed a ban on smoking in public places including restaurants and bars as well as a helmet law for riders of motor scooters. To everyone's surprise, the Italians obeyed.
One Italian journalist noted that while his countrymen don't like rules, they do know what's in their own best interests. There's hope in that and in the fact that the Italian infrastructure may just be one of the best adapted for the energy-constrained future into which we are now heading.
Friday, September 22, 2006
The Test of Time
It is perhaps the most recognizable architectural object on the planet after the pyramids. The Roman Colosseum appears on so many travel brochures that it is practically the logo of Italy. Opened in 80 A.D. the Colosseum is a testament to the minds that built it--both their hideous purposes, i.e. the staging of gladiatorial contests, and their view of the future.
I pondered that view of the future when I visited the Colosseum on a recent trip to Rome. It's a view which seems to be expressed in the stones themselves. The Colosseum's major arches are composed of huge travertine slabs held together not by mortar, but by iron rods in the center which connect each slab to one above it.
If not for several earthquakes, the complete structure might be standing today. As it is, visitors can still climb into the stands just as spectators did 2,000 years ago. This is despite the fact that the arches are now pocked-marked with holes drilled long ago to rip out the iron inside and melt it down for other uses. (The Colosseum was habitually mined as a source of raw materials for other buildings until 1749 when Pope Benedict XIV outlawed its use as a quarry.) Both the Colosseum's scale--it was said to hold 50,000 people--and its durability say something about the minds of those who built it.
The ancient Romans constructed things as if they expected their society to endure for a very long time. In fact, the Colosseum's last known use in antiquity was in 523 A.D. almost 450 years after its completion. And it remains solid enough today to be used for special concerts and other performances.
It may seem odd then, that for all their engineering prowess, the Romans were little interested in the kind of technical progress we prize so highly. Michael Grant, in his wonderful account of ancient Roman life, The World of Rome, explains why. First, what we call applied science or invention was regarded as lowly work, not to be engaged in by patrician Romans, who were alas the most educated and therefore the most capable of such work. Second, the huge available pool of slaves made labor-saving devices seem unnecessary. Grant relates the following:
I pondered that view of the future when I visited the Colosseum on a recent trip to Rome. It's a view which seems to be expressed in the stones themselves. The Colosseum's major arches are composed of huge travertine slabs held together not by mortar, but by iron rods in the center which connect each slab to one above it.
If not for several earthquakes, the complete structure might be standing today. As it is, visitors can still climb into the stands just as spectators did 2,000 years ago. This is despite the fact that the arches are now pocked-marked with holes drilled long ago to rip out the iron inside and melt it down for other uses. (The Colosseum was habitually mined as a source of raw materials for other buildings until 1749 when Pope Benedict XIV outlawed its use as a quarry.) Both the Colosseum's scale--it was said to hold 50,000 people--and its durability say something about the minds of those who built it.
The ancient Romans constructed things as if they expected their society to endure for a very long time. In fact, the Colosseum's last known use in antiquity was in 523 A.D. almost 450 years after its completion. And it remains solid enough today to be used for special concerts and other performances.
It may seem odd then, that for all their engineering prowess, the Romans were little interested in the kind of technical progress we prize so highly. Michael Grant, in his wonderful account of ancient Roman life, The World of Rome, explains why. First, what we call applied science or invention was regarded as lowly work, not to be engaged in by patrician Romans, who were alas the most educated and therefore the most capable of such work. Second, the huge available pool of slaves made labor-saving devices seem unnecessary. Grant relates the following:
[W]hen [the Emperor] Vespasian was offered a labor-saving machine for transporting heavy columns he was said to have declined it with the words: "I must always ensure that the working classes [read: slaves and lower-class Romans] earn enough money to buy themselves food."
Such sentiments can scarcely be understood by the modern mind. Even more puzzling are accounts of one Hero of Alexandria who constructed a steam engine in the first century A. D. that was never used for anything beyond powering toys.
