Enivornmentalism Turns Against Itself *UPDATED*

After Dr. Foldvary's article (Ethanol subsidies starve poor kids) and seeing a report on Comcast News about the rising cost of "organic" and "environmentally friendly" food -- and headlines like "Era of cheap food ends as prices surge" (h/t Drudge) -- I'm beginning to wonder whether the environmentalist movement doesn't need to be a lot more centralized and coordinated.

If environmentalist causes drive up the cost of food, and that keeps people from buying "environmentally friendly" foods, then . . . . What was that about "a house divided against itself"?

Speaking of the unexpected results of environmentalism, did you see this from NPR last Fall?:

Rice fields are a major source of methane — one of the so-called greenhouse gases linked to global warming. But switching to other crops is unthinkable in Asia, where rice is the primary source of calories for many people. So scientists in Thailand are trying to find rice cultivation techniques that produce less methane.

And speaking of government subsidies (in the name of environmentalism) getting in the way of "environmentally friendly" causes, see Peter Robinson's interview with T.J. Rodgers (in five parts: One, Two, Three, Four, Five).

The centralized power of the US government evidently isn't enough to coordinate the environmentalist movement. And it would be no use appealing th the UN.

(But why use a government body at all?)

-MT

UPDATE:
Looks like it's a busy week on the ethanol/food/environmentalism front. See the following four pieces on NRO today:

Hungry Like the Ethanol Wolf [Editorial]
A New Environmentalism -Victor Davis Hanson
Global Food Riots -Deroy Murdock
Saving the world is cheaper than free -David Freddoso

And see the following recent headlines on Drudge:
Americans hoard food as industry seeks regs -Patrice Hill, Washington Times
Load Up the Pantry -Brett Arends, Wall Street Journal
Two major US retailers ration rice amid global food crisis -AFP
Run on rice makes its way to U.S. -Jerry Hirsch and Tiffany Hsu, Los Angeles Times

Calculating the Cost of a Carbon Tax

Over at Holistic Politics, I have updated my chapter on cheap and pleasant ways to fight global warming.

In particular, I have incorporated more recent tax and energy statistics for my calculations of what carbon tax rates are needed to replace either the income tax or FICA and the impact on energy prices. Assuming no immediate conservation, a $0.67/kg tax on fossil fuel carbon could replace the income tax. This translates roughly into a $2 hike in gasoline prices and a $0.106 hike in the cost of a kilowatt hour of electricity. In actual practice, we'd have to go with higher rates to offset the effects of conservation.

If people conserve too much, completely replacing the personal income tax with a carbon tax would be impossible without deep spending cuts. But there are other possible uses for a carbon tax: deficit reduction, cuts in other taxes or funding a Citizen's Dividend. To this end, I added some carbon tax calculators so you can design your own carbon tax.

Enjoy.

The Price of Gas, Again

Here come the regulators, once again. With regular gas topping $3 per gallon, the notion that "something must be done" about this "gouging" is in the headlines.

Last time this happened, it was due to Hurricane Katrina. That one was more easily explained away, as supply was temporarily curtailed due to Gulf ports being shut down.

This time, it's not so easy. For this time, it's more about FUTURE supply concerns, driven by geo-political risk. Review the "news" of the last month, and we begin to see why. Bush has said US forces will be in Iraq through 2008. And now the saber-rattling has intensified regarding the Iranian's desire for nuclear power and, potentially, weapons.

Radio pundit Bill O'Reilly likes to describe people as "pinheads." His call, of course, but I sometimes wonder where he gets the audacity. Yesterday, he correctly cited the commodities and futures markets as the "culprit" for higher gas prices. He called them "gamblers." Gas prices shouldn't be going up, he says, for current supply is bountiful.

Bill, I humbly submit, is confused. He doesn't seem to understand that "supply" and "demand" aren't simply calculated in freeze frames. Let's take a simpler example. When a big snow storm is predicted, say, a week out, grocery stores tend to "stock up" on ice-melting crystals. The snow may or may not hit, and customers may or may not buy the inventory, but all this is done IN ANTICIPATION of a storm. It is, to use O'Reilly's term, a "gamble" of sorts.

