I will be on vacation until early January and expect to post again on January 7. 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
PowerSwitch
For French language versions of selected articles from Resource Insights and other sites, try the newly established French peak oil site, Test.
Friday, December 22, 2006
Sunday, December 17, 2006
Cuba's Strange Path
Cuba has become the poster child for a transition away from an agricultural economy based on fossil fuel inputs and for a society focused on self-sufficiency. Strangely, it may owe much of its success in this regard to its relative backwardness and its isolation from the world community. The implications for so-called modern industrial countries in a world approaching peak oil couldn't be more striking. To understand this, it is worth briefly tracing Cuba's path since the Cuban revolution.
After the 1959 revolution Cuba increasingly embraced industrial farming techniques that were already widespread in other countries. It was the modern thing to do. Rationalize farming along industrial lines so that the country could grow more crops for export. Inputs such as diesel fuel, fertilizer and pesticides were cheap. Cuba had become an ally of the Soviet Union which supported the country with subsidized oil and agricultural chemicals drawn from the Soviets' vast hydrocarbon reserves. Cuban plans to create a more diversified agriculture were abandoned.
There was one small exception. The military believed that Cuba could at any time suffer a naval blockade. Cuban military leaders realized that one of the key threats of such a blockade would be the loss of access to pharmaceuticals, almost all of which were imported. So the military set up a special laboratory devoted to herbal medicine which among other things gathered information about the already widespread use of herbal medicine within Cuba. This narrow effort would prove prescient.
After the Soviet block began to collapse in 1989, Cuba suddenly found itself denied the subsidized fuel and fertilizer it had been used to. By 1993 economic activity had plunged by almost half, a drop far worse that what the United States experienced during The Great Depression. Cuba's guaranteed markets and preferential pricing for its sugar (pricing that was on average 5.4 times the world price) had vanished and with them the money to import many of its necessities including fuel.
The country struggled to feed itself as its export-oriented agriculture based on fossil fuels had to be transformed into one that could feed the Cuban people with few fossil fuel inputs. Some visionary members of the country's Ministry of Agriculture suggested that the low-input, organic methods they had been experimenting with for years be introduced on a broad scale and that agricultural output be directed toward local consumption. This tumultuous time became known as the Special Period in Peacetime. Few countries came to Cuba's aid and the United States even tightened its embargo.
Today, the agricultural economy has recovered becoming largely organic and focused on satisfying local needs. This has made Cuba self-sufficient in almost all foodstuffs. It has significantly reduced the country's need for fuel and fertilizers. The plant-based medicines which the military had carefully studied for years in its special laboratory have become a mainstay of Cuban medicine.
While the number of private automobiles has diminished, a new public transportation system thrives. Many people have returned to the land and are making reasonably good livelihoods as farmers. The city of Havana has become one big urban food garden.
The oft-cited scientific prowess of Cuban society certainly had something to do with the remarkable and rapid transformation in Cuban agriculture. Cuba is said to have only 2 percent of Latin America's population, but 11 percent of its scientists. But to whom did those scientists turn for many of their clues about how to effect such a grand transformation? They turned to the country's many campesinos. These small farmers had continued to farm using animal power and without fossil fuel-based fertilizers and pesticides. In effect, they had informally preserved a vast bank of knowledge about how to conduct organic, nonmotorized farming on the island of Cuba. They became important partners in teaching others how to make the transition to low-input agriculture.
Other characteristics of Cuban society also seemed to have eased the transition to a low-energy economy. While health and education standards consistently improved during the rule of Fidel Castro, the country never attained a modern consumer culture, a development that was certainly stymied by America's embargo and Cuba's resulting isolation from normal world trade flows. In transportation, many of the cars which remain on the road today--and there are far fewer than before the crisis--date from before 1959. Modern car culture never became widespread either.
Hugo Chavez's subsidized oil exports to Cuba may tempt the country to return to a petroleum-based path. But for now it has enabled the Cubans to forego the need for large additional foreign investment, investment that would link it ever more tightly with a global trade system that destroys self-sufficiency and sustainability. (What ought to be of great concern is the island's increasing dependence on foreign tourism which is itself a product of the continuing availability of cheap oil and the cheap transportation it fuels. The government inexplicably maintains a focus on investment in this area as if future oil availability were merely a local rather than a worldwide issue.)
The more modern parts of Cuban society, its health system and its education system, were also key to the transition. Free and universal health care provided to the Cuban population helped to avert what could have been a public health disaster during the Special Period. It is claimed that the the average Cuban lost 20 pounds during this time. And, yet no widespread health disaster took place. A free education system has enabled Cuba to train more scientists and doctors than it can itself use. Many doctors, for example, work abroad. But the surfeit of scientists has allowed Cuba to do practical research that has been exceptionally useful in the transition to more sustainable agriculture.
There are echoes of the Cuban situation in the simultaneous decline of its old patron, the Soviet Union. Dmitry Orlov recently posted a slide presentation that makes the case that the people of the former Soviet states were actually better able to withstand the economic implosion which followed the collapse of the Soviet Union in part because of their relatively less developed economy. Please understand that what passes for development these days are the following: high private ownership of housing; private transportation, especially private automobiles; suburban sprawl; shrinking and deteriorating public transportation systems; just-in-time inventory systems; outsourcing of critical manufacturing and food production; and a ruthless focus on individual financial achievement to the detriment of solid human relations and community responsibility.
All of this, of course, has important implications for countries that meet the definition of modern industrial societies, but especially for the United States in the event of a peak oil induced decline. In Cuba every vocational student now learns to grow food organically. In the United States very few people know anything about how to grow food of any type; and, Americans have become ever more dependent on fast food restaurants and food processors to do food preparation for them. The number of those with knowledge of organic techniques is increasing, but information on animal power in agriculture is now the province of a tiny cadre of animal power enthusiasts.
Health care (except for the elderly and the poor, but not the working poor) remains a largely private affair. More than 40 million Americans have no health insurance. The health care industry is just that, an industry now largely bound by the same profit incentives that govern any privately owned corporation. The hospital as a public utility, for example, has been almost completely lost. It is hard to see how an equitable system of treatment could be worked out under extreme conditions when it cannot be worked out under conditions of great affluence.
The American transportation system, of course, relies very heavily on private automobiles. As Orlov points out in his presentation, most Russians live in compact cities with public transportation. The collapse of the Soviet system forced no changes in this pattern. It is difficult to see how the American system of sprawl could endure a prolonged decline in oil supplies.
In places such as Cuba and Russia education remains free. The response to rising costs in education and declining public support for it in the United States has been to transfer costs to students and their families. In the resource-challenged era to come, will Americans have the vision to invest more in their education system in order to maintain the levels of competence needed to run society? There is the separate question of reforming that preparation for the kinds of challenges we will actually face. At this point it is hard to imagine both a push for more money in education and a revamping of the curriculum to include, for example, organic gardening.
I could go on. But all of this is said to point out that the supposedly advanced systems of modern industrial civilization float on a sea of cheap hydrocarbons. Once that sea begins to recede, these systems fall into immediate peril. Those whose systems have relatively less need for such hydrocarbons will by definition be less vulnerable. It is for that reason that Cuba's strange path may have much to teach us.
_____________________________________
The book, Sustainable Agriculture and Resistance: Transforming Food Production in Cuba, and the film documentary, The Power of Community: How Cuba Survived Peak Oil, were invaluable resources for understanding Cuba's response to declining oil availability.
After the 1959 revolution Cuba increasingly embraced industrial farming techniques that were already widespread in other countries. It was the modern thing to do. Rationalize farming along industrial lines so that the country could grow more crops for export. Inputs such as diesel fuel, fertilizer and pesticides were cheap. Cuba had become an ally of the Soviet Union which supported the country with subsidized oil and agricultural chemicals drawn from the Soviets' vast hydrocarbon reserves. Cuban plans to create a more diversified agriculture were abandoned.
There was one small exception. The military believed that Cuba could at any time suffer a naval blockade. Cuban military leaders realized that one of the key threats of such a blockade would be the loss of access to pharmaceuticals, almost all of which were imported. So the military set up a special laboratory devoted to herbal medicine which among other things gathered information about the already widespread use of herbal medicine within Cuba. This narrow effort would prove prescient.
After the Soviet block began to collapse in 1989, Cuba suddenly found itself denied the subsidized fuel and fertilizer it had been used to. By 1993 economic activity had plunged by almost half, a drop far worse that what the United States experienced during The Great Depression. Cuba's guaranteed markets and preferential pricing for its sugar (pricing that was on average 5.4 times the world price) had vanished and with them the money to import many of its necessities including fuel.