This rejection of technology may seem foolish to us today. But as the petroleum age comes to a close, the hyper-caffeinated rate of technical progress that cheap energy made possible may slow, and we may be forced to return to older, less energy dependent technologies and methods. Vespasian rejected a labor-saving device for reasons of social stability. And, Romans never grasped the potential of the steam engine. But, perhaps that was because they were ultimately content with what they had. Despite the cruelty perpetrated on slaves and others, for Roman citizens and freedmen the ancient Roman way of life was far more luxurious and sophisticated than what followed for more than a thousand years after the fall of Rome.
Almost completely free from war under imperial rule, ancient Romans generally enjoyed an adequate and varied diet; fresh water brought in by aqueducts (some of which are still in use today); regular baths (a practice that didn't return until the 19th century); excellent exercise facilities; household plumbing; and grand, but violent, entertainments (which we would find repugnant but which oddly seem acceptable to us when packaged in the form of an action film). For the more elite Romans, Latin writers provided some of the finest poetry and prose of antiquity. In fact, Latin proved to be such a broad and flexible language that it continued to be spoken by the educated classes of Europe throughout the Middle Ages. And, no one needs to be told that sculpture, painting and architecture thrived under the patronage of the Roman state and wealthy Roman individuals.
Still, it's not a life one should try to recreate. Romans delighted in cruelty, accepted slavery and narrowly circumscribed the role of women. But, the lives of these ancients remain a window into the mind that created a great civilization with achievements in engineering, law, architecture, military tactics and administration which still influence us today. And, all of that was accomplished without an ideology of perpetual economic growth or its attendant short-term thinking, both of which so imperil us now.
Today, our time horizons are three months for business executives, two years for most politicians, and perhaps 10 or 15 years for the builders of Wal-Mart stores. The aim of those who produce goods and services is to sow dissatisfaction among the population through advertising campaigns that exhort them to buy things which are new and improved. And, the idea that a building should last 500 years--well, that's considered downright crazy.
Heraclitus tells us that "nothing endures but change." To be sure, the ancient Romans and their ways evolved over time. But, should we seek out change for its own sake? Should we automatically assume that change means improvement?
Yes, our society needs to make changes, drastic changes, in order to meet the challenges of energy depletion, global warming and the myriad other ecological problems the industrial way of life has created. Perhaps we should take our cue from the ancient Romans and seek out the kind of changes which will end up creating a more stable and enduring way of life, one that is in harmony with the natural world we depend on and more gentle on the adaptive powers of the human body and mind.
Sunday, August 27, 2006
On Vacation
I will be on vacation until late September and expect to post again on September 24. Meanwhile, I hope you will visit these excellent sites:
Energy Bulletin
Global Public Media
Peak Oil News & Message Boards
The Oil Drum
RealClimate
Peak Energy (Australia)
Life After the Oil Crash News
Energy Bulletin
Global Public Media
Peak Oil News & Message Boards
The Oil Drum
RealClimate
Peak Energy (Australia)
Life After the Oil Crash News
Sunday, August 20, 2006
The Democratization of Envy
Man's desires are infinite.---Aristotle
The amount of household wealth which suffices for a good life is not unlimited.
Envy is an emotion which seems to make no special claim on a particular epoch. Humans everywhere and in every time have experienced it or at least admit to knowing someone who is filled with it. But, longing for the fame, abilities or possessions of others is only useful in the long run if a person has the means to attain them or, at least, believes he or she may someday come by those means.
This explains why for most of history envy has simply taken its place alongside the list of perennial sins that have occupied human beings from the dawn of the species. For most of history most humans either had little to be envious of (as in hunting and gathering societies) or little prospect of obtaining that which they envied (as in feudal societies with their low social mobility).
But, all of that changed with the emergence of industrial society and the concomitant discovery of large quantities of fossil fuels, particularly oil and natural gas. These seemingly endless stores of concentrated power allowed humankind to create previously unimaginable wealth and social mobility. And, with these developments came a society whose central emotion is envy.
Competitive enterprise is at the heart of industrial capitalism. The presumed motive for success is profit. And, the presumed benefit of profit is the ability to afford more goods and services. There is, of course, a benefit to material comfort. But beyond a certain point wealth goes into displays of social status. At the height of ancient Rome, we are told by Thorstein Veblen in his classic, The Theory of the Leisure Class, powerful and well-to-do Romans exhibited their status through displays of vicarious leisure. They hired attendants or kept slaves who did nothing but follow them around. The size of a retinue was a measure of a man's influence and resources. Anyone who could hire others to do nothing, that is to enjoy their master's leisure vicariously, surely must be a person of some station.