In a sense, that's what commodities traders are doing. They correctly see that geopolitical risks have increased in the oil-rich Middle East, and they have bid up the price of oil and gas. This mechanism, while not always correct, does tend to smooth out supply and demand, and in the long run is integral to the operation of the marketplace. It does so voluntarily, I might add, rather than through goverment force. Government is largely outside of the market, and intervening in the market almost always leads to unintended consequences, negative ones.

Demogoguing on the price of gas may win temporary points with the electorate, but it serves no one except the demogogue. Let's give peace in the marketplace a chance.

Environmentalists should view this all as a positive development. If such a basic stuff of life like gas is supplied in such a fickle way, consumers will start to demand more energy-efficient vehicles, or alternative means of power, like hydrogen-powered cars. Sometimes, change like this isn't pretty or orderly, but it does tend to work.

-Robert Capozzi

Problem Already Solved?

For my past few posts I have been tearing apart the many illogical statements made in http://www.lifeaftertheoilcrash.net, a site devoted to claiming that we are doomed because of the impending peaking of the oil supply.

My intent had been to follow these reviews with some posts on ways that we can deal with the oil peak without a collapse of industrial civilization, and I still might, but another physicist, Amory Lovins, appears to have beaten me to the punch. See the February issue of Discover. Or see the free posting on their site.

According to the article, the problem is already solved. The article only lists some of the solutions, but others are hinted at, and Dr. Lovins has a bunch of books out. I have some reading to do.

Here is the interesting part: many of the ideas I had intended to post are not in this article. This doesn't mean my ideas are original, of course; it only means that there are so many potential ideas that we can pick and choose.

So much for doom.

Life After the Oil Crash 4

Continuing my review of lifeaftertheoilcrash.net from December 11.

Unlike the old eco schools which pushed conservation, efficiency, and/or alternative energy, Mr. Savinar manages to cast a pall of doom over every possible alternative.

Consider Canadian tar sands: he points out that the energy return on investment is a mere 1.5 to 1. That is, for every 1.5 unit of energy extracted, 1 unit is consumed. This is certainly bad for the environment, and not as good for the economy as conventional oil, but it does not spell the end of industrial civilization. (And I will discuss ways around this problem in a future entry.) He then cites forecasts of a mere 2.2 million barrels/day for 2015 or 4 million barrels/day by 2020. However, I see no indication in these forecasts that the forecasters are taking into account the dramatic drop in conventional oil that Mr. Savinar forecasts. If conventional oil drops suddenly and prices rise dramatically, there will be a black gold rush into Canada to increase oil production from tar sands.

The same holds for oil shale in the U.S. We have lots of it, but it is expensive and environmentally damaging to extract. But if the drop in conventional oil threatens civilization, the economics of oil shale will change dramatically. Just because previous attempts to make money extracting oil from shale have failed, it doesn’t mean future attempts will fail. A more relevant question is: what is the net energy gained from oil shale harvesting? If negative, then the oil shale is indeed worthless. Somehow I doubt the pessimists. Given enough incentive, someone will figure out how to get net energy from oil shale unless another energy source surfaces first.

Mr. Savinar makes several tremendous errors, all of which stem from not understanding the role of price in the economy.

First, he looks at the huge increases needed for various alternative technologies to make a dent in overall energy production. For example, he cites David Goodstein who estimates that it would take 220,000 square kilometers of solar panels to replace our current fossil fuel use. Currently, we have a mere 10 square kilometers. This is certainly a huge factor, 22,000, but so what? Today, solar cells are several times more expensive than hooking into the conventional grid. Today’s solar cells are just for hobbyists and remote locations. Should the cost of electricity from fossil fuels double or more, then the economics completely changes. We will not be looking at 10%/year growth; we will be looking at over 100%/year.

This has happened in the past. Look at car production before the Model T came out. The idea of commoners owning automobiles was science fiction. Ditto for the idea of home computers in the 1960s. And unlike the 1960s for computers, we already know how to make solar cells that aren’t that far off from being competitive. Without any true breakthroughs in technology, solar cells become competitive should fossil fuels go up enough in price. And there are some interesting new technologies still in prototype stage.

Later, he “debunks” some of the more advanced technologies, sometimes correctly. Mixed in this debunking is some of the silliest logic yet. When he looks at “thermal depolymerization,” a technology for converting organic garbage into oil, he correctly notes that we cannot run civilization off of garbage. It takes energy to create garbage in the first place. Then he gets silly. He says it costs $80 to produce a barrel of oil using this technology. Meanwhile the Saudis pump oil for $2.50/barrel and the Iraqis for $1.00/barrel. A barrel of oil would have to sell for $1,600-$4000 to have a comparable rate of return for thermal depolymerization.