The country struggled to feed itself as its export-oriented agriculture based on fossil fuels had to be transformed into one that could feed the Cuban people with few fossil fuel inputs. Some visionary members of the country's Ministry of Agriculture suggested that the low-input, organic methods they had been experimenting with for years be introduced on a broad scale and that agricultural output be directed toward local consumption. This tumultuous time became known as the Special Period in Peacetime. Few countries came to Cuba's aid and the United States even tightened its embargo.
Today, the agricultural economy has recovered becoming largely organic and focused on satisfying local needs. This has made Cuba self-sufficient in almost all foodstuffs. It has significantly reduced the country's need for fuel and fertilizers. The plant-based medicines which the military had carefully studied for years in its special laboratory have become a mainstay of Cuban medicine.
While the number of private automobiles has diminished, a new public transportation system thrives. Many people have returned to the land and are making reasonably good livelihoods as farmers. The city of Havana has become one big urban food garden.
The oft-cited scientific prowess of Cuban society certainly had something to do with the remarkable and rapid transformation in Cuban agriculture. Cuba is said to have only 2 percent of Latin America's population, but 11 percent of its scientists. But to whom did those scientists turn for many of their clues about how to effect such a grand transformation? They turned to the country's many campesinos. These small farmers had continued to farm using animal power and without fossil fuel-based fertilizers and pesticides. In effect, they had informally preserved a vast bank of knowledge about how to conduct organic, nonmotorized farming on the island of Cuba. They became important partners in teaching others how to make the transition to low-input agriculture.
Other characteristics of Cuban society also seemed to have eased the transition to a low-energy economy. While health and education standards consistently improved during the rule of Fidel Castro, the country never attained a modern consumer culture, a development that was certainly stymied by America's embargo and Cuba's resulting isolation from normal world trade flows. In transportation, many of the cars which remain on the road today--and there are far fewer than before the crisis--date from before 1959. Modern car culture never became widespread either.
Hugo Chavez's subsidized oil exports to Cuba may tempt the country to return to a petroleum-based path. But for now it has enabled the Cubans to forego the need for large additional foreign investment, investment that would link it ever more tightly with a global trade system that destroys self-sufficiency and sustainability. (What ought to be of great concern is the island's increasing dependence on foreign tourism which is itself a product of the continuing availability of cheap oil and the cheap transportation it fuels. The government inexplicably maintains a focus on investment in this area as if future oil availability were merely a local rather than a worldwide issue.)
The more modern parts of Cuban society, its health system and its education system, were also key to the transition. Free and universal health care provided to the Cuban population helped to avert what could have been a public health disaster during the Special Period. It is claimed that the the average Cuban lost 20 pounds during this time. And, yet no widespread health disaster took place. A free education system has enabled Cuba to train more scientists and doctors than it can itself use. Many doctors, for example, work abroad. But the surfeit of scientists has allowed Cuba to do practical research that has been exceptionally useful in the transition to more sustainable agriculture.
There are echoes of the Cuban situation in the simultaneous decline of its old patron, the Soviet Union. Dmitry Orlov recently posted a slide presentation that makes the case that the people of the former Soviet states were actually better able to withstand the economic implosion which followed the collapse of the Soviet Union in part because of their relatively less developed economy. Please understand that what passes for development these days are the following: high private ownership of housing; private transportation, especially private automobiles; suburban sprawl; shrinking and deteriorating public transportation systems; just-in-time inventory systems; outsourcing of critical manufacturing and food production; and a ruthless focus on individual financial achievement to the detriment of solid human relations and community responsibility.
All of this, of course, has important implications for countries that meet the definition of modern industrial societies, but especially for the United States in the event of a peak oil induced decline. In Cuba every vocational student now learns to grow food organically. In the United States very few people know anything about how to grow food of any type; and, Americans have become ever more dependent on fast food restaurants and food processors to do food preparation for them. The number of those with knowledge of organic techniques is increasing, but information on animal power in agriculture is now the province of a tiny cadre of animal power enthusiasts.
Health care (except for the elderly and the poor, but not the working poor) remains a largely private affair. More than 40 million Americans have no health insurance. The health care industry is just that, an industry now largely bound by the same profit incentives that govern any privately owned corporation. The hospital as a public utility, for example, has been almost completely lost. It is hard to see how an equitable system of treatment could be worked out under extreme conditions when it cannot be worked out under conditions of great affluence.
The American transportation system, of course, relies very heavily on private automobiles. As Orlov points out in his presentation, most Russians live in compact cities with public transportation. The collapse of the Soviet system forced no changes in this pattern. It is difficult to see how the American system of sprawl could endure a prolonged decline in oil supplies.
In places such as Cuba and Russia education remains free. The response to rising costs in education and declining public support for it in the United States has been to transfer costs to students and their families. In the resource-challenged era to come, will Americans have the vision to invest more in their education system in order to maintain the levels of competence needed to run society? There is the separate question of reforming that preparation for the kinds of challenges we will actually face. At this point it is hard to imagine both a push for more money in education and a revamping of the curriculum to include, for example, organic gardening.
I could go on. But all of this is said to point out that the supposedly advanced systems of modern industrial civilization float on a sea of cheap hydrocarbons. Once that sea begins to recede, these systems fall into immediate peril. Those whose systems have relatively less need for such hydrocarbons will by definition be less vulnerable. It is for that reason that Cuba's strange path may have much to teach us.
_____________________________________
The book, Sustainable Agriculture and Resistance: Transforming Food Production in Cuba, and the film documentary, The Power of Community: How Cuba Survived Peak Oil, were invaluable resources for understanding Cuba's response to declining oil availability.
Sunday, December 10, 2006
Mavens, mavens everywhere...
As the long somnolent American public began to wake up in large numbers to the dangers of global warming in the past year, those in the peak oil movement looked on in amazement. The first reaction for many might have been, "It's about time!" The second reaction might have been, "What are we doing wrong? Peak oil should be right up there with global warming in the list of dangers that humanity faces."
Global warming has reached the so-called tipping point. That doesn't mean it's clear sailing from here. The next step--what to do about it--is sure to include one bruising battle after another. But peak oil remains unknown to the vast majority of the public. For why this is so, Malcolm Gladwell's bestselling book, The Tipping Point, may offer some insight.
For those who haven't read the book, Gladwell is studying the anatomy of the "social epidemic." How do ideas, fashions, new modes of behavior, and other social changes spread in society? He uses the medical epidemiological model as a starting point. Ideas and fashions spread like communicable diseases from one person to another. In short, he analyzes how word-of-mouth can create social change.
Gladwell puts the main movers in this process into three categories: connectors, mavens and salesmen. Connectors are people with large Rolodexes, but who also have worked or volunteered in many different settings. They often bring people together at parties from various walks of life and are constantly referring people to one another. Not surprisingly, they tend to be extroverts.
Mavens are experts. But, their recognized expertise doesn't necessarily stem from their formal training. Simply stated, they are people found in every community that others look to for advice on a particular topic. Gladwell profiles a Texas business school professor whose maven status comes not from his job, but from his intense interest in anything one might buy. As Gladwell points out, if the professor were a plumber instead, he could acquire the same expertise. This professor knows, for example, how to get the best deals for hotels; why a certain American car provides the same ride and features for far less than a German one; exactly what time of the month to go to the car dealer to buy that car; and what kind of TV to buy and why based on an exhaustive review before buying his own.
One critical trait for mavens, Gladwell says, is that they have an intense desire to be of service to others. This is what makes them important players in spreading new ideas and fashions. But, the mavens are not persuaders. That job falls to the final category, salesmen.
What salesmen (and saleswomen) do, of course, is self-explanatory. Why some are far better at it than others remains something of a mystery. Gladwell discusses research suggesting that so-called cultural microrhythms--the small movements and gestures we make when we encounter and talk with other people--are extremely important. Great salespeople apparently have very compelling microrhythms.
What is obvious from this classification system is that the peak oil movement lacks enough connectors and salespeople. Many of those concerned about peak oil come from technical backgrounds: physics, geology, engineering and computer science. Others may not have formal training in these areas, but have proved adept at assimilating technical information and communicating it. In other words, the peak oil movement has an embarrassment of mavens. This is a great plus, but not enough.