In today's mass society status is now routinely communicated through the display of possessions, the sight of which can reach so many more people. (Veblen coined the popular term for this kind of behavior: conspicuous consumption.) How many times have you passed lavish homes of wealthy heirs or successful entrepreneurs whose names you know, but whom you've never met? Cars, boats, even entire islands can serve the same purpose of display.
With the advent of worldwide telecommunications the whole pageant can now be put on television and beamed to every hamlet which has a solar panel and a TV set. This development more than any other has democratized envy, a particular type of envy that is very closely tied to modern consumerism and thus to the energy-intensive infrastructure which makes that consumerism possible.
Of course, the poor inhabitants of the earth only want what we who live in industrialized countries take for granted: easy travel; large, well-furnished living spaces with central heating and air-conditioning; diets high in animal products; modern medical care; labor saving devices; consumer gadgets of all kinds and the vast array of urban distractions which we call entertainment.
But the point of television-induced consumerist envy is that it can never be satisfied. The newest fashions in housewares, automobiles, electronic wonders, vacation destinations, and megahomes are designed to stimulate ever greater competitiveness among the envious masses (and thus drive up consumption). And, it is the role of modern advertising to encourage that competitiveness.
This is what drives economic growth in industrialized countries, and it will soon be the basis for growth in the so-called developing world. Certainly, there are advancements in medicine, diet and educational opportunity which are important to the well-being of the world's many poor. But, once they pass beyond the stage of want, they move directly into the whirlwind of ever-expanding, unquenchable consumer desire born of envy.
The rich, of course, continue to pursue their larger yachts, grander homes and expensive galas. But, the rich have always done this because it has always been within their means. And, so the wealthy live under the perpetual sway of envy. But, now the world's masses seek to put envy at the center of their lives as their new-found wealth--courtesy of the ongoing fossil-fueled transformation of the planet--makes it possible.
The gap between rich and poor, far from being the curse of modern industrial society, is its very engine. The resulting endless striving which capitalism's defenders say is its cardinal virtue has become the road to ecological overshoot.
The question then for a future with ecological limits becomes: What shall we do with this powerful force of envy which has been awakened across the globe? How will people, both the rich and those aspiring to greater wealth, come to grips with limits which will undermine the consumer society within which that envy flourishes?
At a conference on peak oil and the environment that I attended not too long along, one of the organizers explained that he used to work as a broker on Wall Street servicing wealthy individuals, many worth $50 million or more. By the time he moved on to his next job, the bull market had made most of them much richer. But, he observed, they seemed no happier.
Ultimately, he left Wall Street altogether to begin work on a doctorate in ecological economics. He explained it this way: He said he knows his "relative fitness drives" (which lurk behind the culture of envy) can't be extinguished. Such drives are a part of every human. But he has decided to redirect those drives toward making his mark as someone who helps human societies become more sustainable.
When it comes to redirecting the culture of competitiveness and envy, his path seems like a good place start.
Sunday, August 13, 2006
Is just-in-time nearly out of time?
Civilization, that is, the congregation of people in large settlements we call cities, is thought to owe its origins in part to the invention of agriculture. By growing surpluses of food crops farmers enabled the creation of an urban non-farming class who engaged in all manner of cultural, governmental, and commercial activities. These activities now preoccupy the vast majority of people in advanced economies.
From year to year the new settlements of ancient civilizations ensured their continuity through one very important measure: the storage of surplus food crops, especially grain. This enabled them to withstand a bad harvest or even two or three without facing collapse.
What a supreme irony then that the sine qua non of civilization--maintaining a store of essential materials--should in our time be considered a source of inefficiency and waste to be avoided at all costs. The long tradition of saving for a rainy day (or as we will see, in our case, a drought-stricken decade) has now been rejected in favor of the so-called just-in-time revolution. For those who didn't get the memo, just-in-time inventory management means that everything needed for the manufacture of any good is delivered to the factory just as it is needed or nearly so. Inventory levels are kept at minimal levels which frees up cash for other purposes.