SO WHAT!! So garbage men won’t be driving around in Rolls Royces like rich Arabs do today. Most businesses function quite well on much lower rates of return. Should oil stabilize at $100/barrel, then this technology becomes quite profitable. Actually, less may do the trick since disposing of garbage is also an economic benefit.

This logic applies to all alternative technologies. Once they are as cheap as fossil oil, then investment will increase suddenly. What is a hobby today becomes tomorrow’s necessity.

Finally, Mr. Savinar uses some strange reasoning to claim that conservation and efficiency will make our problem worse. He cites Jevon’s Paradox which states that energy efficiency increases energy use. This paradox is true – when energy prices are held relatively constant. When computerized fuel injection made gasoline engines more efficient, many people bought more powerful cars. Others went from cars to SUVs. When computers went from room sized energy hogs to small home appliances, total energy used for powering computers went up, because more people compute. (This example comes from the other side of the Peak Oil debate, actually, from Huber and Mills’ The Bottomless Well.)

All this is true, if energy prices are stable. If oil production drops off steeply enough, then prices will go up unless alternatives fill in the demand. In this case, price will balance efficiency making oil consumption go down, regardless of efficiency. Increased efficiency serves to allow maintaining a quality lifestyle while oil consumption goes down.

Mr. Savinar gives a particularly contradictory example of Jevon’s Paradox. He describes a business owner who saves $500/month through energy conservation and efficiency. This money goes into the bank, where it gets reinvested, thereby boosting the economy, and thus energy use. There is a false assumption here: that dollars/BTU of energy must be constant. That savings could end up being invested in alternative energy or energy conservation. Earlier on the site Mr. Savinar complains about the capital cost of switching energy technologies.

Let us even suppose that energy extraction is a fixed fraction of the economy. Even if the economy grows, energy extraction could be stable or even go down. It depends on the price of the energy. If energy doubles in price and efficiency doubles then the economy could be exactly where it was in both real and dollar terms.

OK, I am tired of beating up on this site. There are other fallacious arguments, but this is too much like shooting fish in a barrel. What I have not fully covered is where Mr. Savinar is right. There is good information mixed in with the junk. I agree with him that biodiesel from vegetable oils and ethanol from corn are questionable replacements for gasoline. I think using hydrogen as a motor fuel is ludicrous given the current state of technology. Even if a cheap fuel cell is developed, we still have serious problems in distribution and replacement of infrastructure.

Many of the proposed replacements for fossil fuels floating around are questionable. Given this, it is forgivable for those who have limited faith in the market to panic. And I want to repeat that not all peak oil manifestos are as bad as this site. Richard Heinberg’s book, The Party's Over is much better, but even he is blinded by his ideology and makes some ridiculous predictions near the end.

In future posts I will show why there is no need to panic. There are reasonable technologies already available, and simple government actions that could be used to smooth the transition.

Life After the Oil Crash 3

Continuing my review of lifeaftertheoilcrash.net from December 4.

Mr. Savinar then moves on to some serious fear-mongering. He cites something called the Olduvai Gorge theory, which purports to prove that industrial civilization is going to start on a downward cliff in 2012 and be down to 1930s per capital energy consumption by 2030. Going to the cited web site, I found a graph showing predicted world oil production. The author then equates this with a serious decline in electricity production.

Dumb!! Electricity is primarily from coal, not oil. Yes, some heavy fractions of oil are used for electricity, and some waste heat from refineries is used for electricity, but the major source is coal, and there is a lot of coal left in the ground. There is also quite a bit of potential for expanding nuclear capacity.

Easy political prediction: breeder reactors will be made legal and even subsidized should electricity become scarce. If you don’t like nuclear power, get cracking on affordable solar power, because the median voter will risk nuclear proliferation well before voting to go back to the stone age.

The author does have something resembling a point when he says that the use of natural gas to make electricity cannot go on. However, it doesn’t have to. As soon as natural gas goes up in price, there will be a call for building power plants using some other form of energy. Don’t panic over brain dead extrapolations.