In order for peak oil understanding to reach the tipping point, the world's connectors need to bring people from the movement into contact with people outside of it and in walks of life far afield from those I've already mentioned. More lawyers; more doctors; more school administrators and teachers; more airline pilots and bus drivers; more ministers and therapists; more theater professors and piano teachers; and more shoe salesmen, hairdressers and dentists need to understand the basics of peak oil.
Of course, every movement needs its salespeople, and it isn't hard to identify great salespeople in any community. Some of them have probably sold you something. But, many of them are not actually in the sales profession. What distinguishes them is that they are very good at persuading their fellow citizens to act.
There are other hurdles which Gladwell points to such as making one's message "sticky." And, there are challenges with the peak oil message itself; that message implies a considerable amount of change, change that may not seem positive to many people. But any reframing of the peak oil message will matter only if the right kind of people can be recruited into the service of the peak oil movement in the first place. Finding more connectors and salespeople in our communities and helping them understand what is at stake seems like an important first step.
Global warming has reached the so-called tipping point. That doesn't mean it's clear sailing from here. The next step--what to do about it--is sure to include one bruising battle after another. But peak oil remains unknown to the vast majority of the public. For why this is so, Malcolm Gladwell's bestselling book, The Tipping Point, may offer some insight.
For those who haven't read the book, Gladwell is studying the anatomy of the "social epidemic." How do ideas, fashions, new modes of behavior, and other social changes spread in society? He uses the medical epidemiological model as a starting point. Ideas and fashions spread like communicable diseases from one person to another. In short, he analyzes how word-of-mouth can create social change.
Gladwell puts the main movers in this process into three categories: connectors, mavens and salesmen. Connectors are people with large Rolodexes, but who also have worked or volunteered in many different settings. They often bring people together at parties from various walks of life and are constantly referring people to one another. Not surprisingly, they tend to be extroverts.
Mavens are experts. But, their recognized expertise doesn't necessarily stem from their formal training. Simply stated, they are people found in every community that others look to for advice on a particular topic. Gladwell profiles a Texas business school professor whose maven status comes not from his job, but from his intense interest in anything one might buy. As Gladwell points out, if the professor were a plumber instead, he could acquire the same expertise. This professor knows, for example, how to get the best deals for hotels; why a certain American car provides the same ride and features for far less than a German one; exactly what time of the month to go to the car dealer to buy that car; and what kind of TV to buy and why based on an exhaustive review before buying his own.
One critical trait for mavens, Gladwell says, is that they have an intense desire to be of service to others. This is what makes them important players in spreading new ideas and fashions. But, the mavens are not persuaders. That job falls to the final category, salesmen.
What salesmen (and saleswomen) do, of course, is self-explanatory. Why some are far better at it than others remains something of a mystery. Gladwell discusses research suggesting that so-called cultural microrhythms--the small movements and gestures we make when we encounter and talk with other people--are extremely important. Great salespeople apparently have very compelling microrhythms.
What is obvious from this classification system is that the peak oil movement lacks enough connectors and salespeople. Many of those concerned about peak oil come from technical backgrounds: physics, geology, engineering and computer science. Others may not have formal training in these areas, but have proved adept at assimilating technical information and communicating it. In other words, the peak oil movement has an embarrassment of mavens. This is a great plus, but not enough.
In order for peak oil understanding to reach the tipping point, the world's connectors need to bring people from the movement into contact with people outside of it and in walks of life far afield from those I've already mentioned. More lawyers; more doctors; more school administrators and teachers; more airline pilots and bus drivers; more ministers and therapists; more theater professors and piano teachers; and more shoe salesmen, hairdressers and dentists need to understand the basics of peak oil.
Of course, every movement needs its salespeople, and it isn't hard to identify great salespeople in any community. Some of them have probably sold you something. But, many of them are not actually in the sales profession. What distinguishes them is that they are very good at persuading their fellow citizens to act.
There are other hurdles which Gladwell points to such as making one's message "sticky." And, there are challenges with the peak oil message itself; that message implies a considerable amount of change, change that may not seem positive to many people. But any reframing of the peak oil message will matter only if the right kind of people can be recruited into the service of the peak oil movement in the first place. Finding more connectors and salespeople in our communities and helping them understand what is at stake seems like an important first step.
Sunday, December 03, 2006
Copernicus, Darwin and the cure for autistic economics
Autistic children can spend much of their time in a world of elaborate fantasy, emotionally detached from real people and objects. Unfortunately, it is not much of a leap to substitute the words "most economists" for "autistic children" in the previous sentence. So apparent has this become that there is a burgeoning movement to establish what is now called a "post-autistic economics" to meet the challenges of describing the real social and physical world we live in.
This wouldn't matter much were it not for the inordinate say that economists have in shaping public policy of all kinds and at all levels. Those of the post-autistic persuasion say that establishment economists have become a priestly class of sorts that enforces its neoclassical view on any and all who would dissent. It does this by keeping them off college faculties and out of key policy positions.
But as the biosphere presses its limits upon us in the areas of energy, climate, water, soil and pollution, the neoclassical economic view that human ingenuity will allow the species to ignore every other species on the planet and grow the world economy indefinitely has become life threatening, even civilization threatening.
The cure for this view was suggested by a dear friend. It is a surprisingly simple move, and one with an impressive pedigree. The Polish astronomer Nicolaus Copernicus was the first to work out how the Earth revolved around the Sun. He thus began a journey for humankind that removed it from the center of the universe and placed it, to borrow the words of environmental education giant David Orr, "on a small planet attached to an insignificant star in a backwater galaxy."
What Copernicus had done for astronomy, Charles Darwin did for biology. After Darwin humans would no longer be set apart from the animal kingdom. Henceforth, they would be only one of its many inhabitants, buffeted by the same laws of mutation and natural selection as the ape and every other living creature. Anthropocentrism in biology was finished.
It is now time--long past time--for a Copernican/Darwinian revolution in economics in which humans cease to be seen as the privileged species, homo economicus--at the center of everything and exempt from the limits of the biosphere. Instead, humans need to be placed within the same systems that nourish every plant and animal on Earth. In this case, however, there is a twist. Far from having to realize how insignificant and unexceptional we are, we must come to understand that we have evolved into a different species which William Catton Jr. has dubbed "homo colossus," a man-tool hybrid capable of destroying the very habitat that sustains us and so many other creatures.
The simple fact is that the economy cannot become bigger than the biosphere. (There are, of course, some believers in Star Trek-style fantasies who envision us exploiting and living on other planets. To such people may I suggest that they get started on this project right away since we are running out of time to turn things around here on Earth.) Humans already consume at least 40 percent of the photosynthetic product of the Earth each year and, that's an estimate from 1986 when the population was 5.5 billion. Now it is 6.5 billion. And it's projected to be close to 9 billion by 2050. Could we increase our share of the world's photosynthetic product to 60 percent as the 2050 projection implies and still survive? Would we wipe out species upon whom we depend, but of which we currently know nothing? Even if we could transition away from finite fossil fuels, would finding a theoretical, but as yet unknown, unlimited and pollutionless energy source really solve our problems? Or would it simply cause us to bump up against other limits?
When you undergo the Copernican/Darwinian revolution in economics, you cannot avoid such questions. The physical world and its limits must be accounted for. To that end some researchers are proposing a comprehensive biophysical economics. One outline of an approach to such a problem can be found in an article entitled "The Need to Reintegrate the Natural Sciences with Economics."
The field of study now known as ecological economics has been working on the problem in a piecemeal fashion for a long time. But even though a comprehensive biophysical economics may never be possible--since it would require understanding everything about the natural world--we must attempt the feat for two reasons: 1) to expose the dire peril in which neoclassical economics has placed us and 2) to suggest ways to build an economy that can operate indefinitely on the Earth and not one that only functions until it destroys the Earth's capacity to sustain us.
The French writer François-René de Chateaubriand is reputed to have said, "Forests precede civilizations and deserts follow them." It is to this problem that economists must now turn themselves.
This wouldn't matter much were it not for the inordinate say that economists have in shaping public policy of all kinds and at all levels. Those of the post-autistic persuasion say that establishment economists have become a priestly class of sorts that enforces its neoclassical view on any and all who would dissent. It does this by keeping them off college faculties and out of key policy positions.
But as the biosphere presses its limits upon us in the areas of energy, climate, water, soil and pollution, the neoclassical economic view that human ingenuity will allow the species to ignore every other species on the planet and grow the world economy indefinitely has become life threatening, even civilization threatening.