Just-in-time methods have become synonymous with lean, well-managed international corporations. And, they are now the Achilles heel of a global trading system at risk on several fronts.
It is no accident that just-in-time methods came of age in the 1990s and were adopted by nearly every organization big enough to benefit from them. The relative tranquillity of the '90s made fears of any widespread disruption of supply lines fade from memory. With the collapse of the Soviet Union, there were no more superpower confrontations. The ambitions of Saddam Hussein to control a vast portion of the world's oil supply were contained. The sea-lanes were secured by the dominance of the U. S. fleet. Cheap energy meant cheap transportation which encouraged the expansion of trade. And, this allowed the wholesale removal of industries from places of high cost to places where labor and resources were the cheapest. In addition, the bear market in raw materials continued. This lulled purchasing managers into believing that needed materials would be cheaper tomorrow and the day after that and the day after that. So, why keep anything but minimal inventories?
These conditions created fertile ground for just-in-time ideas in almost every corner of the globe and in almost every organization including government and nonprofits. And, under such conditions it was inarguably better to keep inventories lean. As a result spartan inventories soon became a necessity as company after company sought competitive advantage through this type of cost-cutting.
Whether just-in-time inventory is an idea for all time or was merely suited to a unique moment in history is now being tested. Commodity prices for many critical industrial commodities have now skyrocketed. At the end of 2001 copper could be had for about 65 cents a pound. Last week it closed at about $3.50 a pound. Nickel hovered near $2 a pound in 2001 and now sells for almost $13 a pound. Oil sold for about $20 a barrel in late 2001 and now sits above $70. And, the list goes on. (Memo to purchasing managers: Things are not getting cheaper anymore!)
The United States military now sits astride one of the greatest known reservoirs of oil in the world, Iraq. But that military appears impotent to increase oil production in the face of continuing chaos and an emerging civil war in the country. Iran and North Korea now ignore demands from the world's only putative superpower whose strength, financial and military, is being sapped every day by its engagement in Iraq.
U. S. friction with China over high Chinese trade surpluses, an undervalued currency, Taiwan, and China's increasingly close relations with Venezuela and Iran which were sought in order to secure precious oil and natural gas does not bode well for the future stability of the world and the free movement of goods.
The willingness of Russia to curtail gas supplies to the Ukraine and ultimately to Europe demonstrate the precariousness of energy supplies. In our own hemisphere, Hurricane Katrina laid bare the vulnerability of both the U.S. and world energy infrastructure to natural disasters. And, the recent pipeline problem at Alaska's Prudhoe Bay oil field showed our vulnerability to mere poor maintenance. The world now appears to have a razor thin cushion of excess oil production capacity.
Rising energy costs are starting to take their toll on the trucking industry, but despite rising fuel costs marine and rail shipments remain relatively affordable even if capacity is being strained.
All of this has been put down to temporary and cyclical factors such as the general bull market in commodities and increased demand from the growing economies of China and India. And, if that's true, then there is little cause for alarm except among those companies that can't obtain the supplies they need at prices that allow them to be competitive.
However, the drop in world grain stocks paints a more ominous picture. Those stocks have declined to about 57 days of supply. The last time grain stocks were this low was in 1972, just before grain prices doubled. And, as more and more grain is converted into fuel rather than food, the situation may worsen. High oil prices encourage such conversion.
Low grain stocks are also partly the result of declining harvests. And, declining harvests are partly due to drought in critical grain growing regions of the world: the U. S. western and Plains states, Canada, southern Africa and much of Europe. If global warming is the culprit, this problem is not going away.
Of more immediate concern is the way just-in-time ideas have filtered into the retail food system. Grocery stores are believed to have no more than a three-day supply of food. That means those who don't grow their own food (which is most of us) will find themselves going hungry within a week of an emergency that shuts down the just-in-time delivery system to stores. What could do that? Try an avian flu pandemic.
And, that brings us to the medical field which has long been applying the minimalist, just-in-time view to its operations. The corporate mentality driving both for-profit and non-profit hospitals has resulted in an attempt to keep capacity to a minimum in order to drive down costs. But, the effect has been to undermine surge capacity, that is, the capacity to treat large numbers of patients from a mass casualty event such as a terrorist attack or a flu pandemic. The issue also applies to vaccines, drugs and medical equipment that might be needed in an emergency.