Now for Mr. Savinar’s next argument:

"Big deal. If gas prices get high, I’ll just drive less. Why should I give a damn?"


Because petrochemicals are key components to much more than just the gas in your car. As geologist Dale Allen Pfeiffer points out in his article entitled, "Eating Fossil Fuels," approximately 10 calories of fossil fuels are required to produce every 1 calorie of food eaten in the US.

This argument has some merit, but Mr. Savinar exaggerates it tremendously. It is certainly true that a 10% drop in oil will likely need more than a 10% drop in automotive travel. Higher priority uses of petroleum like petrochemicals and agriculture will take precedence. However consider these arguments:

1. Pesticides are made from oil;

They don’t have to be. But they probably will be, since the amount of oil needed to produce pesticides is small compared to current use.

2. Commercial fertilizers are made from ammonia, which is made from natural gas, which will peak about 10 years after oil peaks;

They don’t have to be made from natural gas. A quick googling of “Haber Process” reveals that we need heat and hydrogen to make ammonia for fertilizer. We can get these from nuclear, solar, wind, coal, oil shale or biomass.

3. With … farming implements such as tractors and trailers are
constructed and powered using oil;

And these uses will get dibs on scarce oil if no substitute is available. But do not that the technology to convert coal or biomass into diesel fuel goes back to World War II.

4. [paraphrase] Food storage systems require fossil fuels. But most of the fuels are used in the form of electricity. We have a longer lead time before we run out of coal, and there are other alternatives.
5. [paraphrase] on average, food is transported almost 1500 miles before it gets to the consumer.

This is trivial to fix. Agriculture is currently optimized to minimize labor costs. Should energy costs go up, this will change dramatically. For example, where I went to high school in rural eastern Virginia, there used to be large tomato fields. These are all gone in favor of basic grains, because the canning industry centralized. This process is completely reversible. Similarly, because of pollution, the Chesapeake Bay is oyster yields have dropped dramatically. Rather than close the oyster shucking houses, oysters are hauled from the Gulf Coast to be shucked by these skilled laborers. Should fuel become more expensive than training oyster shuckers, this will change. No exotic technology is needed whatsoever.

Mr. Savinar then goes on to state how a number of other industries rely on fossil fuels. Here, he is extremely sloppy in differentiating which require portable liquid fuels and which require electricity. Some of these uses do require liquid fuels, but peak oil theory does not prove that these fuels will disappear in the near future, only that production will drop significantly. High priority uses will continue! Low priority uses of oil, such as using a giant SUV to carry a single commuter, will decline unless a reasonably priced alternative is found.

And yes, there are alternatives. I will get to them in future entries, but I still have more bad arguments to refute first. Stay tuned.

Life After the Oil Crash 2

Continuing my review of lifeaftertheoilcrash.net began November 26.

Let us suppose that the basic prediction of the peak oil theorists is correct. Let us suppose that we are near the peak of oil production. From now on out, conventional oil production is going on a downhill slide. Does this mean the end of industrial civilization? Should we panic? Should we have a crash program to send people back to the villages?

Such are the prescriptions of various peak oil theory promoters. Before you follow their advice, keep in mind the degree of economic ignorance some of these people have. lifeaftertheoilcrash.net is particularly bad. Consider these quotes:

"In this regard, the ramifications of Peak Oil for our civilization are similar to the ramifications of dehydration for the human body. The human body is 70 percent water. The body of a 200 pound man thus holds 140 pounds of water. Because water is so crucial to everything the human body does, the man doesn't need to lose all 140 pounds of water weight before collapsing due to dehydration. A loss of as little as 10-15 pounds of water may be enough to kill him."

This is a really bad analogy. A better analogy would be that of a 300 pound glutton who has to go from a 4000 calorie diet to a 2000 calorie diet. The result might be painful, but not life-threatening. Or we can consider water itself. Suppose your water supply was cut in half: would you die of thirst? No!! You would simply have to bathe less, wash your clothes less, use a water conserving flap in your toilet, and/or stop watering your lawn. If the problem persisted, you might install an "alternative water" system; i.e., a cistern fed by your gutters.

Or how about this quote:

"A shortfall between demand and supply as little as 10-15 percent is enough to wholly shatter an oil-dependent economy and reduce its citizenry to poverty."