The cure for this view was suggested by a dear friend. It is a surprisingly simple move, and one with an impressive pedigree. The Polish astronomer Nicolaus Copernicus was the first to work out how the Earth revolved around the Sun. He thus began a journey for humankind that removed it from the center of the universe and placed it, to borrow the words of environmental education giant David Orr, "on a small planet attached to an insignificant star in a backwater galaxy."
What Copernicus had done for astronomy, Charles Darwin did for biology. After Darwin humans would no longer be set apart from the animal kingdom. Henceforth, they would be only one of its many inhabitants, buffeted by the same laws of mutation and natural selection as the ape and every other living creature. Anthropocentrism in biology was finished.
It is now time--long past time--for a Copernican/Darwinian revolution in economics in which humans cease to be seen as the privileged species, homo economicus--at the center of everything and exempt from the limits of the biosphere. Instead, humans need to be placed within the same systems that nourish every plant and animal on Earth. In this case, however, there is a twist. Far from having to realize how insignificant and unexceptional we are, we must come to understand that we have evolved into a different species which William Catton Jr. has dubbed "homo colossus," a man-tool hybrid capable of destroying the very habitat that sustains us and so many other creatures.
The simple fact is that the economy cannot become bigger than the biosphere. (There are, of course, some believers in Star Trek-style fantasies who envision us exploiting and living on other planets. To such people may I suggest that they get started on this project right away since we are running out of time to turn things around here on Earth.) Humans already consume at least 40 percent of the photosynthetic product of the Earth each year and, that's an estimate from 1986 when the population was 5.5 billion. Now it is 6.5 billion. And it's projected to be close to 9 billion by 2050. Could we increase our share of the world's photosynthetic product to 60 percent as the 2050 projection implies and still survive? Would we wipe out species upon whom we depend, but of which we currently know nothing? Even if we could transition away from finite fossil fuels, would finding a theoretical, but as yet unknown, unlimited and pollutionless energy source really solve our problems? Or would it simply cause us to bump up against other limits?
When you undergo the Copernican/Darwinian revolution in economics, you cannot avoid such questions. The physical world and its limits must be accounted for. To that end some researchers are proposing a comprehensive biophysical economics. One outline of an approach to such a problem can be found in an article entitled "The Need to Reintegrate the Natural Sciences with Economics."
The field of study now known as ecological economics has been working on the problem in a piecemeal fashion for a long time. But even though a comprehensive biophysical economics may never be possible--since it would require understanding everything about the natural world--we must attempt the feat for two reasons: 1) to expose the dire peril in which neoclassical economics has placed us and 2) to suggest ways to build an economy that can operate indefinitely on the Earth and not one that only functions until it destroys the Earth's capacity to sustain us.
The French writer François-René de Chateaubriand is reputed to have said, "Forests precede civilizations and deserts follow them." It is to this problem that economists must now turn themselves.
Sunday, November 19, 2006
Does The Oil Drum threaten CERA's market share?
Cambridge Energy Research Associates (CERA) fired another missile at the peak oil movement last week by releasing a report attacking the notion of an imminent peak in world oil supplies and projecting an "undulating plateau" in oil production starting sometime after 2030. To rework a now shopworn phrase coined by the group's president, Daniel Yergin, this is not the first time CERA has attempted to undermine those concerned about a nearby peak, it's more like the fifth.
CERA is a profit-making business that sells its consulting services and specialized reports to a narrow, well-heeled audience. Why would it care about the pronouncements of a relatively small band of peak oil Internet vigilantes, some mostly retired oil company geologists, a few energy analysts and some concerned citizens who still constitute only the tiniest fraction of the public? The answer could lie in the accessibility, credibility and packaging of their message, a message that can be examined in detail for free by anyone (including CERA clients) at The Oil Drum, Energy Bulletin, The Oil Depletion Analysis Center , the Association for the Study of Peak Oil & Gas, and myriad other places.
No one who is reading this needs to be told how much the Internet has revolutionized the dissemination of information. And so, the question I ask in the title of this piece is actually more than half serious. Companies whose business is the collection and dissemination of specialized information are having a harder and harder time competing with the free resources that are now available online. They are also having a harder time keeping their information offerings under wraps since those who receive them often write about them on the net. In addition, if that information impinges on important public policies, its authors may find the information dissected by an army of volunteers whose expertise and depth may collectively approach or exceed that of the issuing company.
Firms that provide consulting or information on narrow technical or managerial issues almost never find themselves the target of such scrutiny. But CERA is large and well-known, and for reasons that are not completely clear it has staked its entire business on the assumption that hydrocarbon energy will be plentiful for three or four decades to come. Anything that calls that assumption into question threatens the credibility of those who work for CERA. Unfortunately, the very nature of the Internet has created a dilemma for the firm and its employees. How can CERA refute analyses appearing on such sites as The Oil Drum without giving away valuable information for free?
The answer is a public relations campaign that relies on carefully crafted messages which appear to refute CERA's detractors while presenting very little actual evidence. The beauty of this approach is that the evidence never comes under serious scrutiny. (Only a small portion of that evidence has so far leaked into the public domain through presentations by CERA itself or via short tidbits offered by those who've read the CERA reports.)
The firm would only be spending time on such a strategy if its principals thought that analyses from such sources as The Oil Drum and stories such as Peter Maass's piece in The New York Times were a threat to its credibility. It's not hard to imagine CERA clients reading the peak oil analysis now in the public domain and calling Daniel Yergin to ask what's up. It's also not hard to imagine that there might be some CERA clients who dislike talk of a nearby peak because it is bad for business or bad for their position in the world (as in the case of certain oil exporting countries). And, this might be true regardless of what those clients actually believe about the timing of a peak.
The CERA counteroffensive got underway in earnest last year with a guest editorial authored by Yergin in The Washington Post. It has since been escalating with a series of media interviews, an appearance before Congress and the occasional new report like the one in August predicting clear sailing through 2015.
CERA's tactics are shrewd and not necessarily easy for the uninformed reader to detect. One tactic is to accuse the other side of what you yourself are doing and thus draw attention away from your own actions. The press release trumpeting the availability of the report states that peak oil modelers "have not made available a transparent and detailed analysis that would allow objective and rational discussion." First, CERA must not have looked very hard since much of the work is available in print or on the web and many modelers have been more than happy to explain their methods to questioners. Second, CERA makes this claim even as it restricts access to its own analysis, which it says it must do, of course, for business reasons. (Each copy costs $1,000.) But for a company whose whole operating premise is that peak oil is decades away, one would think it would want the world and especially potential clients to know exactly why it believes this. Perhaps CERA simply doesn't want the kind of scrutiny that would result from a public release of the report. It's hard to believe that the firm would miss the income.
In addition, Yergin has said that for Matthew Simmons "[peak oil] seems to be a theological issue." Simmons' book, Twilight in the Desert, sounded an alarm about Saudi Arabia's capacity to produce more oil. But Yergin, who authored Commanding Heights, a paean to free-market ideology, may need to exorcise his own god--the god of the marketplace--in order to assess the oil situation more objectively. For Yergin the marketplace will fix all.
Another important tactic is to use words and phrases that denigrate one's opponent. The report itself is entitled, Why Peak Oil Theory Falls Down: Myths, Legends, and the Future of Oil Resources. Do I need to underline the denigrating words?
A third tactic is to set up straw man arguments. Here is where CERA excels. The CERA report pretends that among peak oil theorists there is exactly one estimate for the remaining recoverable oil. Here CERA doesn't acknowledge differing definitions of oil and ignores what CERA experts must surely know, namely, that the low estimates don't include unconventional reserves such as oil sands. Many peak oil modelers believe those unconventional reserves won't change the date of the peak much, but may help to cushion the decline in output. Nevertheless, CERA chooses the lowest estimate without explanation so as make that estimate seem unreasonable within the context of the report.
CERA also claims that peak oil theory always implies a "sharp decline" in production. In fact, peak oil analysts vary in their views. Some like oil analyst Henry Groppe say the peak has arrived and that we are now on a long plateau. Consultant Robert Hirsch does indeed worry that the decline might be sharp. Resource economist Douglas Reynolds thinks that oil supplies will trace out a long, gently sloped curve of decline. Of course, CERA wants to lump all such theorists into the Chicken Little category.
In addition, the report claims that all peak oil modelers ignore political factors, economics, technology and infrastructure. Some do and some don't. It depends on what the modeler is trying to accomplish. Certainly, all assumptions need to be examined including CERA's.