As for energy supplies, one almost certain near-term crisis will come to North America when its natural gas production begins to decline. That crisis could arrive as early as this winter and it's one reason the U. S. Federal Energy Regulatory Commission is trying to encourage the creation of additional natural gas storage.
When it comes to oil, there is a recognition on the part of nearly every major importing nation that just-in-time inventories are not enough. The United States, the European Union and China all have plans for or already have in place large state-run petroleum inventories, normally referred to as strategic petroleum reserves.
Perhaps the ultimate expression of the just-in-time idea is Wal-Mart's so-called warehouse-on-wheels. Only in a cheap oil environment would the idea of motion be added to the idea of warehouse. Wal-Mart tries to keep much of its inventory on the road in trucks to maintain low costs and flexibility. This is the ultimate in just-in-time delivery. But, those who believe world peak oil production will soon be upon us with its skyrocketing oil prices think that Wal-Mart would quickly crumble under the resulting financial and logistical strain.
When any resource becomes scarce, the natural tendency of people is to hoard it. That has the effect of sending the price higher which makes people think they should hoard it all the more.
In the coming years we may be faced with such a dynamic in many markets. The most devastating and far-reaching effects could come in the energy markets. Will the just-in-time religion which swept the world in the 1990s survive such a dynamic? Will the new fashion be to plan ahead and make sure we have extra supplies of metals, fuel, medicine and food on hand to run our factories and our civilization when disruptions occur?
Such a novel idea, isn't it? Or maybe it's an idea that's as old as civilization itself.
From year to year the new settlements of ancient civilizations ensured their continuity through one very important measure: the storage of surplus food crops, especially grain. This enabled them to withstand a bad harvest or even two or three without facing collapse.
What a supreme irony then that the sine qua non of civilization--maintaining a store of essential materials--should in our time be considered a source of inefficiency and waste to be avoided at all costs. The long tradition of saving for a rainy day (or as we will see, in our case, a drought-stricken decade) has now been rejected in favor of the so-called just-in-time revolution. For those who didn't get the memo, just-in-time inventory management means that everything needed for the manufacture of any good is delivered to the factory just as it is needed or nearly so. Inventory levels are kept at minimal levels which frees up cash for other purposes.
Just-in-time methods have become synonymous with lean, well-managed international corporations. And, they are now the Achilles heel of a global trading system at risk on several fronts.
It is no accident that just-in-time methods came of age in the 1990s and were adopted by nearly every organization big enough to benefit from them. The relative tranquillity of the '90s made fears of any widespread disruption of supply lines fade from memory. With the collapse of the Soviet Union, there were no more superpower confrontations. The ambitions of Saddam Hussein to control a vast portion of the world's oil supply were contained. The sea-lanes were secured by the dominance of the U. S. fleet. Cheap energy meant cheap transportation which encouraged the expansion of trade. And, this allowed the wholesale removal of industries from places of high cost to places where labor and resources were the cheapest. In addition, the bear market in raw materials continued. This lulled purchasing managers into believing that needed materials would be cheaper tomorrow and the day after that and the day after that. So, why keep anything but minimal inventories?
These conditions created fertile ground for just-in-time ideas in almost every corner of the globe and in almost every organization including government and nonprofits. And, under such conditions it was inarguably better to keep inventories lean. As a result spartan inventories soon became a necessity as company after company sought competitive advantage through this type of cost-cutting.
Whether just-in-time inventory is an idea for all time or was merely suited to a unique moment in history is now being tested. Commodity prices for many critical industrial commodities have now skyrocketed. At the end of 2001 copper could be had for about 65 cents a pound. Last week it closed at about $3.50 a pound. Nickel hovered near $2 a pound in 2001 and now sells for almost $13 a pound. Oil sold for about $20 a barrel in late 2001 and now sits above $70. And, the list goes on. (Memo to purchasing managers: Things are not getting cheaper anymore!)