Piffle! Even if supply has a hard limit, demand is a curve. At a high enough price, demand matches supply. And we know quite well that an industrial economy can survive a shortage of cheap oil. The Europeans have been living with expensive oil for years due to their fuel taxes. Nazi Germany survived an oil shortfall by converting coal into diesel fuel. South Africa did likewise.

Or how about:

"The effects of even a small drop in production can be devastating. For instance, during the 1970s oil shocks, shortfalls in production as small as 5% caused the price of oil to nearly quadruple. The same thing happened in California a few years ago with natural gas: a production drop of less than 5% caused prices to skyrocket by 400%. "

Semi bad examples. In both cases there were price freezes by the government. In the 1970s, owners of old wells in the U.S. could not raise their prices to the world level. There was no incentive to increase output. Taking inflation into account, oil prices were being forced down at the wellhead in the U.S. In California, consumer prices were held fixed, and utilities were not allowed to by futures contracts. This was an artificial situation. Had consumers experienced a price rise by far less than 400%, demand would have subsided.

I say these are semi bad examples. It is possible for the government to go on a witchhunt accusing oil companies of "price gouging" or "windfall profits." If these idiocies lead to price controls, then we will have a true energy crisis. Congress has the power to turn peak oil into a full-fledged disaster.

To be continued...

Life After the Oil Crash

About a year ago I was working a booth at an energy fair when I was approached by a young woman who informed me that the free market was not prepared to deal with the problem of "Peak Oil," and that drastic action was needed NOW! She claimed that she had worked at the Cato Institute in the past, and had been in favor of market economics until she learned of the impending crisis.

Since then, the phrase "Peak Oil" has been popping up repeatedly, and I suspect it will reach the popular consciousness as much as global warming is today.

For those who have read the message of the Peak Oil Cassandras, I have an urgent message for you: DON'T PANIC! Things are not as dire as they claim.

For those who haven't been exposed, I will summarize their basic argument here, and then analyze their conclusions in subsequent entries. Before I get into the analysis, let me state from the outset that they could be onto something. Oil production may well peak soon, and there may be some economic hardships ahead. What I will question is how much action is required today, and whether the decline in oil production will result in the end of industrial civilization (their contention).

The Peak Oil thesis runs like this: when an oil field is discovered, initial production is small at first. It takes a while to drill the wells to tap into the field. As holes are drilled production increases. Then, when roughly half of the recoverable oil is extracted, production starts to decline. Pressure drops off. Secondary and then tertiary recovery techniques are required. These things keep production going, but at a lower and lower amount. Over time, the output from a field looks like some type of bell curve.

Each field has its own bell curve. The discovery of new fields is also a bell curve -- one which are on well on the right hand side of. Add up the curves and you get another bell shaped curve, the curve of total oil production. As a result, we can expect a decline in oil production long before we run out of oil. The decline should begin when roughly half of the recoverable oil is used up.

This by itself is good news. It means we will get a reduction in supply and a rise in prices long before we run out of oil. This gives the market time to respond!

Now, the pessimistic view: the initial drop-off could be steep. Further, demand is rising. When production starts dropping it could drop pretty fast at first -- possibly faster than the market could comfortably adjust to.

To makes things more fun yet, this peak could happen at any moment. According to the Peak Oil theorists Saudi Arabia and some of the other OPEC members could be very close to their peaks. This is a far different view than the official view, which has had reserves increasing dramatically during the 1990s. But, these stated reserves were stated by governments which had an incentive to fib: OPEC quotas are based on reserves. If a country ups its stated reserves, it can pump more oil and still comply with the cartel agreement.

This puts me in a peculiar dilemma: do I believe the fearmongers? Or governments which have an incentive to lie? Neither has a good reputation in my book.

In my next entries, I will assume the fearmongers to be correct up to this point. It is the consequences of the oil peak and how we should respond where I will differ. I do not think we are looking at the end of industrial civilization, or that we have to get the population back down to 2 billion or we must experience a die-off. I do not think that cars will be owned only by the rich, or that we must go back to a village lifestyle. (We might anyway, if people find that desireable, but that's another story.)

Until then, I invite you to read www.lifeaftertheoilcrash.net. Then, keep an eye on this blog and I will point out the errors on this site, and why things are not as dire as stated. If you want more homework, read "The Party's Over" by Richard Heinberg. The book is much better than the site, but, being a book, it is longer and you have to buy it.