The report claims that peak oil thinkers focus on "superficial analysis of reservoir constraints." In fact, they focus on observed and expected flow rates as well. Those flow rates do, of course, have to come from reservoirs. But, here CERA itself doesn't appear to deal with possible bottlenecks for flow rates from such sources as oil sands and oil shale. The firm just assumes that technology will provide the needed bounty. Finally, there is perhaps CERA's favorite straw man argument: Peak oil believers say we are running out of oil. Of course, what they really say is that rates of production will decline after peak.
Let's stop for minute. The authors of the CERA report say they have done an exhaustive field-by-field survey of the world's existing oil supplies. And, they claim to have done a detailed projection of new discoveries. But for some reason they didn't bother to check out the true spectrum of opinion among the peak oil community before putting misleading and distorted arguments in the mouths of those who disagree with them. It's hard to accept that the authors did this out of carelessness rather than calculation.
Despite the seeming effectiveness of the public relations offensive, CERA may ultimately find itself in a losing battle. There is, of course, the question of timing. Events may overtake us all. But even if a peak is delayed for some time, CERA has put itself in an untenable position. Please forgive the analogy, but when it comes to arguing its case, CERA is like a stripper who wants all the attention, but is only willing to show a little leg. The major voices on the other side are willing to bare all and let anyone with an Internet connection examine their logic and evidence.
For all these reasons, I take with a grain of salt CERA's supposed olive branch in the report which states: "We respect the urgency and seriousness with which some with whom we disagree put their case...We invite others to join in a considered dialogue, which now seems too easily lost in the rancor."
If the firm's partners really want to have an honest dialogue, they could start by making their own evidence available (not just their conclusions) and by dispensing with the dishonest straw man arguments. But, CERA probably already knows that the kind of scrutiny that would surely follow could easily be bad for business.
CERA is in the forecasting business. But, forecasting is nothing more than pretending to know the one thing which none of us can know: the future. Given how much money people are willing to pay for forecasts, it is doubtful that CERA's soothsayers would ever concede that they, like the rest of us, are in the dark about the exact trajectory of oil supplies. It's not that forecasts can't be useful tools. They can be. However, this is not because we can get forecasts exactly right with any regularity; rather it's because forecasts can help us assess the risks we face and plan for those risks.
On that count I'm sticking with writers of The Oil Drum, their kindred spirits, and the information that is publicly available. If CERA would like to join the conversation instead of merely engaging in public relations campaigns, that would be a step in the right direction. Until then, those looking for clues about the future of oil and other hydrocarbons might do no better than to start with The Oil Drum and other like-minded sites and work their way out.
CERA is a profit-making business that sells its consulting services and specialized reports to a narrow, well-heeled audience. Why would it care about the pronouncements of a relatively small band of peak oil Internet vigilantes, some mostly retired oil company geologists, a few energy analysts and some concerned citizens who still constitute only the tiniest fraction of the public? The answer could lie in the accessibility, credibility and packaging of their message, a message that can be examined in detail for free by anyone (including CERA clients) at The Oil Drum, Energy Bulletin, The Oil Depletion Analysis Center , the Association for the Study of Peak Oil & Gas, and myriad other places.
No one who is reading this needs to be told how much the Internet has revolutionized the dissemination of information. And so, the question I ask in the title of this piece is actually more than half serious. Companies whose business is the collection and dissemination of specialized information are having a harder and harder time competing with the free resources that are now available online. They are also having a harder time keeping their information offerings under wraps since those who receive them often write about them on the net. In addition, if that information impinges on important public policies, its authors may find the information dissected by an army of volunteers whose expertise and depth may collectively approach or exceed that of the issuing company.
Firms that provide consulting or information on narrow technical or managerial issues almost never find themselves the target of such scrutiny. But CERA is large and well-known, and for reasons that are not completely clear it has staked its entire business on the assumption that hydrocarbon energy will be plentiful for three or four decades to come. Anything that calls that assumption into question threatens the credibility of those who work for CERA. Unfortunately, the very nature of the Internet has created a dilemma for the firm and its employees. How can CERA refute analyses appearing on such sites as The Oil Drum without giving away valuable information for free?
The answer is a public relations campaign that relies on carefully crafted messages which appear to refute CERA's detractors while presenting very little actual evidence. The beauty of this approach is that the evidence never comes under serious scrutiny. (Only a small portion of that evidence has so far leaked into the public domain through presentations by CERA itself or via short tidbits offered by those who've read the CERA reports.)
The firm would only be spending time on such a strategy if its principals thought that analyses from such sources as The Oil Drum and stories such as Peter Maass's piece in The New York Times were a threat to its credibility. It's not hard to imagine CERA clients reading the peak oil analysis now in the public domain and calling Daniel Yergin to ask what's up. It's also not hard to imagine that there might be some CERA clients who dislike talk of a nearby peak because it is bad for business or bad for their position in the world (as in the case of certain oil exporting countries). And, this might be true regardless of what those clients actually believe about the timing of a peak.
The CERA counteroffensive got underway in earnest last year with a guest editorial authored by Yergin in The Washington Post. It has since been escalating with a series of media interviews, an appearance before Congress and the occasional new report like the one in August predicting clear sailing through 2015.
CERA's tactics are shrewd and not necessarily easy for the uninformed reader to detect. One tactic is to accuse the other side of what you yourself are doing and thus draw attention away from your own actions. The press release trumpeting the availability of the report states that peak oil modelers "have not made available a transparent and detailed analysis that would allow objective and rational discussion." First, CERA must not have looked very hard since much of the work is available in print or on the web and many modelers have been more than happy to explain their methods to questioners. Second, CERA makes this claim even as it restricts access to its own analysis, which it says it must do, of course, for business reasons. (Each copy costs $1,000.) But for a company whose whole operating premise is that peak oil is decades away, one would think it would want the world and especially potential clients to know exactly why it believes this. Perhaps CERA simply doesn't want the kind of scrutiny that would result from a public release of the report. It's hard to believe that the firm would miss the income.
In addition, Yergin has said that for Matthew Simmons "[peak oil] seems to be a theological issue." Simmons' book, Twilight in the Desert, sounded an alarm about Saudi Arabia's capacity to produce more oil. But Yergin, who authored Commanding Heights, a paean to free-market ideology, may need to exorcise his own god--the god of the marketplace--in order to assess the oil situation more objectively. For Yergin the marketplace will fix all.
Another important tactic is to use words and phrases that denigrate one's opponent. The report itself is entitled, Why Peak Oil Theory Falls Down: Myths, Legends, and the Future of Oil Resources. Do I need to underline the denigrating words?
A third tactic is to set up straw man arguments. Here is where CERA excels. The CERA report pretends that among peak oil theorists there is exactly one estimate for the remaining recoverable oil. Here CERA doesn't acknowledge differing definitions of oil and ignores what CERA experts must surely know, namely, that the low estimates don't include unconventional reserves such as oil sands. Many peak oil modelers believe those unconventional reserves won't change the date of the peak much, but may help to cushion the decline in output. Nevertheless, CERA chooses the lowest estimate without explanation so as make that estimate seem unreasonable within the context of the report.
CERA also claims that peak oil theory always implies a "sharp decline" in production. In fact, peak oil analysts vary in their views. Some like oil analyst Henry Groppe say the peak has arrived and that we are now on a long plateau. Consultant Robert Hirsch does indeed worry that the decline might be sharp. Resource economist Douglas Reynolds thinks that oil supplies will trace out a long, gently sloped curve of decline. Of course, CERA wants to lump all such theorists into the Chicken Little category.
In addition, the report claims that all peak oil modelers ignore political factors, economics, technology and infrastructure. Some do and some don't. It depends on what the modeler is trying to accomplish. Certainly, all assumptions need to be examined including CERA's.
The report claims that peak oil thinkers focus on "superficial analysis of reservoir constraints." In fact, they focus on observed and expected flow rates as well. Those flow rates do, of course, have to come from reservoirs. But, here CERA itself doesn't appear to deal with possible bottlenecks for flow rates from such sources as oil sands and oil shale. The firm just assumes that technology will provide the needed bounty. Finally, there is perhaps CERA's favorite straw man argument: Peak oil believers say we are running out of oil. Of course, what they really say is that rates of production will decline after peak.
Let's stop for minute. The authors of the CERA report say they have done an exhaustive field-by-field survey of the world's existing oil supplies. And, they claim to have done a detailed projection of new discoveries. But for some reason they didn't bother to check out the true spectrum of opinion among the peak oil community before putting misleading and distorted arguments in the mouths of those who disagree with them. It's hard to accept that the authors did this out of carelessness rather than calculation.