The United States military now sits astride one of the greatest known reservoirs of oil in the world, Iraq. But that military appears impotent to increase oil production in the face of continuing chaos and an emerging civil war in the country. Iran and North Korea now ignore demands from the world's only putative superpower whose strength, financial and military, is being sapped every day by its engagement in Iraq.
U. S. friction with China over high Chinese trade surpluses, an undervalued currency, Taiwan, and China's increasingly close relations with Venezuela and Iran which were sought in order to secure precious oil and natural gas does not bode well for the future stability of the world and the free movement of goods.
The willingness of Russia to curtail gas supplies to the Ukraine and ultimately to Europe demonstrate the precariousness of energy supplies. In our own hemisphere, Hurricane Katrina laid bare the vulnerability of both the U.S. and world energy infrastructure to natural disasters. And, the recent pipeline problem at Alaska's Prudhoe Bay oil field showed our vulnerability to mere poor maintenance. The world now appears to have a razor thin cushion of excess oil production capacity.
Rising energy costs are starting to take their toll on the trucking industry, but despite rising fuel costs marine and rail shipments remain relatively affordable even if capacity is being strained.
All of this has been put down to temporary and cyclical factors such as the general bull market in commodities and increased demand from the growing economies of China and India. And, if that's true, then there is little cause for alarm except among those companies that can't obtain the supplies they need at prices that allow them to be competitive.
However, the drop in world grain stocks paints a more ominous picture. Those stocks have declined to about 57 days of supply. The last time grain stocks were this low was in 1972, just before grain prices doubled. And, as more and more grain is converted into fuel rather than food, the situation may worsen. High oil prices encourage such conversion.
Low grain stocks are also partly the result of declining harvests. And, declining harvests are partly due to drought in critical grain growing regions of the world: the U. S. western and Plains states, Canada, southern Africa and much of Europe. If global warming is the culprit, this problem is not going away.
Of more immediate concern is the way just-in-time ideas have filtered into the retail food system. Grocery stores are believed to have no more than a three-day supply of food. That means those who don't grow their own food (which is most of us) will find themselves going hungry within a week of an emergency that shuts down the just-in-time delivery system to stores. What could do that? Try an avian flu pandemic.
And, that brings us to the medical field which has long been applying the minimalist, just-in-time view to its operations. The corporate mentality driving both for-profit and non-profit hospitals has resulted in an attempt to keep capacity to a minimum in order to drive down costs. But, the effect has been to undermine surge capacity, that is, the capacity to treat large numbers of patients from a mass casualty event such as a terrorist attack or a flu pandemic. The issue also applies to vaccines, drugs and medical equipment that might be needed in an emergency.
As for energy supplies, one almost certain near-term crisis will come to North America when its natural gas production begins to decline. That crisis could arrive as early as this winter and it's one reason the U. S. Federal Energy Regulatory Commission is trying to encourage the creation of additional natural gas storage.
When it comes to oil, there is a recognition on the part of nearly every major importing nation that just-in-time inventories are not enough. The United States, the European Union and China all have plans for or already have in place large state-run petroleum inventories, normally referred to as strategic petroleum reserves.
Perhaps the ultimate expression of the just-in-time idea is Wal-Mart's so-called warehouse-on-wheels. Only in a cheap oil environment would the idea of motion be added to the idea of warehouse. Wal-Mart tries to keep much of its inventory on the road in trucks to maintain low costs and flexibility. This is the ultimate in just-in-time delivery. But, those who believe world peak oil production will soon be upon us with its skyrocketing oil prices think that Wal-Mart would quickly crumble under the resulting financial and logistical strain.
When any resource becomes scarce, the natural tendency of people is to hoard it. That has the effect of sending the price higher which makes people think they should hoard it all the more.
In the coming years we may be faced with such a dynamic in many markets. The most devastating and far-reaching effects could come in the energy markets. Will the just-in-time religion which swept the world in the 1990s survive such a dynamic? Will the new fashion be to plan ahead and make sure we have extra supplies of metals, fuel, medicine and food on hand to run our factories and our civilization when disruptions occur?
Such a novel idea, isn't it? Or maybe it's an idea that's as old as civilization itself.
Saturday, August 05, 2006
Apocalypse always: Is the peak oil movement really just another apocalyptic cult?
Whenever the world's scientists release yet one more piece of evidence pointing to ecological catastrophe in climate or resource depletion, some of those who are historically minded like to say it has ever been thus. For instance, peak oil nemesis Daniel Yergin loves to repeat the idea that "[t]his is not he first time the world has 'run out of oil.' It's more like the fifth." When it comes to global warming, the few remaining skeptics are fond of saying that scientists were predicting a new ice age as recently as the 1970s. More recently, the author of an article in Harper's Magazine entitled "Imagine There's No Oil: Scenes from a Liberal Apocalypse," a piece otherwise sympathetic in its coverage of the peak oil movement, drew parallels between those concerned about an imminent peak in world oil production and apocalyptic cults of the past.
Even though the peak oil movement does share a common bond with those cults in its obsession with dates, perhaps the most compelling comparisons are between the dramatic end-of-the-world scenarios of past cults and the dramatic end-of-civilization-as-we-know-it scenarios of some peak oil adherents.
Still, at its core the peak oil movement is decidedly different from an apocalyptic cult. I am often asked if I believe in peak oil as if it were an article of faith rather than a question of evidence. I respond that I take the possibility seriously because the accumulated evidence demonstrates that oil wells, oil fields and oil-producing countries have and continue to peak and decline in their production. I add that there is no compelling evidence that world oil production will not do the same at some point.
In fact, undergirding the peak oil thesis now are both a large body of scientific evidence and a great number of experts, some of them drawn from the oil industry itself. The basis of this movement then cannot be fairly compared to such movements as the Millerites and the Shakers which at their core relied on revelation, not science. By contrast, accepting peak oil theory doesn't require personal revelation or mere belief, only an evaluation of the publicly available evidence. That's why even peak oil's supposed detractors such as Daniel Yergin can acknowledge that oil is finite and that someday its production will cease to rise and ultimately decline.
Perhaps the one thing which is holding back the peak oil idea from wider acceptance is that some of the data needed to create definitive scenarios for peak are simply not available. Much of the world's oil remains controlled by state oil companies that have no obligation to submit to an audit. The other problem is that oil is not easy to measure because it is underground and because its recovery is dependent on myriad factors that include technology, geology, geography and market prices. This contrasts with climate studies in which no government or corporation can hide the atmosphere or the oceans from eager researchers who want to do measurements. This difference may explain why concern about global warming has been embraced by nearly every informed person on the planet, while the concept of peak oil remains relatively obscure and often dismissed even by many in the environmental movement.
Another distinction between the usual run of apocalyptic cults and the peak oil movement is its diversity. It contains not just end-of-civilization doomsayers, but many who believe that a transition to a sustainable and prosperous society is eminently doable (albeit with considerable effort) and some who believe that the transition to alternative fuels will be brought about by the marketplace. And, while the above-mentioned Harper's article styles peak oil as a "liberal apocalypse," two of the peak oil movement's most prominent spokespersons are Congressman Roscoe Bartlett, a self-described "very conservative Republican," and energy investment banker Matthew Simmons, an advisor to the Bush presidential campaign in 2000.
The label "apocalyptic" is most often intended to be derisory. But even if it applies, those who use it this way may miss something very important about some apocalyptic movements. These movements sometimes spawn great creativity that has ongoing benefits for society at large. For example, even though the Shakers in America never numbered more than perhaps 6,000, their contributions to American society are astonishingly broad and enduring. Their art and architecture continue to inspire designers today. Their craftsmanship, particularly in furniture, commands high prices for original pieces and has led to many reproductions that are still being manufactured today. Inventions such as the flat broom, the circular saw, and the idea of printed packaging used in the sale of seeds are attributed to the Shakers. And, Shaker music lives on, perhaps most notably in the song "Simple Gifts," which has been adapted and arranged again and again.
Even if peak oil production turns out to be decades away, the contributions of the peak oil movement are already manifold. The people involved are forcing a re-evaluation not only of the idea of energy and its sources, but of the very way in which we live. They are creating dialogue on basic questions about what constitutes a good life--questions about excessive consumption, unhealthy lifestyles, and pathological social, political and economic arrangements born of fossil-fuel dependence. Above all, they are sounding the alarm about the unsustainability of our current way of life. And, they are offering concrete solutions to move us toward sustainability in a wide range of areas that are inextricably linked to energy including food production, water resources and climate.