Despite the seeming effectiveness of the public relations offensive, CERA may ultimately find itself in a losing battle. There is, of course, the question of timing. Events may overtake us all. But even if a peak is delayed for some time, CERA has put itself in an untenable position. Please forgive the analogy, but when it comes to arguing its case, CERA is like a stripper who wants all the attention, but is only willing to show a little leg. The major voices on the other side are willing to bare all and let anyone with an Internet connection examine their logic and evidence.
For all these reasons, I take with a grain of salt CERA's supposed olive branch in the report which states: "We respect the urgency and seriousness with which some with whom we disagree put their case...We invite others to join in a considered dialogue, which now seems too easily lost in the rancor."
If the firm's partners really want to have an honest dialogue, they could start by making their own evidence available (not just their conclusions) and by dispensing with the dishonest straw man arguments. But, CERA probably already knows that the kind of scrutiny that would surely follow could easily be bad for business.
CERA is in the forecasting business. But, forecasting is nothing more than pretending to know the one thing which none of us can know: the future. Given how much money people are willing to pay for forecasts, it is doubtful that CERA's soothsayers would ever concede that they, like the rest of us, are in the dark about the exact trajectory of oil supplies. It's not that forecasts can't be useful tools. They can be. However, this is not because we can get forecasts exactly right with any regularity; rather it's because forecasts can help us assess the risks we face and plan for those risks.
On that count I'm sticking with writers of The Oil Drum, their kindred spirits, and the information that is publicly available. If CERA would like to join the conversation instead of merely engaging in public relations campaigns, that would be a step in the right direction. Until then, those looking for clues about the future of oil and other hydrocarbons might do no better than to start with The Oil Drum and other like-minded sites and work their way out.
Sunday, November 12, 2006
Attitude adjustment: Facing our ecological predicament
After a talk I gave last year on food and energy, one audience member remarked that it seemed to him that we face challenges so daunting that little can be done to stop a worldwide collapse of civilization. "What is the point in trying?" he seemed to be asking. As I prepare for guest lectures on peak oil and the consequences of overshoot at a local college this week, I'm asking myself: Is that person's attitude really all that unreasonable?
Attitudes, of course, flow from assumptions, and there is a wide assortment of assumptions regarding our ecological future. Those assumptions are widely debated and large bodies of evidence have been marshalled for various views. But, perhaps we also need to know something about the usefulness of certain attitudes. People maintain particular attitudes not merely because of the evidence available to them, but also because of the efficacy of the attitudes themselves.
For some people, of course, the problems of global warming, energy depletion, soil erosion and the whole gamut of ecological dangers aren't problems at all. These people simply deny the existence of any ecological problems. This attitude may seem foolhardy until we understand its advantages. First, those who deny our ecological problems are free from the anxieties about any potential bad effects. That leaves more emotional energy available to focus on day-to-day activities and immediate needs. Second, the denial itself serves to immunize these people against contrary evidence. This is a timesaver since contrary evidence has been ruled inadmissible ahead of time and therefore need not be considered. Third, the deniers may not necessarily be cocksure of their position. But, they may also believe that if they are wrong, the consequences of any gathering ecological calamity may be so far in the future so as not to matter to them or even to their children.
Strangely, my glum audience member arrives at almost the same place as the deniers just mentioned because he assumes that our problems are so immense that they cannot be addressed. Intellectually, our pessimist has accepted the premise of ecological peril and social collapse, so he is not freed from the anxieties bred by this knowledge. He does, however, gain time and emotional energy to focus on what is left of the "good life" before the worst hits. He doesn't need to spend time evaluating new evidence for or against the possibility of a collapse. And, if the consequences of the inevitable calamity do visit him, he will have the satisfaction of having made the most of his time prior to its arrival. If there turn out to be no severe adverse consequences in his lifetime, at least he will not have wasted much energy worrying about them. Yes, his children will likely be affected, but under his assumptions, there is nothing he can do about it anyway.
So far, I've detailed two opposing viewpoints that seem nothing more than a defense of apathy. But, there are two other slight variants that lead to only a little more activity though they may appear to be more "reasonable" to the casual observer.
First, there are those who believe we have potentially serious problems, but that technology guided by the marketplace will inevitably solve them. They may even allow for some government intervention, for example, through carbon taxes to help slow global warming. The advantages of this view are obvious. There is very little work for individuals to do. Corporations and even to a certain extent the government will take care of everything. (Some may regard this as a disadvantage, but that's another discussion.)
Second, there are those who share the aforementioned belief that we face potentially serious problems; however, they also believe that only the right kind of technology can address these problems, so-called "green" technology. This technology will not simply be introduced by the marketplace, but must be subsidized or mandated by the government. Other bad technology such as coal-fired power plants must be actively and severely regulated and ultimately replaced. While this view requires a little more action since citizens must pressure their governments to enact the various subsidies, standards and regulations needed for this bright green future, it still envisions a more or less business-as-usual world albeit one based on "green" technology.
Paradoxically, the hardest sell is not a view that would require the greatest change in belief. We've already covered that. It's actually quite easy to sell people on a deeply pessimistic view of the future. As we have seen, those who hold such a view may adopt an attitude of complete resignation that resembles in its results the attitude of those who deny any problems at all. (Compare, for example, the apparent resignation of those who believe in an imminent biblical apocalypse.)
The hardest sell to any audience is that there is a chance for us to chart a course to sustainability, but that it will take a lot of work at every level: individual, household, municipal, state, federal and even international. And, by the way, when we get there all of us will have considerably less material wealth than we do today.
Not surprisingly, the thought of working hard for a future with lowered expectations is not all that appealing to a public whose ever-expanding pursuits continue to float on a sea of seemingly endless fossil fuels. The advantages of the path to sustainability are actually quite numerous. One can point to many nonmaterial benefits such as closer communities and families, a closer relationship with nature, a slower pace, possibilities for a deeper spiritual life, and an ecologically sound human society for the generations to come. Unfortunately, all of these advantages have little appeal to an audience that would prefer something closer to business as usual.
And, yet the approach which is hardest to sell seems like the safest. It relies on the concrete, concerted actions of people everywhere doing things that require no miracles of technology, no rosy assumptions about the future availability of critical resources, and only limited faith in the marketplace (a marketplace that has consistently given us the illusion of decreasing scarcity.) It is an approach that one can get started on today without the enactment of any big government program. To that extent it empowers individuals and small groups.
So, why does this approach which some are calling Plan C get the cold shoulder? I think in part this is because it requires people to hold in their minds two simultaneously troubling ideas: 1) the terrible ecological dangers that we face and 2) the difficult truth that we can only surmount them through efforts that have grown deeply unfamiliar to many of us. It puts the burden for reaching sustainability squarely on the shoulders of every community member. Given our atrophied community-building skills and our vast ignorance of nature, we may be forgiven for wondering if we are up to the task. It is more comfortable to think we can rely on experts in government and industry whom many of us assume (perhaps wrongly) know what they are doing.
If Plan C is to become the main focus of action, as I believe it must, then people will ultimately need to accept two critical notions: 1) that technology will not save us and so we must save ourselves and 2) that we can save ourselves and our children because we are still capable of learning and executing the things we need to do to build a sustainable society.
William James in his essay, "Is Life Worth Living?", wrote:
Attitudes, of course, flow from assumptions, and there is a wide assortment of assumptions regarding our ecological future. Those assumptions are widely debated and large bodies of evidence have been marshalled for various views. But, perhaps we also need to know something about the usefulness of certain attitudes. People maintain particular attitudes not merely because of the evidence available to them, but also because of the efficacy of the attitudes themselves.
For some people, of course, the problems of global warming, energy depletion, soil erosion and the whole gamut of ecological dangers aren't problems at all. These people simply deny the existence of any ecological problems. This attitude may seem foolhardy until we understand its advantages. First, those who deny our ecological problems are free from the anxieties about any potential bad effects. That leaves more emotional energy available to focus on day-to-day activities and immediate needs. Second, the denial itself serves to immunize these people against contrary evidence. This is a timesaver since contrary evidence has been ruled inadmissible ahead of time and therefore need not be considered. Third, the deniers may not necessarily be cocksure of their position. But, they may also believe that if they are wrong, the consequences of any gathering ecological calamity may be so far in the future so as not to matter to them or even to their children.