Can those who mock the peak oil movement as apocalyptic honestly say that it's too early to start moving toward sustainability? Do they really think we will be better off if we wait and risk being too late?
Even though the peak oil movement does share a common bond with those cults in its obsession with dates, perhaps the most compelling comparisons are between the dramatic end-of-the-world scenarios of past cults and the dramatic end-of-civilization-as-we-know-it scenarios of some peak oil adherents.
Still, at its core the peak oil movement is decidedly different from an apocalyptic cult. I am often asked if I believe in peak oil as if it were an article of faith rather than a question of evidence. I respond that I take the possibility seriously because the accumulated evidence demonstrates that oil wells, oil fields and oil-producing countries have and continue to peak and decline in their production. I add that there is no compelling evidence that world oil production will not do the same at some point.
In fact, undergirding the peak oil thesis now are both a large body of scientific evidence and a great number of experts, some of them drawn from the oil industry itself. The basis of this movement then cannot be fairly compared to such movements as the Millerites and the Shakers which at their core relied on revelation, not science. By contrast, accepting peak oil theory doesn't require personal revelation or mere belief, only an evaluation of the publicly available evidence. That's why even peak oil's supposed detractors such as Daniel Yergin can acknowledge that oil is finite and that someday its production will cease to rise and ultimately decline.
Perhaps the one thing which is holding back the peak oil idea from wider acceptance is that some of the data needed to create definitive scenarios for peak are simply not available. Much of the world's oil remains controlled by state oil companies that have no obligation to submit to an audit. The other problem is that oil is not easy to measure because it is underground and because its recovery is dependent on myriad factors that include technology, geology, geography and market prices. This contrasts with climate studies in which no government or corporation can hide the atmosphere or the oceans from eager researchers who want to do measurements. This difference may explain why concern about global warming has been embraced by nearly every informed person on the planet, while the concept of peak oil remains relatively obscure and often dismissed even by many in the environmental movement.
Another distinction between the usual run of apocalyptic cults and the peak oil movement is its diversity. It contains not just end-of-civilization doomsayers, but many who believe that a transition to a sustainable and prosperous society is eminently doable (albeit with considerable effort) and some who believe that the transition to alternative fuels will be brought about by the marketplace. And, while the above-mentioned Harper's article styles peak oil as a "liberal apocalypse," two of the peak oil movement's most prominent spokespersons are Congressman Roscoe Bartlett, a self-described "very conservative Republican," and energy investment banker Matthew Simmons, an advisor to the Bush presidential campaign in 2000.
The label "apocalyptic" is most often intended to be derisory. But even if it applies, those who use it this way may miss something very important about some apocalyptic movements. These movements sometimes spawn great creativity that has ongoing benefits for society at large. For example, even though the Shakers in America never numbered more than perhaps 6,000, their contributions to American society are astonishingly broad and enduring. Their art and architecture continue to inspire designers today. Their craftsmanship, particularly in furniture, commands high prices for original pieces and has led to many reproductions that are still being manufactured today. Inventions such as the flat broom, the circular saw, and the idea of printed packaging used in the sale of seeds are attributed to the Shakers. And, Shaker music lives on, perhaps most notably in the song "Simple Gifts," which has been adapted and arranged again and again.
Even if peak oil production turns out to be decades away, the contributions of the peak oil movement are already manifold. The people involved are forcing a re-evaluation not only of the idea of energy and its sources, but of the very way in which we live. They are creating dialogue on basic questions about what constitutes a good life--questions about excessive consumption, unhealthy lifestyles, and pathological social, political and economic arrangements born of fossil-fuel dependence. Above all, they are sounding the alarm about the unsustainability of our current way of life. And, they are offering concrete solutions to move us toward sustainability in a wide range of areas that are inextricably linked to energy including food production, water resources and climate.
Can those who mock the peak oil movement as apocalyptic honestly say that it's too early to start moving toward sustainability? Do they really think we will be better off if we wait and risk being too late?
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