Strangely, my glum audience member arrives at almost the same place as the deniers just mentioned because he assumes that our problems are so immense that they cannot be addressed. Intellectually, our pessimist has accepted the premise of ecological peril and social collapse, so he is not freed from the anxieties bred by this knowledge. He does, however, gain time and emotional energy to focus on what is left of the "good life" before the worst hits. He doesn't need to spend time evaluating new evidence for or against the possibility of a collapse. And, if the consequences of the inevitable calamity do visit him, he will have the satisfaction of having made the most of his time prior to its arrival. If there turn out to be no severe adverse consequences in his lifetime, at least he will not have wasted much energy worrying about them. Yes, his children will likely be affected, but under his assumptions, there is nothing he can do about it anyway.
So far, I've detailed two opposing viewpoints that seem nothing more than a defense of apathy. But, there are two other slight variants that lead to only a little more activity though they may appear to be more "reasonable" to the casual observer.
First, there are those who believe we have potentially serious problems, but that technology guided by the marketplace will inevitably solve them. They may even allow for some government intervention, for example, through carbon taxes to help slow global warming. The advantages of this view are obvious. There is very little work for individuals to do. Corporations and even to a certain extent the government will take care of everything. (Some may regard this as a disadvantage, but that's another discussion.)
Second, there are those who share the aforementioned belief that we face potentially serious problems; however, they also believe that only the right kind of technology can address these problems, so-called "green" technology. This technology will not simply be introduced by the marketplace, but must be subsidized or mandated by the government. Other bad technology such as coal-fired power plants must be actively and severely regulated and ultimately replaced. While this view requires a little more action since citizens must pressure their governments to enact the various subsidies, standards and regulations needed for this bright green future, it still envisions a more or less business-as-usual world albeit one based on "green" technology.
Paradoxically, the hardest sell is not a view that would require the greatest change in belief. We've already covered that. It's actually quite easy to sell people on a deeply pessimistic view of the future. As we have seen, those who hold such a view may adopt an attitude of complete resignation that resembles in its results the attitude of those who deny any problems at all. (Compare, for example, the apparent resignation of those who believe in an imminent biblical apocalypse.)
The hardest sell to any audience is that there is a chance for us to chart a course to sustainability, but that it will take a lot of work at every level: individual, household, municipal, state, federal and even international. And, by the way, when we get there all of us will have considerably less material wealth than we do today.
Not surprisingly, the thought of working hard for a future with lowered expectations is not all that appealing to a public whose ever-expanding pursuits continue to float on a sea of seemingly endless fossil fuels. The advantages of the path to sustainability are actually quite numerous. One can point to many nonmaterial benefits such as closer communities and families, a closer relationship with nature, a slower pace, possibilities for a deeper spiritual life, and an ecologically sound human society for the generations to come. Unfortunately, all of these advantages have little appeal to an audience that would prefer something closer to business as usual.
And, yet the approach which is hardest to sell seems like the safest. It relies on the concrete, concerted actions of people everywhere doing things that require no miracles of technology, no rosy assumptions about the future availability of critical resources, and only limited faith in the marketplace (a marketplace that has consistently given us the illusion of decreasing scarcity.) It is an approach that one can get started on today without the enactment of any big government program. To that extent it empowers individuals and small groups.
So, why does this approach which some are calling Plan C get the cold shoulder? I think in part this is because it requires people to hold in their minds two simultaneously troubling ideas: 1) the terrible ecological dangers that we face and 2) the difficult truth that we can only surmount them through efforts that have grown deeply unfamiliar to many of us. It puts the burden for reaching sustainability squarely on the shoulders of every community member. Given our atrophied community-building skills and our vast ignorance of nature, we may be forgiven for wondering if we are up to the task. It is more comfortable to think we can rely on experts in government and industry whom many of us assume (perhaps wrongly) know what they are doing.
If Plan C is to become the main focus of action, as I believe it must, then people will ultimately need to accept two critical notions: 1) that technology will not save us and so we must save ourselves and 2) that we can save ourselves and our children because we are still capable of learning and executing the things we need to do to build a sustainable society.
William James in his essay, "Is Life Worth Living?", wrote:
It is only by risking our persons from one hour to another that we live at all. And often enough our faith beforehand in an uncertified result is the only thing that makes the result come true. Suppose, for instance, that you are climbing a mountain, and have worked yourself into a position from which the only escape is by a terrible leap. Have faith that you can successfully make it, and your feet are nerved to its accomplishment. But mistrust yourself, and think of all the sweet things you have heard the scientists say of maybes, and you will hesitate so long that, at last, all unstrung and trembling, and launching yourself in a moment of despair, you roll in the abyss. In such a case...the part of wisdom as well as courage is to believe what is in the line of your needs, for only by such belief is the need fulfilled.Let us not hesitate and let us believe what is in the line of our needs so that we may succeed.
Tuesday, November 07, 2006
The 'Dark Matter' of American Politics
There is an invisible "dark matter" in American politics influencing the issues debated in every election but which few voters or politicians perceive. To understand this analogy you will need to recall that dark matter was postulated by scientists decades ago to explain the movements of large objects such as galaxies. Such movements could not be explained by the gravitational effects of the known, visible matter in the universe. Instead, scientists reasoned, those movements must also be influenced by gravity from unseen matter which they dubbed "dark matter."
The "dark matter" of American politics is the physical world--the climate, the air, the water, the minerals, the energy resources--upon which all of our political, social, cultural and economic life depend. The state of our physical world exerts a kind of hidden gravitational pull on the important issues of the day. And yet, to listen to the rhetoric of the most recent election campaign, you would conclude that the ecological underpinnings of our civilization are in such good condition that they require virtually no attention.
The vast majority of candidates of both major parties have barely mentioned global warming. (There are, of course, notable exceptions such as California governor Arnold Schwarzenegger.) Despite a seven-year drought in the West, discussion of the link between that drought and global warming is completely lacking even though all the scientific evidence points to more and longer droughts as the world warms.
The future of water supplies remains a local concern and the drought in the West has barely registered as a national issue except in those areas seeking federal drought aid. Most puzzling of all, the devastation wrought by Hurricane Katrina has virtually dropped off the political radar. When it is discussed, the discussion turns to the incompetence of the federal and state response, but not to global warming which may be responsible for the increasing number of intense storms entering the Gulf of Mexico.
With regard to energy, there is talk of energy security and the need to reduce oil imports. Enthusiasm is greatest for the development of biofuels; but that's primarily because the manufacture of such fuels provides an opportunity for heavy government subsidies to politically well-connected biofuels processors; their army of lobbyists can and do reward politicians with huge campaign contributions. Without the subsidies most of the industry would disappear.
The most prominent issue of the American campaign, of course, was the war in Iraq. While most Americans know the obvious--Iraq has lots of oil and America needs lots of oil--the debate has centered around democracy, terrorism and the human and financial costs of the conflict. Very little has been said about the fact that oil is central to economic growth and that there is no ready substitute for it. And, virtually nothing has been said about the possibility of a peak in world oil production, an event which is likely to happen within the next decade or two. (Some say it already has.) From the political rhetoric you wouldn't know that the reason Iraq has been the central issue of the campaign is precisely because of its large role in the oil markets.
In addition, soil erosion and fertility, the depletion of major fisheries, the destruction of forests, and the skyrocketing prices of raw materials such as copper, nickel and steel are all nonstarters for political candidates. It's as if the basics of civilization--stable climate, fresh water, fertile soil, minerals, and energy supplies--were afterthoughts or at most a problem of location as in the case of oil.
And yet, major issues in American politics flow directly from our ecological predicament. Perhaps most obvious is the increasing vulnerability of the American way of life to the vicissitudes of Middle Eastern oil politics and conflict. This vulnerability has its roots in the peaking of domestic oil supplies way back in 1970. The stagnation of incomes since then has to do in part with the enormous amount of American wealth which has been sent overseas to supply the economy with the energy it needs.
Heavy military expenditures, increasing public and private debt, and threats to our democratic institutions are all related to the stressed condition of the biosphere. A detailed list of the symptoms that result from that stress--the stress of living beyond the earth's carrying capacity--is provided in the latest edition of Limits to Growth. That list reads like a summary of the causes of American political disputes over the past 30 years. Unfortunately, many of these symptoms have been cast in ideological terms instead of ecological terms. This has led people to believe that addressing the symptoms is merely a question of electing the right politicians rather than reworking our way of life. The list of symptoms bears repeating:
1. Capital, resources, and labor diverted to activities compensating for the loss of services that were formerly provided without cost by nature (for example, sewage treatment, air purification, water purification, flood control, pest control, restoration of soil nutrients, pollination, or the preservation of species).
2. Capital, resources, and labor diverted from final goods production to exploitation of scarcer, more distant, deeper, or more dilute resources.
3. Technologies invented to make use of lower-quality, smaller, more dispersed, less valuable resources, because the higher-value ones are gone.
4. Failing natural pollution cleanup mechanisms; rising levels of pollution.
5. Capital depreciation exceeding investment, and maintenance deferred, so there is deterioration in capital stocks, especially long-lived infrastructure.
6. Growing demands for capital, resources, and labor used by the military or industry to gain access to, secure, and defend resources that are increasingly concentrated in fewer, more remote, or increasingly hostile regions.
7. Investment in human resources (education, health care, shelter) postponed in order to meet immediate consumption, investment, or security needs, or to pay debts.
8. Debts a rising percentage of annual real output.
9. Eroding goals for health and environment.
10. Increasing conflicts, especially conflicts over sources [that is, resources] or sinks [for pollution].
11. Shifting consumption patterns as the population can no longer pay the price of what it really wants and, instead, purchases what it can afford.
12. Declining respect for the instruments of collective government as they are used increasingly by the elites to preserve or increase their share of a declining resource base.
13. Growing chaos in natural systems, with "natural" disasters more frequent and more severe because of less resilience in the environmental system.
The authors of Limits to Growth go on to say:
The "dark matter" of American politics is the physical world--the climate, the air, the water, the minerals, the energy resources--upon which all of our political, social, cultural and economic life depend. The state of our physical world exerts a kind of hidden gravitational pull on the important issues of the day. And yet, to listen to the rhetoric of the most recent election campaign, you would conclude that the ecological underpinnings of our civilization are in such good condition that they require virtually no attention.
The vast majority of candidates of both major parties have barely mentioned global warming. (There are, of course, notable exceptions such as California governor Arnold Schwarzenegger.) Despite a seven-year drought in the West, discussion of the link between that drought and global warming is completely lacking even though all the scientific evidence points to more and longer droughts as the world warms.
The future of water supplies remains a local concern and the drought in the West has barely registered as a national issue except in those areas seeking federal drought aid. Most puzzling of all, the devastation wrought by Hurricane Katrina has virtually dropped off the political radar. When it is discussed, the discussion turns to the incompetence of the federal and state response, but not to global warming which may be responsible for the increasing number of intense storms entering the Gulf of Mexico.
With regard to energy, there is talk of energy security and the need to reduce oil imports. Enthusiasm is greatest for the development of biofuels; but that's primarily because the manufacture of such fuels provides an opportunity for heavy government subsidies to politically well-connected biofuels processors; their army of lobbyists can and do reward politicians with huge campaign contributions. Without the subsidies most of the industry would disappear.
The most prominent issue of the American campaign, of course, was the war in Iraq. While most Americans know the obvious--Iraq has lots of oil and America needs lots of oil--the debate has centered around democracy, terrorism and the human and financial costs of the conflict. Very little has been said about the fact that oil is central to economic growth and that there is no ready substitute for it. And, virtually nothing has been said about the possibility of a peak in world oil production, an event which is likely to happen within the next decade or two. (Some say it already has.) From the political rhetoric you wouldn't know that the reason Iraq has been the central issue of the campaign is precisely because of its large role in the oil markets.
In addition, soil erosion and fertility, the depletion of major fisheries, the destruction of forests, and the skyrocketing prices of raw materials such as copper, nickel and steel are all nonstarters for political candidates. It's as if the basics of civilization--stable climate, fresh water, fertile soil, minerals, and energy supplies--were afterthoughts or at most a problem of location as in the case of oil.
And yet, major issues in American politics flow directly from our ecological predicament. Perhaps most obvious is the increasing vulnerability of the American way of life to the vicissitudes of Middle Eastern oil politics and conflict. This vulnerability has its roots in the peaking of domestic oil supplies way back in 1970. The stagnation of incomes since then has to do in part with the enormous amount of American wealth which has been sent overseas to supply the economy with the energy it needs.
Heavy military expenditures, increasing public and private debt, and threats to our democratic institutions are all related to the stressed condition of the biosphere. A detailed list of the symptoms that result from that stress--the stress of living beyond the earth's carrying capacity--is provided in the latest edition of Limits to Growth. That list reads like a summary of the causes of American political disputes over the past 30 years. Unfortunately, many of these symptoms have been cast in ideological terms instead of ecological terms. This has led people to believe that addressing the symptoms is merely a question of electing the right politicians rather than reworking our way of life. The list of symptoms bears repeating:
1. Capital, resources, and labor diverted to activities compensating for the loss of services that were formerly provided without cost by nature (for example, sewage treatment, air purification, water purification, flood control, pest control, restoration of soil nutrients, pollination, or the preservation of species).
2. Capital, resources, and labor diverted from final goods production to exploitation of scarcer, more distant, deeper, or more dilute resources.
3. Technologies invented to make use of lower-quality, smaller, more dispersed, less valuable resources, because the higher-value ones are gone.
4. Failing natural pollution cleanup mechanisms; rising levels of pollution.
5. Capital depreciation exceeding investment, and maintenance deferred, so there is deterioration in capital stocks, especially long-lived infrastructure.
6. Growing demands for capital, resources, and labor used by the military or industry to gain access to, secure, and defend resources that are increasingly concentrated in fewer, more remote, or increasingly hostile regions.
7. Investment in human resources (education, health care, shelter) postponed in order to meet immediate consumption, investment, or security needs, or to pay debts.
8. Debts a rising percentage of annual real output.
9. Eroding goals for health and environment.
10. Increasing conflicts, especially conflicts over sources [that is, resources] or sinks [for pollution].
11. Shifting consumption patterns as the population can no longer pay the price of what it really wants and, instead, purchases what it can afford.
12. Declining respect for the instruments of collective government as they are used increasingly by the elites to preserve or increase their share of a declining resource base.
13. Growing chaos in natural systems, with "natural" disasters more frequent and more severe because of less resilience in the environmental system.
The authors of Limits to Growth go on to say:
A period of overshoot* does not necessarily lead to collapse. It does require fast and determined action, however, if collapse is to be avoided. The resource base must be protected quickly, and the drains on it sharply reduced. Excessive pollution levels must be lowered, and emission rates reduced back to levels below what is sustainable. It may not be necessary to reduce population or capital or living standards. What must go down quickly are material and energy throughputs. In other words, the ecological footprint of humanity must be lowered.
So, what has been keeping American voters from understanding the ecological predicament which all humans now face? One might want to blame in part the suppression of research on global warming by the current administration. Or one could finger active propaganda efforts by global warming deniers such as ExxonMobil. Those efforts seem to have had some effect on the American public; 59 percent believe that human activity has no effect on climate.
Some blame must go to the environmental movement itself for having defined environmental concerns as either 1) remote and narrowly focused on certain strips of wilderness or endangered species or 2) mere adjuncts to better living in an industrial society as was the case for campaigns for clean water and clean air. But perhaps the most effective piece of propaganda affecting Americans' views on the sustainability of their way of life has been the continued availability and low prices of the basic resources they use. The marketplace has been inaccurately signaling that there is nothing to worry about. Resource economist Douglas Reynolds calls it the illusion of decreasing scarcity.
To complement the public's experience, there is the convenient market ideology of the cornucopian economists who espouse virtually no limits to economic growth. Cornucopian ideas find resonance in American culture because the experience of European colonists and their descendents in the New World--especially in what is now the United States--was that resources are basically limitless. Anyone willing to do the work to extract them could make a good livelihood. Critical to this mindset is the fact that the United States was the world's preeminent oil power and its largest oil exporter well into the 20th century.
The question then is, What would it take for the true ecological picture to break through into American political discourse? Only emergencies such as the two oil crises of the 1970s have so far been able to focus the public's and the politicians' minds on critical ecological issues. Many people believe that we are heading for just such a crisis when world oil production begins to decline in the next decade or two. Some believe the decline has already begun and that its full effects are only a few months or at most a year or two away.
The only rational response given American political realities is to try to educate as many Americans as possible about the true context in which we now live and the limited range of responses available to us given our ecological predicament. When the crisis comes, if the number of people who understand our true predicament is sufficient, they may be able to spread the word far enough to move political, economic and social decisions in the right direction. If not, then the "dark matter" of American politics will remain hidden and the country may face a series of economic and environmental reversals born of faulty understanding and false hopes.
__________________________________
*The condition of having exceeded for the time being the permanent carrying capacity of the habitat.
Tuesday, October 31, 2006
If we build it, will they come?
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.
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.
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.
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